Item 15. Exhibits and Financial Statement Schedules
|
|
|
|
|
|
(a)(1)
|
The following consolidated financial statements of People’s United Financial, Inc. and the independent registered public accounting firm report thereon are included herein beginning on page F-1:
|
|
|
|
Consolidated Statements of Condition as of December 31, 2019 and 2018
|
|
|
|
Consolidated Statements of Income for the years ended December 31, 2019, 2018 and 2017
|
|
|
|
Consolidated Statements of Comprehensive Income for the years ended December 31, 2019, 2018 and 2017
|
|
|
|
Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2019, 2018 and 2017
|
|
|
|
Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017
|
|
|
|
Notes to Consolidated Financial Statements
|
|
|
|
Report of Independent Registered Public Accounting Firm
|
|
|
(a)(2)
|
Financial statement schedules have been omitted as they are not applicable or the information is included in the consolidated financial statements or notes thereto.
|
|
|
(a)(3)
|
Exhibits
|
The following Exhibits are filed with this Report or are incorporated by reference. Each exhibit identified by an asterisk constitutes a management contract or compensatory plan, contract or arrangement.
|
|
|
|
|
|
|
|
|
Designation
|
|
Description
|
|
|
|
3.1
|
|
|
|
|
|
|
3.2
|
|
|
|
|
|
|
4
|
|
|
Description of Registrant's Securities
|
|
|
|
4.1
|
|
|
|
|
|
|
4.2
|
|
|
|
|
|
|
4.3
|
|
|
|
|
|
|
4.5
|
|
|
|
|
|
|
4.6
|
|
|
|
|
|
|
4.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Designation
|
|
Description
|
|
|
|
4.8
|
|
|
|
|
|
|
10.1*
|
|
|
|
|
|
|
10.2*
|
|
|
|
10.3*
|
|
|
|
|
|
|
10.4*
|
|
|
|
10.5*
|
|
|
|
10.6*
|
|
|
|
10.7*
|
|
|
|
10.7(a)*
|
|
|
|
10.7(b)*
|
|
|
|
10.7(c)*
|
|
|
|
10.7(d)*
|
|
|
|
10.7(e)*
|
|
|
|
10.7(f)*
|
|
|
|
10.8*
|
|
|
|
10.8(a)*
|
|
|
|
10.9*
|
|
|
|
10.9(a)*
|
|
|
|
|
|
|
|
|
|
|
|
|
Designation
|
|
Description
|
|
|
|
10.10*
|
|
|
|
10.10(a)*
|
|
|
|
10.10(b)*
|
|
|
|
10.11*
|
|
|
|
10.12*
|
|
|
|
10.12(a)*
|
|
|
|
|
|
|
10.12(b)*
|
|
|
|
|
|
|
10.13*
|
|
|
|
|
|
|
10.14*
|
|
|
|
|
|
|
10.15*
|
|
|
|
|
|
|
10.15(a)*
|
|
|
|
|
|
|
10.16*
|
|
|
|
|
|
|
10.16(a)*
|
|
|
|
|
|
|
10.17*
|
|
|
|
|
|
|
10.17(a)*
|
|
|
|
|
|
|
10.17(b)*
|
|
|
|
|
|
|
10.17(c)*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Designation
|
|
Description
|
|
|
|
10.18*
|
|
|
|
|
|
|
10.18(a)*
|
|
|
|
|
|
|
10.18(b)*
|
|
|
|
|
|
|
10.19*
|
|
|
|
|
|
|
21
|
|
|
Subsidiaries
|
|
|
|
23
|
|
|
Consent of KPMG LLP
|
|
|
|
31.1
|
|
|
Rule 13a-14(a)/15d-14(a) Certifications
|
|
|
|
31.2
|
|
|
Rule 13a-14(a)/15d-14(a) Certifications
|
|
|
|
32
|
|
|
Section 1350 Certifications
|
|
|
|
99.1
|
|
|
Impact of Inflation
|
|
|
|
101.1
|
|
|
The following financial information from People’s United Financial, Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 formatted in Inline XBRL: (i) Consolidated Statements of Condition as of December 31, 2019 and 2018; (ii) Consolidated Statements of Income for the years ended December 31, 2019, 2018 and 2017; (iii) Consolidated Statements of Comprehensive Income for the years ended December 31, 2019, 2018 and 2017; (iv) Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2019, 2018 and 2017; (v) Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017; and (vi) Notes to Consolidated Financial Statements.
|
|
|
|
104
|
|
|
Cover page formatted in Inline XBRL and contained within Exhibit 101.1
|
Item 16. Form 10-K Summary
None.
SIGNATURES
Pursuant to the requirements of Section 13 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: March 2, 2020
|
By:
|
/s/ John P. Barnes
|
|
|
John P. Barnes
|
|
|
Chairman and Chief Executive Officer
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of People’s United Financial, Inc. and in the capacities and on the dates indicated.
|
|
|
|
|
|
|
|
|
Date: March 2, 2020
|
By:
|
/s/ John P. Barnes
|
|
|
John P. Barnes
|
|
|
Chairman, Chief Executive Officer and
|
|
|
Director (Principal Executive Officer)
|
|
|
|
Date: March 2, 2020
|
By:
|
/s/ R. David Rosato
|
|
|
R. David Rosato
|
|
|
Senior Executive Vice President and
|
|
|
Chief Financial Officer
|
|
|
(Principal Financial Officer)
|
|
|
|
Date: March 2, 2020
|
By:
|
/s/ Jeffrey A. Hoyt
|
|
|
Jeffrey A. Hoyt
|
|
|
Senior Vice President and
|
|
|
Chief Accounting Officer
|
|
|
(Principal Accounting Officer)
|
|
|
|
Date: March 2, 2020
|
By:
|
/s/ Collin P. Baron
|
|
|
Collin P. Baron
|
|
|
Director
|
|
|
|
Date: March 2, 2020
|
By:
|
/s/ Kevin T. Bottomley
|
|
|
Kevin T. Bottomley
|
|
|
Director
|
|
|
|
Date: March 2, 2020
|
By:
|
/s/ George P. Carter
|
|
|
George P. Carter
|
|
|
Lead Director
|
|
|
|
Date: March 2, 2020
|
By:
|
/s/ Jane Chwick
|
|
|
Jane Chwick
|
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date: March 2, 2020
|
By:
|
/s/ William F. Cruger, Jr.
|
|
|
William F. Cruger, Jr.
|
|
|
Director
|
|
|
|
Date: March 2, 2020
|
By:
|
/s/ John K. Dwight
|
|
|
John K. Dwight
|
|
|
Director
|
|
|
|
Date: March 2, 2020
|
By:
|
/s/ Jerry Franklin
|
|
|
Jerry Franklin
|
|
|
Director
|
|
|
|
Date: March 2, 2020
|
By:
|
/s/ Janet M. Hansen
|
|
|
Janet M. Hansen
|
|
|
Director
|
|
|
|
Date: March 2, 2020
|
By:
|
/s/ Nancy McAllister
|
|
|
Nancy McAllister
|
|
|
Director
|
|
|
|
Date: March 2, 2020
|
By:
|
/s/ Mark W. Richards
|
|
|
Mark W. Richards
|
|
|
Director
|
|
|
|
Date: March 2, 2020
|
By:
|
/s/ Kirk W. Walters
|
|
|
Kirk W. Walters
|
|
|
Senior Executive Vice President and
Director
|
STATEMENT OF MANAGEMENT’S RESPONSIBILITY
Management is responsible for the preparation, content and integrity of the consolidated financial statements and all other information included in this annual report. The consolidated financial statements and related footnotes are prepared in conformity with U.S. generally accepted accounting principles. Management is also responsible for compliance with laws and regulations relating to safety and soundness as designated by the Office of the Comptroller of the Currency.
The Board of Directors has an Audit Committee composed of seven outside directors, each of whom meets the criteria for independence as set forth in applicable listing standards. The Audit Committee meets regularly with the independent auditors, the internal auditors and management to ensure that internal control over financial reporting is being properly administered and that financial data is being properly reported. The Audit Committee reviews the scope and timing of internal audits, including recommendations made with respect to internal control over financial reporting. The independent auditors and the internal auditors have free access to the Audit Committee.
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management is responsible for establishing and maintaining effective internal control over financial reporting for People's United Financial, Inc. (the Company). Management maintains a system of internal control over financial reporting, including an internal audit function, which is designed to provide reasonable assurance that assets are safeguarded against loss from unauthorized use or disposition, transactions are properly authorized, and that accounting records are reliable for the preparation of financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that internal control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In order to evaluate the effectiveness of internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act, management has conducted an assessment, including testing, using the criteria in Internal Control – Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on its assessment, management has concluded that People's United Financial, Inc. maintained effective internal control over financial reporting as of December 31, 2019, based on criteria in Internal Control – Integrated Framework (2013) issued by COSO.
People's United Financial, Inc. acquired United Financial Bancorp, Inc. (United Financial) effective November 1, 2019. Management excluded from its assessment of the effectiveness of the Company's internal control over financial reporting, as of December 31, 2019, United Financial's internal control over financial reporting associated with total assets of approximately $6.0 billion and total interest and non-interest income of approximately $48 million included in the consolidated financial statements of People's United Financial, Inc. as of and for the year ended December 31, 2019.
|
|
|
|
|
|
|
|
|
/s/ John P. Barnes
|
|
/s/ R. David Rosato
|
John P. Barnes
|
|
R. David Rosato
|
Chairman and Chief Executive Officer
|
|
Senior Executive Vice President
and Chief Financial Officer
|
|
|
|
Date: March 2, 2020
|
|
|
People’s United Financial, Inc. and Subsidiaries
Index to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
People’s United Financial, Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statements of condition of People’s United Financial, Inc. and subsidiaries (the Company) as of December 31, 2019 and 2018, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2019, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2019, in conformity with
U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission”, and our report dated March 2, 2020 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Assessment of the allowance for loan losses related to loans collectively evaluated for impairment
As discussed in Notes 1 and 5 to the consolidated financial statements, the Company’s allowance for loan losses at December 31, 2019 was $246.6 million of which $208.9 million related to Commercial loans (Commercial Portfolio) collectively evaluated for impairment and $26.5 million related to Retail loans (Retail Portfolio) collectively evaluated for impairment. The allowance related to loans collectively evaluated for impairment (ALL) consists of both quantitative and qualitative loss components. The Company estimates the quantitative component of the ALL for the Commercial Portfolio using a methodology that incorporates (1) the probability of default for a given loan risk rating (PD), and (2) historical
loss-given-default data (LGD), both derived using look-back periods and loss emergence periods, which are based on loan risk ratings. The qualitative component represents adjustments to the quantitative component for qualitative factors. For the Retail Portfolio, the quantitative component of the ALL is estimated using a methodology that gives consideration to historical portfolio loss experience over a look-back period and a loss emergence period.
We identified the assessment of the quantitative and qualitative component of the ALL for the Commercial Portfolio and the quantitative component of the ALL for the Retail Portfolio as a critical audit matter because they involved significant measurement uncertainty requiring complex auditor judgment, and knowledge and experience in the industry. In addition, auditor judgment was required to evaluate the sufficiency of audit evidence obtained. This assessment of the ALL encompassed the evaluation of the ALL methodology, inclusive of the methodologies used to estimate (1) PDs and LGDs, including look-back periods, loss emergence periods, and loan risk ratings and to determine qualitative factors for the Commercial Portfolio, and (2) historical portfolio loss experience over the look-back period and the loss emergence period for the Retail Portfolio.
The primary procedures we performed to address the critical audit matter included the following. We tested certain internal controls over the Company’s ALL process, including controls related to the (1) development of the ALL methodology, (2) determination of the key factors and assumptions consisting of PDs, LGDs, look-back periods, loss emergence periods, and qualitative factor adjustments used to estimate the ALL for the Commercial Portfolio, and historical portfolio loss experience, look-back period and the loss emergence period used to estimate the ALL for the Retail Portfolio, (3) periodic testing of Commercial Portfolio loan risk ratings, (4) calculation of the ALL estimate, and
(5) analysis of the ALL results, trends and ratios.
We evaluated the Company’s process to develop the ALL estimate by testing certain sources of data, factors, and assumptions that the Company used, and considered the relevance and reliability of such data, factors, and assumptions. In addition, we involved credit risk professionals with specialized industry knowledge and experience, who assisted in:
•evaluating the Company’s ALL methodology for compliance with U.S. generally accepted accounting principles,
•testing the historical loss look-back period assumptions used in the Commercial and Retail portfolio methodologies to evaluate the length of those periods,
•evaluating the methodology used to develop PDs, LGDs and the loss emergence periods used in the Commercial Portfolio,
•evaluating the methodology used to develop historical portfolio loss experience and the loss emergence period used in the Retail Portfolio,
•testing the Commercial Portfolio qualitative factor framework and related adjustments by:
◦evaluating the metrics used to allocate the qualitative factor adjustments, including the relevance of sources of data and assumptions,
◦analyzing the determination of each qualitative factor adjustment, and
◦evaluating trends in the total ALL, including the qualitative factor adjustments, for consistency with trends in loan portfolio growth (attrition) and credit performance.
•testing individual loan risk ratings for a selection of commercial loans in the current year by evaluating the financial performance of the borrower and the underlying collateral.
Assessment of the fair value measurements of acquired loans and core deposit intangibles in the BSB Bancorp and United
Financial acquisitions
As discussed in Note 2 to the consolidated financial statements, the Company completed the acquisitions of BSB Bancorp, Inc. (BSB Bancorp) and United Financial Bancorp, Inc. (United Financial) on April 1, 2019 and November 1, 2019, respectively. The acquisitions were accounted for as business combinations using the acquisition method of accounting. Accordingly, assets acquired, liabilities assumed and consideration paid were recorded at their estimated fair values at the time of the respective acquisition dates. For the BSB Bancorp acquisition, the fair value of acquired loans was $2.6 billion and the fair value of the core deposit intangible (CDI) was $39.5 million. For the United Financial acquisition, the fair value of acquired loans was $5.5 billion and the fair value of the CDI was $41.5 million. The fair values of acquired loans were based on the income approach, utilizing a discounted cash flow methodology that projected principal and interest cash flows based on loan contractual terms, applying key assumptions for credit losses using loan risk ratings, and prepayment rates and discounting these cash flows at implied market based discount rates. The fair values of the CDIs were based on a cost savings methodology under the income approach, whereby projected cost savings were derived by estimating costs to carry deposits compared to alternative funding costs, and included key inputs and assumptions related to customer attrition rates, net maintenance costs, costs of alternative funding, deposit interest rates and discount rates.
We identified the assessment of the fair value measurements for loans and CDIs acquired as part of the BSB Bancorp and United Financial acquisitions as a critical audit matter. The assessment encompassed the evaluation of the fair value methodologies for acquired loans and CDIs, including the key inputs and assumptions used in the fair value estimates. The valuation assumptions for acquired loans related to loan risk ratings, prepayment rates and discount rates, and the valuation assumptions for the CDIs related to customer attrition rates and net maintenance costs involved significant measurement uncertainty and required specialized skills and knowledge to evaluate. Additionally, there was auditor judgment involved in designing and performing audit procedures in order to evaluate and test these key inputs and assumptions.
The primary procedures we performed to address the critical audit matter included testing certain internal controls over the (1) development of the fair value methodologies, (2) determination of the key valuation assumptions for acquired loans related to loan risk ratings, prepayment rates and discount rates, and the key valuation assumptions for the CDI related to customer attrition rates and net maintenance costs, (3) evaluating the inputs used to develop the key assumptions, and
(4) analysis of the fair value measurements results. We tested individual loan risk ratings for a selection of acquired commercial loans by evaluating the financial performance of the borrower and the underlying collateral. We involved valuation professionals with specialized skills and knowledge, who assisted in:
•evaluating the valuation methodologies, for compliance with U.S. generally accepted accounting principles,
•developing an estimate of the fair value of the loans using the loan contractual terms and independently developed assumptions for credit losses, discount rates and prepayment rates used by other market participants, and compared the results to the Company’s fair value estimate,
•evaluating the CDI assumption related to net maintenance costs, and inputs used to develop those assumptions, that were used in the fair value measurements,
•evaluating the CDI assumption related to customer attrition rates by comparing to third party data used by other market participants, and evaluating the mathematical accuracy of certain calculations within the CDI fair value measurement.
/s/ KPMG LLP
We have served as the Company’s auditor since 1986.
Stamford, Connecticut
March 2, 2020
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
People’s United Financial, Inc.:
Opinion on Internal Control Over Financial Reporting
We have audited People’s United Financial, Inc. and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated statements of condition of the Company as of December 31, 2019 and 2018, and the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2019, and related notes (collectively, the consolidated financial statements), and our report dated March 2, 2020 expressed an unqualified opinion on those consolidated financial statements.
The Company acquired United Financial Bancorp, Inc. (United Financial) effective November 1, 2019. Management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting, as of December 31, 2019, United Financial’s internal control over financial reporting associated with total assets of approximately $6.0 billion and total interest and non-interest income of approximately $48 million included in the consolidated financial statements of the Company as of and for the year ended December 31, 2019. Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of United Financial.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ KPMG LLP
Stamford, Connecticut
March 2, 2020
People’s United Financial, Inc. and Subsidiaries
Consolidated Statements of Condition
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31 (in millions)
|
|
2019
|
|
2018
|
Assets
|
|
|
|
|
Cash and due from banks
|
|
$
|
484.2
|
|
|
$
|
665.7
|
|
Short-term investments
|
|
316.8
|
|
|
266.3
|
|
Total cash and cash equivalents (note 3)
|
|
801.0
|
|
|
932.0
|
|
Securities (note 4):
|
|
|
|
|
Trading debt securities, at fair value
|
|
7.1
|
|
|
8.4
|
|
Equity securities, at fair value
|
|
8.2
|
|
|
8.1
|
|
Debt securities available-for-sale, at fair value
|
|
3,564.3
|
|
|
3,121.0
|
|
Debt securities held-to-maturity, at amortized cost (fair value of $4.02 billion and $3.78 billion)
|
|
3,869.2
|
|
|
3,792.3
|
|
Federal Home Loan Bank and Federal Reserve Bank stock, at cost
|
|
341.1
|
|
|
303.4
|
|
Total securities
|
|
7,789.9
|
|
|
7,233.2
|
|
Loans held-for-sale (note 5)
|
|
511.3
|
|
|
19.5
|
|
Loans (notes 5 and 6):
|
|
|
|
|
Commercial real estate
|
|
14,762.3
|
|
|
11,649.6
|
|
Commercial and industrial
|
|
11,041.6
|
|
|
9,088.9
|
|
Equipment financing
|
|
4,910.4
|
|
|
4,339.2
|
|
Total Commercial Portfolio
|
|
30,714.3
|
|
|
25,077.7
|
|
Residential mortgage
|
|
10,318.1
|
|
|
8,154.2
|
|
Home equity and other consumer
|
|
2,563.7
|
|
|
2,009.5
|
|
Total Retail Portfolio
|
|
12,881.8
|
|
|
10,163.7
|
|
Total loans
|
|
43,596.1
|
|
|
35,241.4
|
|
Less allowance for loan losses
|
|
(246.6)
|
|
|
(240.4)
|
|
Total loans, net
|
|
43,349.5
|
|
|
35,001.0
|
|
Goodwill (notes 2 and 7)
|
|
3,065.5
|
|
|
2,685.7
|
|
Bank-owned life insurance
|
|
705.0
|
|
|
467.0
|
|
Premises and equipment, net (note 8)
|
|
305.5
|
|
|
267.3
|
|
Other acquisition-related intangible assets (notes 2 and 7)
|
|
209.1
|
|
|
180.0
|
|
Other assets (notes 6, 9 and 22)
|
|
1,853.0
|
|
|
1,091.6
|
|
Total assets
|
|
$
|
58,589.8
|
|
|
$
|
47,877.3
|
|
Liabilities
|
|
|
|
|
Deposits (note 10):
|
|
|
|
|
Non-interest-bearing
|
|
$
|
9,803.7
|
|
|
$
|
8,543.0
|
|
Savings
|
|
4,987.7
|
|
|
4,116.5
|
|
Interest-bearing checking and money market
|
|
19,592.6
|
|
|
16,583.3
|
|
Time
|
|
9,205.5
|
|
|
6,916.2
|
|
Total deposits
|
|
43,589.5
|
|
|
36,159.0
|
|
Borrowings (note 11):
|
|
|
|
|
Federal Home Loan Bank advances
|
|
3,125.4
|
|
|
2,404.5
|
|
Federal funds purchased
|
|
1,620.0
|
|
|
845.0
|
|
Customer repurchase agreements
|
|
409.1
|
|
|
332.9
|
|
Other borrowings
|
|
—
|
|
|
11.0
|
|
Total borrowings
|
|
5,154.5
|
|
|
3,593.4
|
|
Notes and debentures (note 12)
|
|
993.1
|
|
|
895.8
|
|
Other liabilities (notes 6, 9 and 22)
|
|
905.5
|
|
|
695.2
|
|
Total liabilities
|
|
50,642.6
|
|
|
41,343.4
|
|
Commitments and contingencies (notes 6, 21 and 22)
|
|
|
|
|
Stockholders’ Equity (notes 2, 14, 17, 18 and 19)
|
|
|
|
|
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;
532.8 million shares and 466.3 million shares issued)
|
|
5.3
|
|
|
4.7
|
|
Additional paid-in capital
|
|
7,639.4
|
|
|
6,549.3
|
|
Retained earnings
|
|
1,512.8
|
|
|
1,284.8
|
|
Unallocated common stock of Employee Stock Ownership Plan, at cost
(5.9 million shares and 6.3 million shares)
|
|
(122.9)
|
|
|
(130.1)
|
|
Accumulated other comprehensive loss
|
|
(166.9)
|
|
|
(256.8)
|
|
Treasury stock, at cost (89.2 million shares and 89.0 million shares)
|
|
(1,164.6)
|
|
|
(1,162.1)
|
|
Total stockholders’ equity
|
|
7,947.2
|
|
|
6,533.9
|
|
Total liabilities and stockholders’ equity
|
|
$
|
58,589.8
|
|
|
$
|
47,877.3
|
|
See accompanying notes to consolidated financial statements.
People’s United Financial, Inc. and Subsidiaries
Consolidated Statements of Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31 (in millions, except per common share data)
|
|
2019
|
|
2018
|
|
2017
|
Interest and dividend income:
|
|
|
|
|
|
|
Commercial real estate
|
|
$
|
556.4
|
|
|
$
|
463.4
|
|
|
$
|
405.7
|
|
Commercial and industrial
|
|
443.6
|
|
|
365.7
|
|
|
298.8
|
|
Equipment financing
|
|
253.8
|
|
|
212.3
|
|
|
152.1
|
|
Residential mortgage
|
|
329.1
|
|
|
236.2
|
|
|
207.5
|
|
Home equity and other consumer
|
|
106.1
|
|
|
88.6
|
|
|
80.0
|
|
Total interest on loans
|
|
1,689.0
|
|
|
1,366.2
|
|
|
1,144.1
|
|
Securities
|
|
186.5
|
|
|
184.2
|
|
|
153.7
|
|
Short-term investments
|
|
4.8
|
|
|
5.0
|
|
|
3.7
|
|
Loans held-for-sale
|
|
0.8
|
|
|
0.9
|
|
|
0.9
|
|
Total interest and dividend income
|
|
1,881.1
|
|
|
1,556.3
|
|
|
1,302.4
|
|
Interest expense:
|
|
|
|
|
|
|
Deposits (note 10)
|
|
356.9
|
|
|
216.1
|
|
|
130.7
|
|
Borrowings (note 11)
|
|
77.0
|
|
|
70.9
|
|
|
41.3
|
|
Notes and debentures
|
|
34.9
|
|
|
33.3
|
|
|
29.9
|
|
Total interest expense
|
|
468.8
|
|
|
320.3
|
|
|
201.9
|
|
Net interest income
|
|
1,412.3
|
|
|
1,236.0
|
|
|
1,100.5
|
|
Provision for loan losses (note 5)
|
|
28.3
|
|
|
30.0
|
|
|
26.0
|
|
Net interest income after provision for loan losses
|
|
1,384.0
|
|
|
1,206.0
|
|
|
1,074.5
|
|
Non-interest income:
|
|
|
|
|
|
|
Bank service charges
|
|
107.5
|
|
|
99.9
|
|
|
98.5
|
|
Investment management fees
|
|
67.6
|
|
|
68.7
|
|
|
66.5
|
|
Operating lease income (note 6)
|
|
51.2
|
|
|
44.9
|
|
|
43.8
|
|
Commercial banking lending fees
|
|
42.7
|
|
|
37.3
|
|
|
35.5
|
|
Insurance revenue
|
|
37.0
|
|
|
34.6
|
|
|
33.2
|
|
Cash management fees
|
|
28.4
|
|
|
27.1
|
|
|
26.1
|
|
Brokerage commissions
|
|
10.6
|
|
|
12.8
|
|
|
12.1
|
|
Net security gains (losses) (note 4)
|
|
0.2
|
|
|
(9.8)
|
|
|
(25.4)
|
|
Other non-interest income (notes 4 and 6)
|
|
85.9
|
|
|
50.9
|
|
|
62.6
|
|
Total non-interest income
|
|
431.1
|
|
|
366.4
|
|
|
352.9
|
|
Non-interest expense:
|
|
|
|
|
|
|
Compensation and benefits (notes 18 and 19)
|
|
646.2
|
|
|
562.9
|
|
|
522.7
|
|
Occupancy and equipment (note 8)
|
|
185.9
|
|
|
168.2
|
|
|
159.6
|
|
Professional and outside services
|
|
98.2
|
|
|
77.6
|
|
|
81.5
|
|
Operating lease expense
|
|
38.8
|
|
|
36.4
|
|
|
35.2
|
|
Amortization of other acquisition-related intangible assets (note 7)
|
|
32.5
|
|
|
21.8
|
|
|
30.0
|
|
Regulatory assessments
|
|
26.1
|
|
|
37.9
|
|
|
41.7
|
|
Other non-interest expense
|
|
135.0
|
|
|
91.3
|
|
|
89.6
|
|
Total non-interest expense
|
|
1,162.7
|
|
|
996.1
|
|
|
960.3
|
|
Income before income tax expense
|
|
652.4
|
|
|
576.3
|
|
|
467.1
|
|
Income tax expense (note 13)
|
|
132.0
|
|
|
108.2
|
|
|
129.9
|
|
Net income
|
|
520.4
|
|
|
468.1
|
|
|
337.2
|
|
Preferred stock dividend
|
|
14.1
|
|
|
14.1
|
|
|
14.1
|
|
Net income available to common shareholders
|
|
$
|
506.3
|
|
|
$
|
454.0
|
|
|
$
|
323.1
|
|
Earnings per common share (note 16):
|
|
|
|
|
|
|
Basic
|
|
$
|
1.28
|
|
|
$
|
1.30
|
|
|
$
|
0.98
|
|
Diluted
|
|
1.27
|
|
|
1.29
|
|
|
0.97
|
|
See accompanying notes to consolidated financial statements.
People’s United Financial, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31 (in millions)
|
|
2019
|
|
2018
|
|
2017
|
Net income
|
|
$
|
520.4
|
|
|
$
|
468.1
|
|
|
$
|
337.2
|
|
Other comprehensive income (loss), before tax:
|
|
|
|
|
|
|
Net actuarial gains and losses on pension and other postretirement plans:
|
|
|
|
|
|
|
Net actuarial gains (losses) arising during the year
|
|
12.1
|
|
|
(32.6)
|
|
|
(5.5)
|
|
Reclassification adjustment for net actuarial loss included in net income
|
|
8.3
|
|
|
8.6
|
|
|
9.3
|
|
Net actuarial gains (losses)
|
|
20.4
|
|
|
(24.0)
|
|
|
3.8
|
|
Prior service credit on pension and other postretirement plans:
|
|
|
|
|
|
|
Reclassification adjustment for prior service credit included in net income
|
|
—
|
|
|
(0.3)
|
|
|
(0.8)
|
|
Net actuarial gains (losses) and prior service credit
|
|
20.4
|
|
|
(24.3)
|
|
|
3.0
|
|
Net unrealized gains and losses on securities available-for-sale:
|
|
|
|
|
|
|
Net unrealized holding gains (losses) arising during the year
|
|
89.2
|
|
|
(38.3)
|
|
|
(8.6)
|
|
Reclassification adjustment for net realized (gains) losses included in net income
|
|
(0.1)
|
|
|
9.9
|
|
|
25.4
|
|
Net unrealized gains (losses)
|
|
89.1
|
|
|
(28.4)
|
|
|
16.8
|
|
Net unrealized gains and losses on securities transferred to held-to-maturity:
|
|
|
|
|
|
|
Reclassification adjustment for amortization of unrealized losses on securities transferred to held-to-maturity included in net income
|
|
4.6
|
|
|
3.9
|
|
|
3.7
|
|
Net unrealized gains
|
|
4.6
|
|
|
3.9
|
|
|
3.7
|
|
Net unrealized gains and losses on derivatives accounted for as cash flow hedges:
|
|
|
|
|
|
|
Net unrealized gains (losses) arising during the year
|
|
1.9
|
|
|
(1.7)
|
|
|
(1.0)
|
|
Reclassification adjustment for net realized losses (gains)
included in net income
|
|
1.1
|
|
|
0.5
|
|
|
(0.9)
|
|
Net unrealized gains (losses)
|
|
3.0
|
|
|
(1.2)
|
|
|
(1.9)
|
|
Other comprehensive income (loss), before tax
|
|
117.1
|
|
|
(50.0)
|
|
|
21.6
|
|
Deferred income tax (expense) benefit related to other
comprehensive income (loss)
|
|
(27.2)
|
|
|
12.2
|
|
|
(8.3)
|
|
Total other comprehensive income (loss), net of tax (note 17)
|
|
89.9
|
|
|
(37.8)
|
|
|
13.3
|
|
Total comprehensive income
|
|
$
|
610.3
|
|
|
$
|
430.3
|
|
|
$
|
350.5
|
|
See accompanying notes to consolidated financial statements.
People’s United Financial, Inc. and Subsidiaries
Consolidated Statements of Changes in Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions, except per
common share data)
|
Preferred
Stock
|
|
Common
Stock
|
|
Additional
Paid-In
Capital
|
|
Retained
Earnings
|
|
Unallocated
ESOP (1)
Common
Stock
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Treasury
Stock
|
|
Total
Stockholders'
Equity
|
Balance at December 31, 2016
|
$
|
244.1
|
|
|
$
|
4.0
|
|
|
$
|
5,446.1
|
|
|
$
|
949.3
|
|
|
$
|
(144.6)
|
|
|
$
|
(195.0)
|
|
|
$
|
(1,162.0)
|
|
|
$
|
5,141.9
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
337.2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
337.2
|
|
Total other comprehensive income,
net of tax (note 17)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13.3
|
|
|
—
|
|
|
13.3
|
|
Common stock issued in Suffolk
Bancorp acquisition (note 2)
|
—
|
|
|
0.2
|
|
|
484.6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
484.8
|
|
Cash dividends on common stock
($0.6875 per share)
|
—
|
|
|
—
|
|
|
—
|
|
|
(227.9)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(227.9)
|
|
Cash dividends on preferred stock
|
—
|
|
|
—
|
|
|
—
|
|
|
(14.1)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(14.1)
|
|
Restricted stock and performance-
based share awards
|
—
|
|
|
—
|
|
|
14.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.1)
|
|
|
14.2
|
|
ESOP common stock committed to
be released (note 18)
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.9)
|
|
|
7.3
|
|
|
—
|
|
|
—
|
|
|
6.4
|
|
Common stock repurchased and
retired upon vesting of restricted
stock awards (note 19)
|
—
|
|
|
—
|
|
|
—
|
|
|
(3.4)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3.4)
|
|
Stock options and related tax benefits
|
—
|
|
|
0.2
|
|
|
67.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
67.5
|
|
Balance at December 31, 2017
|
244.1
|
|
|
4.4
|
|
|
6,012.3
|
|
|
1,040.2
|
|
|
(137.3)
|
|
|
(181.7)
|
|
|
(1,162.1)
|
|
|
5,819.9
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
468.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
468.1
|
|
Total other comprehensive loss,
net of tax (note 17)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(37.8)
|
|
|
—
|
|
|
(37.8)
|
|
Common stock issued in First
Connecticut acquisition (note 2)
|
—
|
|
|
0.3
|
|
486.1
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
486.4
|
Cash dividends on common stock
($0.6975 per share)
|
—
|
|
|
—
|
|
|
—
|
|
|
(243.8)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(243.8)
|
|
Cash dividends on preferred stock
|
—
|
|
|
—
|
|
|
—
|
|
|
(14.1)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(14.1)
|
|
Restricted stock and performance-
based share awards
|
—
|
|
|
—
|
|
|
17.9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
17.9
|
|
ESOP common stock committed to
be released (note 18)
|
—
|
|
|
—
|
|
|
—
|
|
|
(1.0)
|
|
|
7.2
|
|
|
—
|
|
|
—
|
|
|
6.2
|
|
Common stock repurchased and
retired upon vesting of restricted
stock awards (note 19)
|
—
|
|
|
—
|
|
|
—
|
|
|
(2.5)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2.5)
|
|
Stock options exercised
|
—
|
|
|
—
|
|
|
33.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
33.0
|
|
Transition adjustments related to
adoption of new accounting
standards (note 17)
|
—
|
|
|
—
|
|
|
—
|
|
|
37.9
|
|
|
—
|
|
|
(37.3)
|
|
|
—
|
|
|
0.6
|
|
Balance at December 31, 2018
|
244.1
|
|
|
4.7
|
|
|
6,549.3
|
|
|
1,284.8
|
|
|
(130.1)
|
|
|
(256.8)
|
|
|
(1,162.1)
|
|
|
6,533.9
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
520.4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
520.4
|
|
Total other comprehensive income,
net of tax (note 17)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
89.9
|
|
|
—
|
|
|
89.9
|
|
Common stock issued in acquisitions
(note 2):
BSB Bancorp
|
—
|
|
|
0.2
|
|
|
324.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
324.5
|
|
United Financial
|
—
|
|
|
0.4
|
|
|
720.2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
720.6
|
|
Cash dividends on common stock
($0.7075 per share)
|
—
|
|
|
—
|
|
|
—
|
|
|
(274.8)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(274.8)
|
|
Cash dividends on preferred stock
|
—
|
|
|
—
|
|
|
—
|
|
|
(14.1)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(14.1)
|
|
Restricted stock and performance-
based share awards
|
—
|
|
|
—
|
|
|
16.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16.3
|
|
Common stock repurchased (note 14)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2.5)
|
|
|
(2.5)
|
|
ESOP common stock committed to
be released (note 18)
|
—
|
|
|
—
|
|
|
—
|
|
|
(1.5)
|
|
|
7.2
|
|
|
—
|
|
|
—
|
|
|
5.7
|
|
Common stock repurchased and
retired upon vesting of restricted
stock awards (note 19)
|
—
|
|
|
—
|
|
|
—
|
|
|
(2.0)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2.0)
|
|
Stock options exercised
|
—
|
|
|
—
|
|
|
29.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
29.3
|
|
Balance at December 31, 2019
|
$
|
244.1
|
|
|
$
|
5.3
|
|
|
$
|
7,639.4
|
|
|
$
|
1,512.8
|
|
|
$
|
(122.9)
|
|
|
$
|
(166.9)
|
|
|
$
|
(1,164.6)
|
|
|
$
|
7,947.2
|
|
(1)Employee Stock Ownership Plan
See accompanying notes to consolidated financial statements.
People’s United Financial, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31 (in millions)
|
|
2019
|
|
2018
|
|
2017
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
Net income
|
|
$
|
520.4
|
|
|
$
|
468.1
|
|
|
$
|
337.2
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
Depreciation and amortization of premises and equipment
|
|
41.7
|
|
|
36.3
|
|
|
39.1
|
|
Expense related to operating leases
|
|
38.8
|
|
|
36.4
|
|
|
35.2
|
|
Amortization of other acquisition-related intangible assets
|
|
32.5
|
|
|
21.8
|
|
|
30.0
|
|
Provision for loan losses
|
|
28.3
|
|
|
30.0
|
|
|
26.0
|
|
Expense related to share-based awards
|
|
24.9
|
|
|
22.4
|
|
|
19.8
|
|
Deferred income tax expense
|
|
14.3
|
|
|
1.9
|
|
|
25.8
|
|
ESOP common stock committed to be released
|
|
5.7
|
|
|
6.2
|
|
|
6.4
|
|
Net security (gains) losses
|
|
(0.2)
|
|
|
9.8
|
|
|
25.4
|
|
Net gains on sales of acquired loans
|
|
(0.4)
|
|
|
(1.8)
|
|
|
(2.4)
|
|
Net gains on sales of residential mortgage loans
|
|
(1.9)
|
|
|
(1.2)
|
|
|
(3.2)
|
|
Originations of loans held-for-sale
|
|
(180.3)
|
|
|
(188.2)
|
|
|
(261.8)
|
|
Proceeds from sales of loans held-for-sale
|
|
181.9
|
|
|
186.5
|
|
|
287.7
|
|
Net changes in trading debt securities
|
|
1.3
|
|
|
(0.2)
|
|
|
(1.4)
|
|
Excess income tax benefits from stock options exercised
|
|
0.3
|
|
|
1.3
|
|
|
1.1
|
|
Net changes in other assets and other liabilities
|
|
(466.5)
|
|
|
(40.0)
|
|
|
38.1
|
|
Net cash provided by operating activities
|
|
240.8
|
|
|
589.3
|
|
|
603.0
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
Proceeds from sales of equity securities
|
|
1.6
|
|
|
2.3
|
|
|
—
|
|
Proceeds from principal repayments and maturities of
debt securities available-for-sale
|
|
578.5
|
|
|
465.5
|
|
|
562.6
|
|
Proceeds from sales of debt securities available-for-sale
|
|
365.3
|
|
|
313.8
|
|
|
1,305.5
|
|
Proceeds from principal repayments and maturities of
debt securities held-to-maturity
|
|
158.2
|
|
|
185.3
|
|
|
120.9
|
|
Purchases of debt securities available-for-sale
|
|
(827.8)
|
|
|
(726.8)
|
|
|
(603.3)
|
|
Purchases of debt securities held-to-maturity
|
|
(257.9)
|
|
|
(407.4)
|
|
|
(1,580.4)
|
|
Net redemptions of Federal Home Loan Bank stock
|
|
19.3
|
|
|
17.2
|
|
|
27.1
|
|
Net purchases of Federal Reserve Bank stock
|
|
(25.2)
|
|
|
(8.3)
|
|
|
(20.8)
|
|
Proceeds from sales of loans
|
|
51.2
|
|
|
22.3
|
|
|
38.7
|
|
Net principal (disbursements) collections of loans
|
|
(770.3)
|
|
|
244.8
|
|
|
(538.7)
|
|
Purchases of loans
|
|
(71.2)
|
|
|
(37.5)
|
|
|
(17.7)
|
|
Purchases of premises and equipment
|
|
(26.5)
|
|
|
(28.3)
|
|
|
(4.8)
|
|
Purchases of leased equipment, net
|
|
(41.2)
|
|
|
(59.6)
|
|
|
(24.2)
|
|
Proceeds from sales of real estate owned
|
|
13.9
|
|
|
9.1
|
|
|
10.0
|
|
Return of premiums on bank-owned life insurance, net
|
|
2.2
|
|
|
1.0
|
|
|
2.7
|
|
Net cash acquired in acquisitions and dispositions
|
|
519.4
|
|
|
6.2
|
|
|
28.9
|
|
Net cash used in investing activities
|
|
(310.5)
|
|
|
(0.4)
|
|
|
(693.5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
Net (decrease) increase in deposits
|
|
(117.6)
|
|
|
696.6
|
|
|
1,343.1
|
|
Net increase (decrease) in borrowings with terms of three months or less
|
|
647.7
|
|
|
(525.7)
|
|
|
(293.8)
|
|
Repayments of borrowings with terms of more than three months
|
|
(321.2)
|
|
|
(476.7)
|
|
|
(380.7)
|
|
Repayments of notes and debentures
|
|
—
|
|
|
—
|
|
|
(125.0)
|
|
Cash dividends paid on common stock
|
|
(274.8)
|
|
|
(243.8)
|
|
|
(227.9)
|
|
Cash dividends paid on preferred stock
|
|
(14.1)
|
|
|
(14.1)
|
|
|
(14.1)
|
|
Repurchases of common stock
|
|
(4.5)
|
|
|
(2.5)
|
|
|
(3.4)
|
|
Proceeds from stock options exercised
|
|
24.1
|
|
|
27.9
|
|
|
61.8
|
|
Contingent consideration payments
|
|
(0.9)
|
|
|
(1.2)
|
|
|
(1.0)
|
|
Net cash (used in) provided by financing activities
|
|
(61.3)
|
|
|
(539.5)
|
|
|
359.0
|
|
Net (decrease) increase in cash, cash equivalents and restricted cash
|
|
(131.0)
|
|
|
49.4
|
|
|
268.5
|
|
Cash, cash equivalents and restricted cash at beginning of year
|
|
932.0
|
|
|
882.6
|
|
|
614.1
|
|
Cash, cash equivalents and restricted cash at end of year
|
|
$
|
801.0
|
|
|
$
|
932.0
|
|
|
$
|
882.6
|
|
Supplemental Information:
|
|
|
|
|
|
|
Interest payments
|
|
$
|
473.4
|
|
|
$
|
312.3
|
|
|
$
|
195.9
|
|
Income tax payments
|
|
107.7
|
|
|
45.6
|
|
|
112.9
|
|
Significant non-cash transactions:
|
|
|
|
|
|
|
|
|
|
Right-of-use assets obtained in exchange for lessee operating and finance lease liabilities
|
|
91.7
|
|
|
—
|
|
|
—
|
|
Real estate properties acquired by foreclosure
|
|
19.9
|
|
|
7.7
|
|
|
17.2
|
|
Unsettled purchases of securities
|
|
—
|
|
|
4.0
|
|
|
—
|
|
Assets acquired and liabilities assumed in acquisitions and dispositions (note 2):
|
|
|
|
|
|
|
Non-cash assets, excluding goodwill and other acquisition-related intangibles
|
|
9,224.7
|
|
|
3,173.6
|
|
|
2,642.1
|
|
Liabilities
|
|
9,120.4
|
|
|
2,965.1
|
|
|
2,634.1
|
|
Common stock issued in acquisitions
|
|
1,045.1
|
|
|
486.4
|
|
|
484.8
|
|
See accompanying notes to consolidated financial statements.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
|
|
|
NOTE 1 – Summary of Significant Accounting Policies
|
People’s United Financial, Inc. (“People’s United” or the “Company”) is a bank holding company and a financial holding company registered under the Bank Holding Company Act of 1956, as amended, and is incorporated under the state laws of Delaware. People’s United is the holding company for People’s United Bank, National Association (the “Bank”), a national banking association headquartered in Bridgeport, Connecticut. The principal business of People’s United is to provide, through the Bank and its subsidiaries, commercial banking, retail banking and wealth management services to individual, corporate and municipal customers.
The Bank provides a full-range of traditional banking services, including accepting deposits and originating loans, as well as specialized financial services through its non-bank subsidiaries, including: equipment financing provided through People’s Capital and Leasing Corp. (“PCLC”), People’s United Equipment Finance Corp. (“PUEFC”) and LEAF Commercial Capital, Inc. (“LEAF”); brokerage, financial advisory services, investment management services and life insurance provided through People’s Securities, Inc. (“PSI”); investment advisory services and financial management and planning services provided through People’s United Advisors, Inc. (“PUA”) and commercial insurance services provided through People’s United Insurance Agency, Inc. (“PUIA”). The Company’s overall financial results are particularly dependent on economic conditions in New England and New York, which are its primary markets, although economic conditions elsewhere in the United States affect its national equipment financing business.
People’s United is regulated by the Board of Governors of the Federal Reserve System (the “FRB”) and subject to FRB examination, supervision and reporting requirements. The Bank is regulated by the Office of the Comptroller of the Currency (the “OCC”) and subject to OCC examination, supervision and reporting requirements. Deposits are insured up to applicable limits by the Deposit Insurance Fund of the Federal Deposit Insurance Corporation (the “FDIC”).
Basis of Financial Statement Presentation
The accompanying consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) and include the accounts of People’s United and its subsidiaries. All significant intercompany transactions and balances are eliminated in consolidation.
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, which are included in the discussion below, 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.
For purposes of the Consolidated Statements of Cash Flows, cash equivalents include highly-liquid instruments, such as: (i) interest-bearing deposits at the Federal Reserve Bank of New York (the “FRB-NY”); (ii) government-sponsored enterprise (“GSE”) debt securities with an original maturity of three months or less (determined as of the date of purchase); (iii) federal funds sold; (iv) commercial paper; and (v) money market mutual funds. These instruments are reported as short-term investments in the Consolidated Statements of Condition at cost or amortized cost, which approximates fair value. GSE debt securities classified as cash equivalents are held to maturity and carry the implicit backing of the U.S. government, but are not direct obligations of the U.S. government.
Securities
Marketable debt securities (other than those reported as short-term investments) are classified as either trading debt securities, held-to-maturity debt securities or available-for-sale debt securities. Management determines the classification of a security at the time of its purchase and reevaluates such classification at each balance sheet date.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Debt securities purchased for sale in the near term as well as those securities held by PSI (in accordance with the requirements for a broker-dealer) are classified as trading debt securities and reported at fair value with gains and losses reported in non-interest income.
Debt securities for which People’s United has the intent and ability to hold to maturity are classified as held-to-maturity securities and reported at amortized cost. All other debt securities are classified as available-for-sale and reported at fair value with unrealized gains and losses reported on an after-tax basis in stockholders’ equity as a component of accumulated other comprehensive income (loss) (“AOCL”). Premiums (discounts) are amortized (accreted) to interest income for debt securities, using the interest method over the remaining period to contractual maturity, adjusted for the effect of actual prepayments in the case of mortgage-backed and collateralized mortgage obligation (“CMO”) securities.
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.
Debt securities transferred from available-for-sale to held-to-maturity are recorded at fair value at the date of transfer. The unrealized pre-tax gain or loss resulting from the difference between fair value and amortized cost at the transfer date becomes part of the new amortized cost basis of the securities and remains in AOCL. Such unrealized gains or losses are amortized to interest income as an adjustment to yield over the remaining life of the securities, offset by the amortization (accretion) of the premium (discount) resulting from the transfer at fair value, with no effect to net income.
Management conducts a periodic review and evaluation of the debt 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 of the issuer. The amount of the impairment related to other factors is recognized in other comprehensive income. Management has the ability and intent to hold the securities classified as
held-to-maturity until they mature, at which time People’s United expects to receive full value for the securities.
Both Federal Home Loan Bank (“FHLB”) stock and FRB-NY stock are non-marketable equity securities and are, therefore, reported at their respective costs, which equals par value (the amount at which shares have been redeemed in the past). These investments are periodically evaluated for impairment based on, among other things, the capital adequacy of the applicable FHLB or the FRB-NY and their overall financial condition. Equity securities are reported at fair value with gains and losses reported in non-interest income.
Securities Resale and Securities Repurchase Agreements
In securities resale agreements, a counterparty transfers securities to People’s United (as transferee) and People’s United agrees to resell the same securities to the counterparty at a fixed price in the future. In securities repurchase agreements, which include both retail arrangements with customers and wholesale arrangements with other counterparties, People’s United (as transferor) transfers securities to a counterparty and agrees to repurchase the same securities from the counterparty at a fixed price in the future.
People’s United accounts for securities resale agreements as secured lending transactions and securities repurchase agreements as secured borrowings since the transferor maintains effective control over the transferred securities and the transfer meets the other criteria for such accounting. The securities are pledged by the transferor as collateral and the transferee has the right by contract to repledge that collateral provided the same collateral is returned to the transferor upon maturity of the underlying agreement. The fair value of the pledged collateral approximates the recorded amount of the secured loan or borrowing. Decreases in the fair value of the transferred securities below an established threshold require the transferor to provide additional collateral.
Loans Held-for-Sale
Loans held-for-sale are reported at the lower of cost or fair value in the aggregate with any adjustment for net unrealized losses reported in non-interest income. Management identifies and designates as loans held-for-sale certain newly-originated adjustable-rate and fixed-rate residential mortgage loans that meet secondary market requirements, as these loans are originated with the intent to sell. From time to time, management may also identify and designate certain loans previously
held-for-investment as held-for-sale. Such loans are transferred to loans held-for-sale and adjusted to the lower of cost or fair value with the resulting unrealized loss, if any, reported in non-interest income.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Loans
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’ below). All other loans are referred to as ‘originated’ loans.
Basis of Accounting
Originated loans are reported at amortized cost less the allowance for loan losses. Interest on loans is accrued to income monthly based on outstanding principal balances. Loan origination fees and certain direct loan origination costs are deferred, and the net fee or cost is recognized in interest income as an adjustment of yield. Depending on the loan portfolio, amounts are amortized or accreted using the level yield method over either the actual life or the estimated average life of the loan.
Non-accrual Loans
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.
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 December 31, 2019, 2018 or 2017.
Impaired Loans
A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreement, including scheduled principal and interest payments. Impaired loans also include certain loans whose terms have been modified in such a way that they are considered troubled debt restructurings (“TDRs”). Loans are considered TDRs if the borrower is experiencing financial difficulty and is afforded a concession by People’s United, such as, but not limited to: (i) payment deferral; (ii) a reduction of the stated interest rate for the remaining contractual life of the loan; (iii) an extension of the loan’s original contractual term at a stated interest rate lower than the current market rate for a new loan with similar risk; (iv) capitalization of interest; or (v) forgiveness of principal or interest.
TDRs may either be accruing or placed 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 (see further discussion under ‘Acquired Loans’ below).
Impairment is evaluated on a collective basis for pools of retail loans possessing similar risk and loss characteristics and on an individual 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 Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Acquired Loans
Loans acquired in a business combination are initially recorded at fair value with no carryover of an acquired entity’s previously established allowance for loan losses. Fair value of the loans is determined using market participant assumptions in estimating the amount and timing of both principal and interest cash flows expected to be collected, as adjusted for an estimate of future credit losses and prepayments, and then applying a market-based discount rate to those cash flows. Acquired loans are evaluated upon acquisition and classified as either purchased performing or purchased credit impaired (“PCI”).
For purchased performing loans, any premium or discount, representing the difference between the fair value and the outstanding principal balance of the loans, is recognized (using the level yield method) as an adjustment to interest income over the remaining period to contractual maturity or until the loan is repaid in full or sold. Subsequent to the acquisition date, the method utilized to estimate the required allowance for loan losses for these loans is similar to that for originated loans. However, a provision for loan losses is only recorded when the required allowance for loan losses exceeds any remaining purchase discount at the loan level.
PCI loans represent those acquired loans with specific evidence of deterioration in credit quality since origination and for which it is probable that, as of the acquisition date, all contractually required principal and interest payments will not be collected. Such loans are generally accounted for on a pool basis, with pools formed based on the loans’ common risk characteristics, such as loan collateral type and accrual status. Each pool is accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows.
Under the accounting model for PCI loans, the excess of cash flows expected to be collected over the carrying amount of the loans, referred to as the “accretable yield”, is accreted into interest income over the life of the loans in each pool using the level yield method. Accordingly, PCI loans are not subject to classification as non-accrual in the same manner as other loans. Rather, PCI loans are considered to be accruing loans because their interest income relates to the accretable yield recognized at the pool level and not to contractual interest payments at the loan level. The difference between contractually required principal and interest payments and the cash flows expected to be collected, referred to as the “nonaccretable difference”, includes estimates of both the impact of prepayments and future credit losses expected to be incurred over the life of the loans in each pool. As such, charge-offs on PCI loans are first applied to the nonaccretable difference and then to any allowance for loan losses recognized subsequent to acquisition.
Subsequent to acquisition, actual cash collections are monitored relative to management’s expectations and revised cash flow forecasts are prepared, as warranted. These revised forecasts involve updates, as necessary, of the key assumptions and estimates used in the initial estimate of fair value. Generally speaking, expected cash flows are affected by:
•Changes in the expected principal and interest payments over the estimated life — Updates to changes in expected cash flows are driven by the credit outlook and actions taken with borrowers. Changes in expected future cash flows resulting from loan modifications are included in the assessment of expected cash flows;
•Changes in prepayment assumptions — Prepayments affect the estimated life of the loans which may change the amount of interest income, and possibly principal, expected to be collected; and
•Changes in interest rate indices for variable rate loans — Expected future cash flows are based, as applicable, on the variable rates in effect at the time of the assessment of expected cash flows.
A decrease in expected cash flows in subsequent periods may indicate that the loan pool is impaired, which would require the establishment of an allowance for loan losses by a charge to the provision for loan losses. An increase in expected cash flows in subsequent periods serves, first, to reduce any previously established allowance for loan losses by the increase in the present value of cash flows expected to be collected, and results in a recalculation of the amount of accretable yield for the loan pool. The adjustment of accretable yield due to an increase in expected cash flows is accounted for as a change in estimate. The additional cash flows expected to be collected are reclassified from the nonaccretable difference to the accretable yield, and the amount of periodic accretion is adjusted accordingly over the remaining life of the loans in the pool.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
PCI loans may be resolved either through receipt of payment (in full or in part) from the borrower, the sale of the loan to a third party or foreclosure of the collateral. In the event of a sale of the loan, a gain or loss on sale is recognized and reported 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. PCI loans subject to modification are not removed from the pool even if those loans would otherwise be deemed TDRs as the pool, and not the individual loan, represents the unit of account.
Allowance and Provision for Loan Losses
Originated Portfolio
The allowance for loan losses is established through provisions for loan losses charged to income. Losses on loans, including impaired loans, are charged to the allowance for loan losses when all or a portion of a loan is deemed to be uncollectible. Recoveries of loans previously charged off are credited to the allowance for loan losses when realized.
People’s United maintains the allowance for loan losses at a level that is deemed to be appropriate to absorb probable losses inherent in the respective loan portfolios, based on a quarterly evaluation of a variety of factors. These factors include, but are not limited to: (i) People’s United’s historical loan loss experience and recent trends in that experience; (ii) risk ratings assigned by lending personnel to commercial real estate loans, commercial and industrial loans, and equipment financing loans, and the results of ongoing reviews of those ratings by People’s United’s independent loan review function; (iii) an evaluation of delinquent 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 commercial loans collectively evaluated for impairment; (ii) an allowance for retail loans collectively evaluated for impairment; and (iii) a specific allowance for loans individually evaluated for impairment, including loans classified as TDRs.
Commercial Loans Collectively Evaluated for Impairment. The Company establishes a loan loss allowance for its commercial loans collectively evaluated for impairment using a methodology that incorporates (i) the probability of default for a given loan risk rating and (ii) historical loss-given-default data, both derived using appropriate look-back periods and loss emergence periods. In accordance with the Company’s loan risk rating system, each commercial loan 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 and industrial, commercial real estate and equipment financing components of the loan portfolio.
In establishing the allowance for loan losses for commercial loans collectively evaluated for impairment, the Company also gives consideration to certain qualitative factors, including the macroeconomic environment and any potential imprecision inherent in its loan loss model that may result from having limited historical loan loss data which, in turn, may result in inaccurate probability of default and loss-given-default estimates. In this manner, historical portfolio experience, as described above, is not adjusted and the allowance for loan losses always includes a component attributable to qualitative factors, the degree of which may change from period to period as such qualitative factors indicate improving or worsening trends. The Company evaluates the qualitative factors on a quarterly basis in order to conclude that they continue to be appropriate. There were no significant changes in our approach to determining the qualitative component of the related allowance for loan losses during 2019.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Retail Loans Collectively Evaluated for Impairment. Pools of retail loans possessing similar risk and loss characteristics are collectively evaluated for impairment. These loan pools include residential mortgage, home equity and other consumer loans that are not assigned individual loan risk ratings. Rather, the assessment of these portfolios, and the establishment of the related allowance for loan losses, is based upon a consideration of (i) historical portfolio loss experience over an appropriate look-back period and loss emergence period and (ii) certain qualitative factors.
The qualitative component of the allowance for loan losses for retail loans collectively evaluated for impairment is intended to incorporate risks inherent in the portfolio, economic uncertainties, regulatory requirements and other subjective factors such as changes in underwriting standards. Accordingly, consideration is given to: (i) present and forecasted economic conditions, including unemployment rates; (ii) changes in industry trends, including the impact of new regulations, (iii) trends in property values; (iv) broader portfolio indicators, including delinquencies, non-performing loans, portfolio concentrations, and trends in the volume and terms of loans; and (v) portfolio-specific risk characteristics.
Portfolio-specific risk characteristics considered include: (i) collateral values/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.), 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 retail loans collectively evaluated for impairment, 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. 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 2019.
Individually Impaired Loans. The allowance for loan losses also includes specific allowances for individually impaired loans. Generally, the Company’s impaired loans consist of (i) classified commercial loans in excess of $1 million that have been placed on non-accrual status and (ii) loans classified as TDRs. Individually impaired loans are measured based upon observable market prices; the present value of expected future cash flows discounted at the loan’s original effective interest rate; or, in the case of collateral dependent loans, fair value of the collateral (based on appraisals and other market information) less cost to sell. If the recorded investment in a loan exceeds the amount measured as described in the preceding sentence, a specific allowance for loan losses would be established as a component of the overall allowance for loan losses or, in the case of a collateral dependent loan, 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).
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
In determining the allowance for loan losses, People’s United gives appropriate consideration to the age of appraisals through its regular evaluation of other relevant qualitative and quantitative information. Specifically, between scheduled appraisals, property values are monitored within the commercial portfolio by reference to current originations of collateral dependent loans and the related appraisals obtained during underwriting as well as by reference to recent trends in commercial property sales as published by leading industry sources. Property values are monitored within the residential mortgage and home equity portfolios by reference to available market indicators, including real estate price indices within the Company’s primary lending areas.
In most situations where a guarantee exists, the guarantee arrangement is not a specific factor in the assessment of the related allowance for loan losses. However, the assessment of a guarantor’s credit strength is reflected in the Company’s internal loan risk ratings which, in turn, are an important factor in its allowance for loan loss methodology for loans within the commercial and industrial, and commercial real estate portfolios.
People’s United did not change its methodologies with respect to determining the allowance for loan losses during 2019. As part of its ongoing assessment of the allowance for loan losses, People’s United regularly makes refinements to certain underlying assumptions used in its methodologies. However, such refinements did not have a material impact on the allowance for loan losses or the provision for loan losses as of or for the year ended December 31, 2019.
While People’s United seeks to use the best available information to make these determinations, future adjustments to the allowance for loan losses may be necessary based on changes in economic conditions, results of regulatory examinations, further information obtained regarding known problem loans, the identification of additional problem loans and other factors.
Acquired Portfolio
Acquired loans are evaluated upon acquisition and classified as either purchased performing or PCI, which represents those acquired loans with specific evidence of deterioration in credit quality since origination and for which it is probable that, as of the acquisition date, all contractually required principal and interest payments will not be collected. PCI loans are generally accounted for on a pool basis, with pools formed based on the loans’ common risk characteristics, such as loan collateral type and accrual status. Each pool is accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows.
For purchased performing loans, the required allowance for loan losses is determined in a manner similar to that for originated loans with a provision for loan losses only recorded when the required allowance for loan losses exceeds any remaining purchase discount at the loan level. For PCI loans, the difference between contractually required principal and interest payments at the acquisition date and the undiscounted cash flows expected to be collected at the acquisition date is referred to as the “nonaccretable difference”, which includes an estimate of future credit losses expected to be incurred over the life of the loans in each pool. A decrease in the expected cash flows in subsequent periods requires the establishment of an allowance for loan losses at that time.
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.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
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.
Revenue from Contracts with Customers
The Company earns revenue from a variety of sources. For revenue streams other than (i) net interest income and (ii) other revenues associated with financial assets and financial liabilities, including loans, leases, securities and derivatives, the Company generally applies the following steps with respect to revenue recognition: (i) identify the contract; (ii) identify the performance obligation; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligation; and (v) recognize revenue when the performance obligation is satisfied. The Company’s contracts with customers are generally short-term in nature, typically due within one year or less, or cancellable by the Company or the customer upon a short notice period. Performance obligations for customer contracts are generally satisfied at a single point in time, typically when the transaction is complete, or over time. For performance obligations satisfied over time, the value of the products/services transferred to the customer are evaluated to determine when, and to what degree, performance obligations have been satisfied. Payments from customers are typically received, and revenue recognized, concurrent with the satisfaction of our performance obligations. In most cases, this occurs within a single financial reporting period. For payments received in advance of the satisfaction of our performance obligations, revenue recognition is deferred until such time the performance obligations have been satisfied. In cases where a payment has not been received despite satisfaction of our performance obligations, an estimate of the amount due is accrued in the period our performance obligations have been satisfied. For contracts with variable components, amounts for which collection is probable are accrued.
The following summarizes the Company’s performance obligations for the more significant recurring revenue streams included in non-interest income:
Service charges and fees on deposit accounts — Service charges and fees on deposit accounts consist of monthly account maintenance and other related fees (bank service charges) as well as cash management fees, which are earned for services related to payment processing, overdrafts, non-sufficient funds and other deposit account activity. The Company’s performance obligation for monthly service fees is generally satisfied, and the related revenue recognized, over the period in which the service is provided. Other deposit account related fees, including overdraft charges and cash management fees, are largely transactional-based, and therefore, the Company’s performance obligation is satisfied, and related revenue recognized, at a point in time. Payment for service charges on deposit accounts is primarily received immediately or in the following month through a direct charge to customers’ accounts.
Card-based and other non-deposit fees — Card-based and other non-deposit fees are comprised, primarily, of debit and credit card income and ATM fees as well as certain commercial banking lending fees. Debit and credit card income is primarily comprised of interchange fees earned whenever the Company’s debit and credit cards are processed through card payment networks. ATM fees and commercial banking lending fees are largely transactional-based and, therefore, the Company’s performance obligation is satisfied, and related revenue recognized, at a point in time. Payment is typically received immediately or in the following month.
Investment management fees — Investment management income is primarily comprised of fees earned from the management and administration of trusts and other customer assets. The Company’s performance obligation is generally satisfied over time and the resulting fees are recognized monthly, based upon the month-end market value of the assets under management and the applicable fee rate. Payment is generally received a few days after month end through a direct charge to customers’ accounts. The Company’s performance obligation for these transactional-based services is generally satisfied, and the related revenue recognized, at a point in time (i.e. as incurred). Payment is received shortly after services are rendered.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Insurance commissions and fees — The Company’s insurance revenue, which represents commissions earned for performing broker- and agency-related services, has two distinct performance obligations. The first performance obligation is the selling of the policy as an agent for the carrier. This performance obligation is satisfied upon binding of the policy. The second performance obligation is the ongoing servicing of the policy which is satisfied over the life of the policy. For employee benefits, the payment is typically received monthly. For property and casualty, payments can vary but are typically received at, or in advance of, the policy period.
Brokerage commissions and fees — Brokerage commissions and fees primarily relate to investment advisory and brokerage activities as well as the sale of mutual funds and annuities. The Company’s performance obligation for investment advisory services is generally satisfied, and the related revenue recognized, over the period in which the services are provided. Fees earned for brokerage activities, such as facilitating securities transactions, are generally recognized at the time of transaction execution. The performance obligation for mutual fund and annuity sales is satisfied upon sale of the underlying investment, and therefore, the related revenue is primarily recognized at the time of sale. Payment for these services is typically received immediately or in advance of the service.
The revenue streams noted above represent approximately $288 million (or 67%) of total non-interest income for the year ended December 31, 2019, and approximately $270 million (or 74%) for the year ended December 31, 2018. Of these amounts, approximately 40% in both 2019 and 2018 is allocated to the Commercial Banking operating segment and approximately 30% in both 2019 and 2018 is allocated to each of the Retail Banking and Wealth Management operating segments.
The Company generally acts in a principal capacity, on its own behalf, in the majority of its contracts with customers. In such transactions, revenue and the related costs to provide our services are recognized on a gross basis in the financial statements. In some cases, the Company may act in an agent capacity, deriving revenue by assisting other entities in transactions with our customers. In such transactions, revenue and the related costs to provide our services are recognized on a net basis in the financial statements. The extent of the Company’s activities for which it acts as an agent (and for which the related revenue and expense has been presented on a net basis) is immaterial.
Bank-Owned Life Insurance
Bank-owned life insurance (“BOLI”) represents the cash surrender value of life insurance policies purchased on the lives of certain key executives and former key executives. BOLI funds are generally invested in separate accounts and are supported by a stable wrap agreement to fully insulate the underlying investments against changes in fair value. Increases in the cash surrender value of these policies and death benefits in excess of the related invested premiums are included in non-interest income in the Consolidated Statements of Income. The Company’s BOLI policies have been underwritten by highly-rated third party insurance carriers and the investments underlying these policies are deemed to be of low-to-moderate market risk.
Premises and Equipment
Premises and equipment are reported at cost less accumulated depreciation and amortization, except for land, which is reported at cost. Buildings, data processing and other equipment, computer software, furniture and fixtures are depreciated using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized using the straight-line method over the shorter of the remaining lease term, the estimated useful life of the improvements or 10 years. Capitalized software development costs are amortized on a straight-line basis over the estimated useful life of the software. Generally, the estimated useful lives are as follows: buildings — 40 years; data processing and other equipment — 3 to 5 years; computer software — 3 to 5 years; and furniture and fixtures — 10 years.
Goodwill and Other Acquisition-Related Intangible Assets
An acquirer in a business combination is required, upon initially obtaining control of another entity, to recognize the assets, liabilities and any non-controlling interest in the acquiree at fair value as of the acquisition date. Contingent consideration, if any, is also recognized and measured at fair value on the date of acquisition. In addition, the accounting standards for business combinations require that: (i) acquisition-related transaction costs be expensed as incurred; (ii) specific requirements be met in order to accrue for a restructuring plan as part of the acquisition; (iii) certain pre-acquisition contingencies be recognized at fair value; and (iv) acquired loans be recorded at fair value as of the acquisition date without recognition of an allowance for loan losses.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Intangible assets are recognized in an amount equal to the excess of the consideration transferred over the fair value of the tangible net assets acquired. “Acquisition-related intangible assets” are separately identified, recognized and amortized, where appropriate, for assets such as trade names, certain contractual agreements and the estimated values of acquired core deposits and/or customer relationships. Mutual fund management contract intangibles recognized by People’s United are deemed to have indefinite useful lives and, accordingly, are not amortized. The remaining intangible asset is recognized as goodwill.
Goodwill and indefinite-lived intangible assets are not amortized but, rather, are reviewed for impairment at least annually, with impairment losses recognized as a charge to expense when they occur. Acquisition-related intangible assets other than goodwill and indefinite-lived intangible assets are amortized to expense over their estimated useful lives in a manner consistent with that in which the related benefits are expected to be realized, and are periodically reviewed by management to assess recoverability, with impairment losses recognized as a charge to expense if carrying amounts exceed fair values.
The Company’s trade name intangibles are amortized on either (i) an accelerated basis over a period of approximately
20 years or (ii) a straight-line basis over 5 years. Core deposit intangibles are amortized on an accelerated basis over a period ranging from 6 to 10 years. Customer relationship intangibles are amortized on a straight-line basis over the estimated remaining average life of those relationships, which ranges from 10 to 15 years from the respective acquisition dates. Intangibles stemming from contractual agreements, such as favorable lease and non-compete agreements, are amortized on a straight-line basis over the remaining term of the respective agreements.
Goodwill is evaluated for impairment at the reporting unit level. 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 quantitative impairment test as described below.
The quantitative test is used to identify potential impairment, and involves comparing each reporting unit’s estimated fair value to its carrying amount, including goodwill. If the estimated fair value of a reporting unit exceeds its carrying amount, goodwill is not deemed to be impaired. Should the carrying amount of the reporting unit exceed its estimated fair value, an impairment loss shall be recognized in an amount equal to that excess, not to exceed the carrying amount of goodwill. At this time, none of the Company’s identified reporting units are at risk of failing the quantitative goodwill impairment test.
The Company estimates the fair value of its reporting units based on an appropriate weighting of values based on (i) a present-value measurement technique (discounted cash flow analysis based on internal forecasts) and (ii) market-based trading and transaction multiples. The discounted cash flow analysis is based on significant assumptions and judgments including future growth rates and discount rates reflecting management’s assessment of market participant views of the risks associated with the projected cash flows of the reporting units. The market-based trading and transaction multiples are derived from the market prices of stocks of companies that are actively traded and engaged in the same or similar businesses as the Company and the respective reporting unit. The derived multiples are then applied to the reporting unit’s financial metrics to produce an indication of value. Differences in the identification of reporting units or in the selection of valuation techniques and related assumptions could result in materially different evaluations of goodwill impairment.
In conducting its 2019 and 2018 goodwill impairment evaluations (as of the annual October 1st evaluation date), People’s United elected to perform the optional qualitative assessment for all three reporting units. In 2017, People’s United elected to perform the optional qualitative assessment for both the Commercial Banking and Retail Banking reporting units and, upon doing so, concluded that performance of the quantitative impairment test was not required. The quantitative impairment test was elected for purposes of the 2017 goodwill impairment evaluation for the Wealth Management reporting unit as a result of the acquisition of Gerstein, Fisher & Associates, Inc., which occurred subsequent to performance of the Company’s 2016 impairment analysis.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Real Estate Owned
Real estate owned (“REO”) properties acquired through foreclosure or deed-in-lieu of foreclosure are recorded initially at the lower of cost or estimated fair value less costs to sell. Any write-down of the recorded investment in the related loan is charged to the allowance for loan losses upon transfer to REO. Thereafter, an allowance for REO losses is established for any further declines in the property’s value. This allowance is increased by provisions charged to income and decreased by
charge-offs for realized losses. Management’s periodic evaluation of the adequacy of the allowance is based on an analysis of individual properties, as well as a general assessment of current real estate market conditions.
Income Taxes
Deferred taxes are recognized for the estimated future tax effects attributable to “temporary differences” and tax loss carryforwards. Temporary differences are differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. A deferred tax liability is recognized for all temporary differences that will result in future taxable income. A deferred tax asset is recognized for all temporary differences that will result in future tax deductions and for all tax loss carryforwards, subject to reduction of the asset by a valuation allowance in certain circumstances. This valuation allowance is recognized if, based on an analysis of available evidence, management determines that it is more likely than not that some portion or all of the deferred tax asset will not be realized. The valuation allowance is subject to ongoing adjustment based on changes in circumstances that affect management’s judgment about the realizability of the deferred tax asset.
Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to future taxable income. The effect on deferred tax assets and liabilities of a change in tax laws or rates is recognized in income tax expense in the period that includes the enactment date of the change. Effective January 1, 2017, tax benefits attributable to deductions in excess of financial statement amounts arising from the exercise of non-statutory stock options are included as a component of income tax expense (previously credited to additional paid-in capital).
Individual tax positions taken or expected to be taken on a tax return must satisfy certain criteria in order for some or all of the related tax benefits to be recognized in the financial statements. Specifically, a recognition threshold of
more-likely-than-not must be met in order to recognize those tax benefits.
Earnings Per Common Share
Basic earnings per common share (“EPS”) excludes dilution and is computed by dividing earnings attributable to common shareholders by the weighted average number of common shares outstanding for the year. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock (such as stock options and performance shares) were exercised or converted into additional common shares that would then share in the earnings of the entity. Diluted EPS is computed by dividing earnings attributable to common shareholders by the weighted average number of common shares outstanding for the year, plus an incremental number of common-equivalent shares computed using the treasury stock method.
Unvested share-based payment awards, which include the right to receive non-forfeitable dividends or dividend equivalents, are considered to participate with common shareholders 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 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.
Derivative Financial Instruments and Hedging Activities
People’s United uses derivative financial instruments as components of its market risk management (principally to manage interest rate risk (“IRR”)). Certain other derivatives are entered into in connection with transactions with commercial customers. Derivatives are not used for speculative purposes.
All derivatives are recognized as either assets or liabilities in the Consolidated Statements of Condition, reported at fair value and presented on a gross basis. Until a derivative is settled, a favorable change in fair value results in an unrealized gain that is recognized as an asset, while an unfavorable change in fair value results in an unrealized loss that is recognized as a liability.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
The Company generally applies hedge accounting to its derivatives used for market risk management purposes. Hedge accounting is permitted only if specific criteria are met, including a requirement that a highly effective relationship exist between the derivative instrument and the hedged item, both at inception of the hedge and on an ongoing basis. The hedge accounting method depends upon whether the derivative instrument is classified as a fair value hedge (i.e. hedging an exposure related to a recognized asset or liability, or a firm commitment) or a cash flow hedge (i.e. hedging an exposure related to the variability of future cash flows associated with a recognized asset or liability, or a forecasted transaction). Changes in the fair value of effective fair value hedges are recognized in current earnings (with the change in fair value of the hedged asset or liability also recorded in earnings). Changes in the fair value of effective cash flow hedges are recognized in other comprehensive income (loss) until earnings are affected by the variability in cash flows of the designated hedged item. Ineffective portions of hedge results are recognized in current earnings. Changes in the fair value of derivatives for which hedge accounting is not applied are recognized in current earnings.
People’s United formally documents at inception all relationships between the derivative instruments and the hedged items, as well as its risk management objectives and strategies for undertaking the hedge transactions. This process includes linking all derivatives that are designated as hedges to specific assets and liabilities, or to specific firm commitments or forecasted transactions. People’s United also formally assesses, both at inception of the hedge and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in the fair values or cash flows of the hedged items. If it is determined that a derivative is not highly effective or has ceased to be a highly effective hedge, People’s United would discontinue hedge accounting prospectively. Gains or losses resulting from the termination of a derivative accounted for as a cash flow hedge remain in AOCL and are amortized to earnings over the remaining period of the former hedging relationship, provided the hedged item continues to be outstanding or it is probable the forecasted transaction will occur.
People’s United uses the dollar offset method, regression analysis and scenario analysis to assess hedge effectiveness at inception and on an ongoing basis. Such methods are chosen based on the nature of the hedge strategy and are used consistently throughout the life of the hedging relationship.
Certain derivative financial instruments are offered to commercial customers to assist them in meeting their financing and investing objectives and for their risk management purposes. These derivative financial instruments consist primarily of interest rate swaps and caps, but also include foreign exchange contracts. The interest rate and foreign exchange risks associated with customer interest rate swaps and caps and foreign exchange contracts are mitigated by entering into similar derivatives having essentially offsetting terms with institutional counterparties.
Interest rate-lock commitments extended to borrowers relate to the origination of residential mortgage loans. To mitigate the IRR inherent in these commitments, People’s United enters into mandatory delivery and best efforts contracts to sell adjustable-rate and fixed-rate residential mortgage loans (servicing released). Forward commitments to sell and interest
rate-lock commitments on residential mortgage loans are considered derivatives and their respective estimated fair values are adjusted based on changes in interest rates.
Changes in the fair value of derivatives for which hedge accounting is not applied are recognized in current earnings, including customer derivatives, interest-rate lock commitments and forward sale commitments.
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 discussed in Note 23, offset asset and liabilities under such arrangements in the Consolidated Statements of Condition.
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. and Subsidiaries
Notes to Consolidated Financial Statements
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 and CMO securities);
◦quoted prices for identical or similar assets or liabilities in less active markets (such as certain U.S. and government agency debt securities, and corporate and municipal debt securities that trade infrequently); and
◦other inputs that (i) are observable for substantially the full term of the asset or liability (e.g. interest rates, yield curves, prepayment speeds, default rates, etc.) or (ii) can be corroborated by observable market data (such as interest rate and currency derivatives and certain other securities).
•Level 3 — Valuation techniques that require unobservable inputs that are supported by little or no market activity and are significant to the fair value measurement of the asset or liability (such as pricing models, discounted cash flow methodologies and similar techniques that typically reflect management’s own estimates of the assumptions a market participant would use in pricing the asset or liability).
People’s United maintains policies and procedures to value assets and liabilities using the most relevant data available.
Stock-Based Compensation
People’s United’s stock-based compensation plans provide for awards of stock options, restricted stock and performance shares to directors, officers and employees. Costs resulting from the issuance of such share-based payment awards are required to be recognized in the financial statements based on the grant date fair value of the award. Stock-based compensation expense is recognized over the requisite service period, which is generally the vesting period.
New Accounting Standards
Standards effective in 2019
Accounting for Leases
In February 2016, the Financial Accounting Standards Board (the “FASB”) amended its standards with respect to the accounting for leases. The amended guidance serves to replace all current GAAP guidance on this topic and requires that an operating lease be recognized on the statement of condition as a right-of-use (“ROU”) asset along with a corresponding liability representing the rent obligation. Key aspects of current lessor accounting generally remain unchanged from existing guidance, although the definition of eligible initial direct costs (“IDC”) has been amended. The guidance became effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018 (January 1, 2019 for People’s United) and, as originally issued, required the use of the modified retrospective transition approach for existing leases that have not expired before the date of initial application.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
In July 2018, the FASB issued two targeted improvements to the standard with the objective of reducing the cost and complexity of implementing the guidance. These amendments, which have the same effective date and transition requirements as the new lease standard, serve to (i) introduce an optional transition method allowing entities to recognize a cumulative-effect transition adjustment to the opening balance of retained earnings in the period of adoption rather than in the earliest period presented and (ii) provide a practical expedient whereby lessors can elect, by class of underlying asset, to not separate lease and related non-lease components if certain criteria are met.
The Company elected the optional transition method which results in the modified retrospective approach being applied on January 1, 2019 (as opposed to January 1, 2017). The Company also elected certain transition relief options provided in the standard, including the package of practical expedients. These relief options allow the Company to forego (i) the recognition of ROU assets and lease liabilities arising from short-term leases (i.e. leases with terms of twelve months or less) and (ii) a reassessment as to: (a) whether expired or existing contracts are or contain leases; (b) the lease classification for expired or existing leases; and (c) whether previously capitalized IDC for existing leases would qualify for capitalization under the standard. The Company did not elect the hindsight practical expedient which allows entities to use hindsight when determining lease term and impairment of ROU assets.
The Company identified several areas that are within the scope of the guidance, including (i) its contracts with respect to leased real estate and office equipment and (ii) lease agreements entered into with customers of the Company’s equipment financing businesses.
The most significant impact of adopting the guidance relates to real estate (primarily branch locations) and office equipment subject to non-cancelable operating lease agreements entered into by the Company as lessee. The amount of the ROU assets and corresponding lease liabilities recorded upon adoption were based, primarily, on the present value of unpaid future minimum lease payments, the amount of which is dependent upon the population of leases in effect at the date of adoption, as well as assumptions with respect to renewals and/or extensions and the interest rate used to discount the future lease obligations. The Federal banking agencies have indicated that to the extent a ROU asset arises due to a lease of a tangible asset (e.g. building or equipment), the asset should be: (i) treated as a tangible asset not subject to deduction from regulatory capital; (ii) risk-weighted at 100%; and (iii) included in total assets for leverage capital purposes.
As it relates to lease agreements entered into with equipment financing customers, and for which the Company acts as lessor, the impact principally relates to the definition of eligible IDC under the new guidance. Specifically, the standard maintains a narrower definition of IDC which will result in the Company recognizing immediately (rather than deferring) certain lease origination-related expenses. Such expenses would be offset by the recognition of a higher yield on the underlying leases over their contractual term.
The guidance was adopted on January 1, 2019 and resulted in the recognition of (i) operating lease liabilities totaling $268.8 million, based on the present value of the remaining minimum lease payments, determined using a discount rate as of the effective date, and (ii) corresponding ROU assets totaling $248.5 million, based upon the operating lease liabilities, adjusted for prepaid and deferred rent, and liabilities associated with lease termination costs. This transition adjustment served to increase risk-weighted assets, resulting in an approximate 5 to 10 basis point decrease in the risk-based capital ratios of both the Company and the Bank at that time. While the adoption of the guidance did not have a material impact on the Company’s Consolidated Statements of Income or Consolidated Statements of Cash Flows, the Company has, where appropriate, modified its business processes, systems and internal controls in order to support the recognition, measurement and disclosure requirements of the new standard. Expanded disclosures about the nature and terms of lease agreements, which are required prospectively, have been included in Note 6.
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, became effective for People's United on January 1, 2019 and did not have a significant impact on the Company’s Consolidated Financial Statements.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Derivatives and Hedging
In August 2017, the FASB amended its standards with respect to the accounting for derivatives and hedging, simplifying existing guidance in order to enable companies to more accurately portray the economic effects of risk management activities in the financial statements and enhancing the transparency and understandability of hedge results through improved disclosures. This new guidance became effective on January 1, 2019 for People’s United and did not have a significant impact on the Company’s Consolidated Financial Statements.
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income
In February 2018, as a result of the enactment of the Tax Cuts and Jobs Act (the “Act”), the FASB issued new accounting guidance providing entities with the option to reclassify, from accumulated other comprehensive income to retained earnings, certain “stranded tax effects” resulting from application of the Act. An entity that elects to do so must provide the following disclosures in the period of adoption: (i) that an election was made to reclassify the income tax effects of the Act from accumulated other comprehensive income to retained earnings and (ii) a description of other income tax effects related to the application of the Act that were reclassified from accumulated other comprehensive income to retained earnings, if any
(e.g. income tax effects other than the effect of the change in the U.S. federal corporate income tax rate on gross deferred tax amounts and related valuation allowances). Regardless of whether an entity elects to adopt the guidance or not it is required to disclose its accounting policy for releasing income tax effects from accumulated other comprehensive income (e.g. the portfolio approach or the security-by-security approach).
The guidance is effective for all organizations for fiscal years beginning after December 15, 2018 (January 1, 2019 for People’s United), including interim periods within those fiscal years, and early adoption is permitted. Entities electing to apply the guidance should do so (i) as of the beginning of the period of adoption or (ii) retrospectively to each period in which the effect of the change in the U.S. federal corporate income tax rate is recognized.
The Company elected to early adopt this amendment effective January 1, 2018 (for the reporting period ending on March 31, 2018). Upon adoption, $37.9 million, representing the income tax effects of the Act as well as the indirect impacts from the decreased federal tax effect on future state tax benefits, was reclassified from AOCL to retained earnings. The reclassification adjustment, which related to: (i) the net actuarial loss on defined benefit pension and postretirement plans; (ii) the net unrealized loss on debt securities available-for-sale and debt securities transferred to held-to-maturity; and (iii) the net unrealized loss on derivatives accounted for as cash flow hedges, served to increase regulatory capital by $37.9 million, which resulted in an approximate 11 basis point increase in the risk-based capital ratios of both the Company and the Bank at that time.
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 carried at amortized cost, as well as available-for-sale debt securities and purchased financial assets with credit deterioration (“PCD assets”). The amendment is to be applied through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (that is, a modified-retrospective approach). For certain assets (such as debt securities for which other-than-temporary impairment has been recognized before the effective date and PCD assets), a prospective transition approach is required. For existing PCI assets, upon adoption, the amortized cost basis will be adjusted to reflect the addition of the allowance for credit losses (“ACL”). This transition relief avoids the need for a reporting entity to reassess its purchased financial assets that exist as of the date of adoption in order to determine whether they would have met, at acquisition, the new criteria of ‘more-than insignificant’ credit deterioration since origination. The transition relief also allows an entity to accrete the remaining noncredit discount (based on the revised amortized cost basis) into interest income over the life of the related asset using the interest method.
For public business entities, this new amendment is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019 (January 1, 2020 for People’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 has not elected that option.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
To assist in implementing the standard, the Company formed a cross-functional working group, comprised of individuals from various disciplines, including credit, risk management, information technology and finance. The implementation activities of the working group were subject to the Company’s established corporate governance and oversight structure. Initially, some of the more important activities of the working group included: (i) purchasing and installing a third-party vendor solution to aid in application of the standard; (ii) establishing the Company’s portfolio segmentation; (iii) fulfilling historical data requirements necessary to comply with the standard; and (iv) developing and testing loss estimation models leveraged from existing credit models used to comply with other regulatory requirements. Subsequently, the working group tested, refined and validated its loss estimation framework during parallel runs that involved a comprehensive assessment of: (i) model functionality;
(ii) internal control design and effectiveness; and (iii) related governance activities. The working group is currently in the final stages of implementation, documenting the relevant processes, systems, internal controls and data sources necessary to support the requirements of the new standard, including related disclosures, and executing established review and approval protocols.
Under the standard, the Company will determine the ACL based on its historical loss experience, current
borrower-specific risk characteristics, forecasts of future economic conditions and other relevant factors. In doing so, the Company will utilize a two-year reasonable and supportable forecast period followed by a one-year period over which estimated losses will revert to historical loss experience for the remaining life of the loan. As a result of the required change to determining estimated credit losses from an “incurred loss” model to a “life of loan” model, the new guidance can be expected to result in an increase in the allowance for loan losses, particularly for longer duration portfolios. That said, any estimate of expected credit losses will be dependent upon portfolio size, composition and credit quality, as well as economic conditions and forecasts at that time.
Based upon forecasted economic conditions and portfolio balances existing as of December 31, 2019, the Company expects to record a pre-tax adjustment to retained earnings of approximately $60 million, representing the aggregate effect of adoption on the ACL for loans and securities as well as the reserve for unfunded commitments. The Company also expects to record an adjustment of approximately $30 million to the amortized cost basis of its existing PCI loans to reflect the addition of the ACL on such loans.
The increase in aggregate loan allowance levels is driven, primarily, by higher reserve requirements associated with the Company’s retail portfolios (i.e. residential mortgage and home equity) due to the difference between the loss emergence periods of these portfolios under the incurred loss model and the expected remaining life of such loans as required by the standard, partially offset by lower reserve requirements associated with certain of the Company’s commercial portfolios, which generally have shorter contractual maturities. The Company’s held-to-maturity debt securities portfolio consists primarily of agency-backed securities and highly-rated municipal and corporate bonds, all of which inherently have minimal non-payment risk.
The adjustments noted above serve to reduce regulatory capital ratios for both the Holding Company and the Bank by approximately 10 basis points. The Company has elected to phase-in, over three years, the day-one regulatory capital effects of the standard in accordance with the Federal banking agencies final rule issued in December 2018.
Simplifying the Test for Goodwill Impairment
In January 2017, the FASB amended its standards with respect to goodwill, simplifying how an entity is required to conduct the impairment assessment by eliminating Step 2, which requires a hypothetical purchase price allocation, from the goodwill impairment test. Instead, goodwill impairment will now be measured as the amount by which a reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of goodwill. An entity will still have the option to perform a qualitative assessment to determine if a quantitative impairment test is necessary. For public business entities, this new guidance is effective in fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019 (January 1, 2020 for People’s United) and is to be applied prospectively. Early adoption is permitted for any impairment tests performed after January 1, 2017. This amendment, which the Company elected to early adopt effective January 1, 2018, did not have a significant impact on the Company’s Consolidated Financial Statements.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Disclosure Requirements — Fair Value Measurement
In August 2018, the FASB issued targeted amendments that serve to eliminate, add and modify certain disclosure requirements for fair value measurements. Among the changes, entities are no longer required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but are required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. These amendments are effective for interim and annual reporting periods beginning after December 15, 2019 (January 1, 2020 for People’s United) and early adoption is permitted. Entities may also elect to (i) early adopt the eliminated and/or modified disclosure requirements and (ii) delay adoption of the new disclosure requirements until their effective date. The provisions set forth in this guidance, which the Company elected to early adopt in 2018, have been reflected in Note 20 (as applicable) and did not have a significant impact on the Company’s Consolidated Financial Statements.
Standards effective in 2021
Disclosure Requirements — Defined Benefit Plans
In August 2018, the FASB issued targeted amendments that serve to make minor changes to the disclosure requirements for employers that sponsor defined benefit pension and/or other postretirement benefit plans. More specifically, the amendments (i) remove disclosures that are no longer considered cost beneficial, (ii) clarify the specific requirements of selected disclosures and (iii) add disclosure requirements identified as relevant. These amendments are effective for fiscal years ending after December 15, 2020 (January 1, 2021 for People’s United) and early adoption is permitted. The provisions set forth in this guidance, which the Company elected to early adopt in 2018, have been reflected in Note 18 (as applicable) and did not have a significant impact on the Company’s Consolidated Financial Statements.
Simplifying the Accounting for Income Taxes
In December 2019, the FASB amended its standards with respect to income taxes, simplifying the accounting in several areas, including intra-period tax allocation, deferred tax liabilities related to outside basis differences, and year-to-date losses in interim periods, among others. For public business entities, this new guidance is effective in fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020 (January 1, 2021 for People’s United) and early adoption is permitted. If an entity elects to early adopt, it must adopt all changes as a result of the guidance. Adoption of this standard is not expected to have a significant impact on the Company’s Consolidated Financial Statements.
|
|
|
NOTE 2 – Acquisitions and Dispositions
|
Acquisitions Completed in 2019
United Financial Bancorp, Inc.
Effective November 1, 2019, People’s United completed its acquisition of United Financial Bancorp, Inc. (“United Financial”) based in Hartford, Connecticut. The fair value of the consideration transferred in the United Financial acquisition totaled $720.6 million and consisted of 44.4 million shares of People’s United common stock. At the acquisition date, United Financial operated 58 branch locations concentrated in central Connecticut and western Massachusetts.
The assets acquired and liabilities assumed in this transaction were recorded by People’s United at their estimated fair values as of the effective date. The excess of the purchase price over the estimated fair value of the net assets acquired was recorded as goodwill and allocated to the Commercial Banking and Retail Banking segments. Merger-related expenses related to the United Financial acquisition recorded during the year ended December 31, 2019 totaled $22.2 million, including: (i) fees for investment advisory, legal, accounting and valuation services; (ii) costs associated with contract terminations and branch closings; and (iii) compensatory charges.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
The acquisition-date estimated fair values of the assets acquired and liabilities assumed in the acquisition of United Financial are summarized as follows:
|
|
|
|
|
|
|
|
|
(in millions)
|
|
|
Assets:
|
|
|
Cash and cash equivalents
|
|
$
|
594.9
|
|
Securities
|
|
381.3
|
|
Loans
|
|
5,535.5
|
|
Goodwill
|
|
204.3
|
|
Core deposit intangible
|
|
41.5
|
|
Premises and equipment
|
|
61.8
|
|
BOLI
|
|
196.5
|
|
Lease ROU assets
|
|
56.3
|
|
Mortgage servicing rights
|
|
10.6
|
|
REO
|
|
1.2
|
|
Other assets
|
|
136.2
|
|
Total assets
|
|
$
|
7,220.1
|
|
|
|
|
|
Liabilities:
|
|
|
Deposits
|
|
$
|
5,687.2
|
|
Borrowings
|
|
622.4
|
|
Lease liabilities
|
|
61.4
|
|
Other liabilities
|
|
128.5
|
|
Total liabilities
|
|
$
|
6,499.5
|
|
Total purchase price
|
|
$
|
720.6
|
|
Net deferred tax assets totaling $16.7 million were established in connection with recording the related purchase accounting adjustments (other than goodwill). Fair value adjustments to assets acquired (other than loans, see Note 5) and liabilities assumed are generally amortized on a straight-line basis over periods consistent with the average life, useful life
and/or contractual term of the related assets and liabilities.
BSB Bancorp, Inc.
Effective April 1, 2019, People’s United completed its acquisition of BSB Bancorp, Inc. (“BSB Bancorp”) based in Belmont, Massachusetts. The fair value of the consideration transferred in the BSB Bancorp acquisition totaled $324.5 million and consisted of 19.7 million shares of People’s United common stock. At the acquisition date, BSB Bancorp operated
six branches in the greater Boston area.
The assets acquired and liabilities assumed in this transaction were recorded by People’s United at their estimated fair values as of the effective date. The excess of the purchase price over the estimated fair value of the net assets acquired was recorded as goodwill and allocated to the Commercial Banking and Retail Banking segments. Merger-related expenses related to the BSB Bancorp acquisition recorded during the years ended December 31, 2019 and 2018 totaled $8.1 million and $0.5 million, respectively, including: (i) fees for investment advisory, legal, accounting and valuation services; (ii) costs associated with contract terminations and branch closings; and (iii) compensatory charges.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
The acquisition-date estimated fair values of the assets acquired and liabilities assumed in the acquisition of BSB Bancorp are summarized as follows:
|
|
|
|
|
|
|
|
|
(in millions)
|
|
|
Assets:
|
|
|
Cash and cash equivalents
|
|
$
|
108.7
|
|
Securities
|
|
175.8
|
|
Loans
|
|
2,642.9
|
|
Goodwill
|
|
144.9
|
|
Core deposit intangible
|
|
39.5
|
|
Premises and equipment
|
|
8.3
|
|
BOLI
|
|
36.8
|
|
Other assets
|
|
29.8
|
|
Total assets
|
|
$
|
3,186.7
|
|
|
|
|
|
Liabilities:
|
|
|
|
Deposits
|
|
$
|
2,118.7
|
|
Borrowings
|
|
696.6
|
|
Other liabilities
|
|
46.9
|
|
Total liabilities
|
|
$
|
2,862.2
|
|
Total purchase price
|
|
$
|
324.5
|
|
Net deferred tax assets totaling $3.8 million were established in connection with recording the related purchase accounting adjustments (other than goodwill). Fair value adjustments to assets acquired (other than loans, see Note 5) and liabilities assumed are generally amortized on a straight-line basis over periods consistent with the average life, useful life and/or contractual term of the related assets and liabilities.
The preceding summaries include adjustments to record the acquired assets and assumed liabilities at their respective fair values based on management’s best estimate using the information available at the time of the respective acquisitions. While there may be changes in the respective acquisition-date fair values of certain balance sheet amounts and other items, management does not expect that such changes, if any, will be material.
Fair values of the major categories of assets acquired and liabilities assumed were determined as follows:
Cash and Cash Equivalents
The fair values of cash and cash equivalents approximate the respective carrying amounts because the instruments are payable on demand or have short-term maturities.
Securities
The fair values of securities acquired were based on quoted market prices. If a quoted market price for a certain security was not available, then a quoted price for a similar security in active markets was used to estimate fair value.
Loans
Loans acquired in connection with these acquisitions were recorded at fair value with no carryover of either United Financial's or BSB Bancorp's previously established allowance for loan losses. Fair value of the loans was determined using market participant assumptions in estimating the amount and timing of both principal and interest cash flows expected to be collected as adjusted for an estimate of future credit losses and prepayments and then applying a market-based discount rate to those cash flows. The acquired loans were evaluated upon the acquisition date and subsequently classified as either purchased performing or PCI (see Note 5).
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
In the aggregate, United Financial loans totaling $136.5 million were deemed PCI (none for BSB Bancorp) and were recorded at a discount from the corresponding outstanding principal balance of $193.1 million. The remaining acquired loans were deemed purchased performing and had a fair value of $8.04 billion and an outstanding principal balance of $8.10 billion, resulting in a discount that will be accreted over the remaining lives of the loans. Included in the Consolidated Statements of Income for the year ended December 31, 2019 is approximately $125 million of interest income attributable to these acquisitions since the respective acquisition dates.
Core Deposit Intangible
The core deposit intangible represents the value of the relationships with the respective deposit customers. The fair values were estimated based on a cost savings methodology that gave appropriate consideration to expected customer attrition rates, net maintenance costs of the deposit base, the alternative cost of funds, the interest cost associated with the respective customer deposits and discount rates. The core deposit intangibles will be amortized using an accelerated amortization method over a
six-year period for United Financial and a 10-year period for BSB Bancorp, reflective of the manner in which the related benefits attributable to the deposits will be recognized.
Deposits
The fair values of acquired savings and transaction deposit accounts were assumed to approximate the respective carrying amounts as these accounts have no stated maturity and are payable on demand. Time deposits were valued based on the present value of the contractual cash flows over the remaining period to maturity using a market rate.
Borrowings
The fair values of FHLB advances and other borrowings represent contractual repayments discounted using interest rates currently available on borrowings with similar characteristics and remaining maturities.
The following table presents selected unaudited pro forma financial information of the Company, reflecting the acquisitions of United Financial and BSB Bancorp, assuming the acquisitions were completed as of the beginning of the respective periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31 (in millions, except per common share data)
|
|
2019
|
|
2018
|
Selected Financial Results:
|
|
|
|
|
Net interest income
|
|
$
|
1,582.5
|
|
|
$
|
1,488.6
|
|
Provision for loan losses
|
|
28.3
|
|
|
30.0
|
|
Non-interest income
|
|
454.5
|
|
|
408.1
|
|
Non-interest expense
|
|
1,277.5
|
|
|
1,186.4
|
|
Net income
|
|
583.5
|
|
|
552.4
|
|
Net income available to common shareholders
|
|
569.4
|
|
|
538.3
|
|
EPS:
|
|
|
|
|
Basic
|
|
$
|
1.31
|
|
|
$
|
1.30
|
|
Diluted
|
|
1.30
|
|
|
1.29
|
|
The selected unaudited pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of the financial results of the combined companies had the acquisitions actually been completed at the beginning of the periods presented, nor does it indicate future results for any other interim or full-year period. Merger-related expenses attributable to the acquisitions that were incurred by People’s United, United Financial and BSB Bancorp during the years ended December 31, 2019 and 2018 are not reflected in the selected unaudited pro forma financial information. Pro forma basic and diluted EPS were calculated using People’s United’s actual weighted-average common shares outstanding for the periods presented, plus the incremental common shares issued, assuming the acquisitions occurred at the beginning of the periods presented.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
VAR Technology Finance
Effective January 2, 2019, the Bank completed its acquisition of VAR Technology Finance ("VAR"), a leasing and financing company headquartered in Mesquite, Texas. The fair value of the consideration transferred in the VAR acquisition consisted of $60.0 million in cash. Merger-related expenses totaling $1.9 million relating to this transaction were recorded during the year ended December 31, 2019.
Sale of Branches
On October 25, 2019, the Bank completed the sale of eight branches located in central Maine, including approximately: (i) $103 million in loans; (ii) $258 million in deposits; and (iii) $227 million of assets under management. The sale resulted in a gain, net of expenses, of $7.6 million, which is included in other non-interest income in the Consolidated Statements of Income.
Acquisitions Completed in 2018
First Connecticut Bancorp, Inc.
Effective October 1, 2018, the Company completed its acquisition of First Connecticut Bancorp, Inc. ("First Connecticut") based in Farmington, Connecticut. The fair value of the consideration transferred in the First Connecticut acquisition totaled $486.4 million and consisted of 28.4 million shares of People's United common stock. At the acquisition date, First Connecticut operated 25 branch locations throughout central Connecticut and western Massachusetts. The fair value of assets acquired and liabilities assumed in the First Connecticut acquisition totaled $3.45 billion and $2.96 billion, respectively. Merger-related expenses recorded during the years ended December 31, 2019 and 2018 related to this acquisition totaled $16.8 million and $8.8 million, respectively.
Vend Lease Company
Effective June 27, 2018, the Bank completed its acquisition of Vend Lease Company ("Vend Lease"), a Baltimore-based equipment finance company. The fair value of the consideration transferred in the Vend Lease acquisition consisted of $37.5 million in cash. In connection with this transaction, the Bank acquired a lease and loan portfolio with an acquisition-date estimated fair value of $68.8 million and recorded goodwill of $23.9 million. Merger-related expenses totaling $2.1 million relating to this transaction were recorded during the year ended December 31, 2018.
Acquisitions Completed in 2017
LEAF
Effective August 1, 2017, the Bank completed its acquisition of LEAF, a Philadelphia-based commercial equipment finance company. The fair value of the consideration transferred in the LEAF acquisition consisted of $220.0 million in cash. The fair value of assets acquired and liabilities assumed in this acquisition totaled $957.7 million and $737.7 million, respectively. Merger-related expenses recorded during the year ended December 31, 2017 related to this acquisition totaled $3.7 million.
Prior to the acquisition, and in connection with its previous revolving warehouse debt facilities and term note securitization transactions, LEAF established bankruptcy-remote special-purpose entities ("SPEs") that issued term debt to institutional investors. These SPEs were variable interest entities ("VIEs"), of which LEAF was deemed the primary beneficiary, and, therefore, the related financings were treated as secured borrowings with the SPEs consolidated in LEAF's financial statements. Following the Company’s acquisition of LEAF, approximately $460 million of LEAF's borrowings were repaid prior to September 30, 2017, including all but one remaining securitization, which was repaid without penalty in June 2018.
Suffolk Bancorp
Effective April 1, 2017, People's United completed its acquisition of Suffolk Bancorp ("Suffolk") based in Riverhead, New York. The fair value of the consideration transferred in the Suffolk acquisition totaled $484.8 million and consisted of 26.6 million shares of People’s United common stock. At the acquisition date, Suffolk operated 27 branch locations in the greater Long Island area. The fair value of assets acquired and liabilities assumed in the Suffolk acquisition totaled $2.38 billion and $1.90 billion, respectively. Merger-related expenses recorded during the year ended December 31, 2017 related to this acquisition totaled $26.6 million.
|
|
|
NOTE 3 – Cash and Cash Equivalents
|
A combination of reserves in the form of deposits with the FRB-NY and vault cash, totaling $171.6 million and $124.1 million at December 31, 2019 and 2018, respectively, were maintained to satisfy federal regulatory requirements. Vault cash is included in cash and due from banks, and interest-bearing deposits with the FRB-NY are included in short-term investments in the Consolidated Statements of Condition. These deposits represent an alternative to overnight federal funds sold and yielded 1.55% and 2.40% at December 31, 2019 and 2018, respectively. Cash and due from banks included restricted cash totaling $13.8 million at December 31, 2017 (none at December 31, 2019 and 2018) relating to one remaining securitization assumed in the acquisition of LEAF that was repaid in June 2018 (see Note 2).
Short-term investments consist of the following cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31 (in millions)
|
|
2019
|
|
2018
|
Interest-bearing deposits at the FRB-NY
|
|
$
|
219.4
|
|
|
$
|
234.0
|
|
Money market mutual funds
|
|
5.7
|
|
|
26.3
|
|
Other (1)
|
|
91.7
|
|
|
6.0
|
|
Total short-term investments
|
|
$
|
316.8
|
|
|
$
|
266.3
|
|
(1)Includes cash collateral posted for certain derivative positions at both December 31, 2019 and 2018.
The amortized cost, gross unrealized gains and losses, and fair value of People’s United’s debt securities available-for-sale and debt securities held-to-maturity are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2019 (in millions)
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
Debt securities available-for-sale:
|
|
|
|
|
|
|
|
|
U.S. Treasury and agency
|
|
$
|
689.5
|
|
|
$
|
0.4
|
|
|
$
|
(2.8)
|
|
|
$
|
687.1
|
|
GSE mortgage-backed and CMO securities
|
|
2,856.3
|
|
|
25.0
|
|
|
(4.1)
|
|
|
2,877.2
|
|
Total debt securities available-for-sale
|
|
$
|
3,545.8
|
|
|
$
|
25.4
|
|
|
$
|
(6.9)
|
|
|
$
|
3,564.3
|
|
Debt securities held-to-maturity:
|
|
|
|
|
|
|
|
|
State and municipal
|
|
$
|
2,503.9
|
|
|
$
|
142.0
|
|
|
$
|
(0.4)
|
|
|
$
|
2,645.5
|
|
GSE mortgage-backed securities
|
|
1,271.4
|
|
|
8.0
|
|
|
(0.3)
|
|
|
1,279.1
|
|
Corporate
|
|
92.4
|
|
|
1.5
|
|
|
—
|
|
|
93.9
|
|
Other
|
|
1.5
|
|
|
—
|
|
|
—
|
|
|
1.5
|
|
Total debt securities held-to-maturity
|
|
$
|
3,869.2
|
|
|
$
|
151.5
|
|
|
$
|
(0.7)
|
|
|
$
|
4,020.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2018 (in millions)
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
Debt securities available-for-sale:
|
|
|
|
|
|
|
|
|
U.S. Treasury and agency
|
|
$
|
699.0
|
|
|
$
|
0.1
|
|
|
$
|
(21.1)
|
|
|
$
|
678.0
|
|
GSE mortgage-backed securities
|
|
2,486.6
|
|
|
4.6
|
|
|
(48.2)
|
|
|
2,443.0
|
|
Total debt securities available-for-sale
|
|
$
|
3,185.6
|
|
|
$
|
4.7
|
|
|
$
|
(69.3)
|
|
|
$
|
3,121.0
|
|
Debt securities held-to-maturity:
|
|
|
|
|
|
|
|
|
State and municipal
|
|
$
|
2,352.4
|
|
|
$
|
35.4
|
|
|
$
|
(18.4)
|
|
|
$
|
2,369.4
|
|
GSE mortgage-backed securities
|
|
1,367.5
|
|
|
—
|
|
|
(33.2)
|
|
|
1,334.3
|
|
Corporate
|
|
70.9
|
|
|
0.5
|
|
|
(0.7)
|
|
|
70.7
|
|
Other
|
|
1.5
|
|
|
—
|
|
|
—
|
|
|
1.5
|
|
Total debt securities held-to-maturity
|
|
$
|
3,792.3
|
|
|
$
|
35.9
|
|
|
$
|
(52.3)
|
|
|
$
|
3,775.9
|
|
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
At December 31, 2019 and 2018, debt securities available-for-sale with fair values of $2.43 billion and $2.20 billion, respectively, and debt securities held-to-maturity with an amortized cost basis of $1.47 billion and $1.49 billion, respectively, were pledged as collateral for public deposits and for other purposes.
The following table is a summary of the amortized cost, fair value and fully taxable equivalent (“FTE”) yield of debt securities as of December 31, 2019, based on remaining period to contractual maturity. Information for GSE mortgage-backed and CMO securities is based on the final contractual maturity dates without considering repayments and prepayments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-Sale
|
|
|
|
|
|
Held-to-Maturity
|
|
|
|
|
(dollars in millions)
|
|
Amortized
Cost
|
|
Fair
Value
|
|
FTE
Yield
|
|
Amortized
Cost
|
|
Fair
Value
|
|
FTE
Yield
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and agency:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Within 1 year
|
|
$
|
158.4
|
|
|
$
|
158.4
|
|
|
1.84
|
%
|
|
$
|
—
|
|
|
$
|
—
|
|
|
—
|
%
|
After 1 but within 5 years
|
|
531.1
|
|
|
528.7
|
|
|
1.43
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
689.5
|
|
|
687.1
|
|
|
1.53
|
|
|
—
|
|
|
—
|
|
|
—
|
|
GSE mortgage-backed and CMO
securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Within 1 year
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2.7
|
|
|
2.7
|
|
|
2.04
|
|
After 1 but within 5 years
|
|
84.9
|
|
|
86.9
|
|
|
3.17
|
|
|
861.0
|
|
|
866.6
|
|
|
2.43
|
|
After 5 but within 10 years
|
|
855.1
|
|
|
867.7
|
|
|
2.67
|
|
|
120.2
|
|
|
121.3
|
|
|
2.52
|
|
After 10 years
|
|
1,916.3
|
|
|
1,922.6
|
|
|
2.35
|
|
|
287.5
|
|
|
288.5
|
|
|
2.17
|
|
Total
|
|
2,856.3
|
|
|
2,877.2
|
|
|
2.47
|
|
|
1,271.4
|
|
|
1,279.1
|
|
|
2.38
|
|
State and municipal:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Within 1 year
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10.3
|
|
|
10.4
|
|
|
2.61
|
|
After 1 but within 5 years
|
|
—
|
|
|
—
|
|
|
—
|
|
|
235.4
|
|
|
245.3
|
|
|
2.78
|
|
After 5 but within 10 years
|
|
—
|
|
|
—
|
|
|
—
|
|
|
418.8
|
|
|
444.1
|
|
|
3.47
|
|
After 10 years
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,839.4
|
|
|
1,945.7
|
|
|
3.81
|
|
Total
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,503.9
|
|
|
2,645.5
|
|
|
3.65
|
|
Corporate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Within 1 year
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5.0
|
|
|
5.0
|
|
|
3.50
|
|
After 1 but within 5 years
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.0
|
|
|
1.0
|
|
|
2.67
|
|
After 5 but within 10 years
|
|
—
|
|
|
—
|
|
|
—
|
|
|
86.4
|
|
|
87.9
|
|
|
4.52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
—
|
|
|
—
|
|
|
—
|
|
|
92.4
|
|
|
93.9
|
|
|
4.45
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Within 1 year
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.5
|
|
|
1.5
|
|
|
2.46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.5
|
|
|
1.5
|
|
|
2.46
|
|
Total:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Within 1 year
|
|
158.4
|
|
|
158.4
|
|
|
1.84
|
|
|
19.5
|
|
|
19.6
|
|
|
2.74
|
|
After 1 but within 5 years
|
|
616.0
|
|
|
615.6
|
|
|
1.67
|
|
|
1,097.4
|
|
|
1,112.9
|
|
|
2.51
|
|
After 5 but within 10 years
|
|
855.1
|
|
|
867.7
|
|
|
2.67
|
|
|
625.4
|
|
|
653.3
|
|
|
3.43
|
|
After 10 years
|
|
1,916.3
|
|
|
1,922.6
|
|
|
2.35
|
|
|
2,126.9
|
|
|
2,234.2
|
|
|
3.59
|
|
Total
|
|
$
|
3,545.8
|
|
|
$
|
3,564.3
|
|
|
2.29
|
%
|
|
$
|
3,869.2
|
|
|
$
|
4,020.0
|
|
|
3.25
|
%
|
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
The following tables summarize those debt securities with unrealized losses, segregated by the length of time the securities have been in a continuous unrealized loss position at the respective dates. Certain unrealized losses totaled less than $0.1 million.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuous Unrealized Loss Position
|
|
|
|
|
|
|
|
|
|
|
|
|
Less Than 12 Months
|
|
|
|
12 Months Or Longer
|
|
|
|
Total
|
|
|
As of December 31, 2019 (in millions)_
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
Debt securities available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
GSE mortgage-backed and CMO
securities
|
|
$
|
565.4
|
|
|
$
|
(3.1)
|
|
|
$
|
509.3
|
|
|
$
|
(1.0)
|
|
|
$
|
1,074.7
|
|
|
$
|
(4.1)
|
|
U.S. Treasury and agency
|
|
181.0
|
|
|
(0.4)
|
|
|
362.4
|
|
|
(2.4)
|
|
|
543.4
|
|
|
(2.8)
|
|
Total debt securities available-for-sale
|
|
$
|
746.4
|
|
|
$
|
(3.5)
|
|
|
$
|
871.7
|
|
|
$
|
(3.4)
|
|
|
$
|
1,618.1
|
|
|
$
|
(6.9)
|
|
Debt securities held-to-maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
GSE mortgage-backed securities
|
|
$
|
100.9
|
|
|
$
|
(0.3)
|
|
|
$
|
9.1
|
|
|
$
|
—
|
|
|
$
|
110.0
|
|
|
$
|
(0.3)
|
|
State and municipal
|
|
33.0
|
|
|
(0.2)
|
|
|
11.4
|
|
|
(0.2)
|
|
|
44.4
|
|
|
(0.4)
|
|
Corporate
|
|
3.5
|
|
|
—
|
|
|
8.6
|
|
|
—
|
|
|
12.1
|
|
|
—
|
|
Total debt securities held-to-maturity
|
|
$
|
137.4
|
|
|
$
|
(0.5)
|
|
|
$
|
29.1
|
|
|
$
|
(0.2)
|
|
|
$
|
166.5
|
|
|
$
|
(0.7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuous Unrealized Loss Position
|
|
|
|
|
|
|
|
|
|
|
|
|
Less Than 12 Months
|
|
|
|
12 Months Or Longer
|
|
|
|
Total
|
|
|
As of December 31, 2018 (in millions)
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
Debt securities available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
GSE mortgage-backed securities
|
|
$
|
132.4
|
|
|
$
|
(0.5)
|
|
|
$
|
1,656.3
|
|
|
$
|
(47.7)
|
|
|
$
|
1,788.7
|
|
|
$
|
(48.2)
|
|
U.S. Treasury and agency
|
|
—
|
|
|
—
|
|
|
656.2
|
|
|
(21.1)
|
|
|
656.2
|
|
|
(21.1)
|
|
Total debt securities available-for-sale
|
|
$
|
132.4
|
|
|
$
|
(0.5)
|
|
|
$
|
2,312.5
|
|
|
$
|
(68.8)
|
|
|
$
|
2,444.9
|
|
|
$
|
(69.3)
|
|
Debt securities held-to-maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
GSE mortgage-backed securities
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,334.3
|
|
|
$
|
(33.2)
|
|
|
$
|
1,334.3
|
|
|
$
|
(33.2)
|
|
State and municipal
|
|
113.4
|
|
|
(0.7)
|
|
|
697.6
|
|
|
(17.7)
|
|
|
811.0
|
|
|
(18.4)
|
|
Corporate
|
|
31.2
|
|
|
(0.6)
|
|
|
2.7
|
|
|
(0.1)
|
|
|
33.9
|
|
|
(0.7)
|
|
Total debt securities held-to-maturity
|
|
$
|
144.6
|
|
|
$
|
(1.3)
|
|
|
$
|
2,034.6
|
|
|
$
|
(51.0)
|
|
|
$
|
2,179.2
|
|
|
$
|
(52.3)
|
|
At December 31, 2019, approximately 8% of the 2,242 debt securities owned by the Company, consisting of 101 debt securities classified as available-for-sale and 79 debt securities classified as held-to-maturity, had gross unrealized losses totaling $6.9 million and $0.7 million, respectively. With respect to those securities with unrealized losses, all of the GSE mortgage-backed and CMO securities had AAA credit ratings and an average contractual maturity of 18 years. The state and municipal securities had an average credit rating of AA and a weighted average maturity of nine years.
The cause of the gross unrealized losses with respect to all of the debt securities is directly related to changes in interest rates. At this time, management does not intend to sell such securities nor is it more likely than not, based upon available evidence, that management will be required to sell such securities prior to recovery. As such, management believes that all gross unrealized losses within the securities portfolio at December 31, 2019 are temporary impairments. No
other-than-temporary impairment losses were recognized in the Consolidated Statements of Income for the years ended December 31, 2019, 2018 and 2017.
People’s United uses the specific identification method to determine the cost of securities sold and records securities transactions on the trade date. People’s United sold (i) GSE mortgage-backed securities with an amortized cost of $235.5 million and recorded $10.0 million of gross realized losses in December 2018 and (ii) U.S. Treasury and CMO securities with a combined amortized cost of $291.3 million and recorded $10.0 million of gross realized losses in December 2017. Also in 2017, People’s United sold U.S. Treasury and CMO securities with a combined amortized cost of $486.9 million and recorded $15.7 million of gross realized losses. Including other minor gains and losses, net security gains (losses) totaled $0.2 million, $(9.8) million and $(25.4) million for the years ended December 31, 2019, 2018 and 2017, respectively.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
The components of net security gains (losses) are summarized below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31 (in millions)
|
|
2019
|
|
2018
|
|
2017
|
Debt securities:
|
|
|
|
|
|
|
Gains
|
|
$
|
0.5
|
|
|
$
|
0.1
|
|
|
$
|
2.1
|
|
Losses
|
|
(0.4)
|
|
|
(10.0)
|
|
|
(27.5)
|
|
Total debt securities
|
|
0.1
|
|
|
(9.9)
|
|
|
(25.4)
|
|
Trading debt securities:
|
|
|
|
|
|
|
Gains
|
|
0.1
|
|
|
0.1
|
|
|
—
|
|
Losses
|
|
—
|
|
|
—
|
|
|
—
|
|
Total trading debt securities (1)
|
|
0.1
|
|
|
0.1
|
|
|
—
|
|
Net security gains (losses)
|
|
$
|
0.2
|
|
|
$
|
(9.8)
|
|
|
$
|
(25.4)
|
|
(1)Net gains and losses on trading debt securities totaled less than $0.1 million for the year ended December 31, 2017.
Effective January 1, 2018, People’s United adopted new accounting guidance that requires equity investments (other than equity method investments) to be measured at fair value with changes in fair value recognized in net income. At
December 31, 2017, the Company’s securities portfolio included equity securities with an amortized cost of $9.6 million and a fair value of $8.7 million. Accordingly, upon adoption of this guidance, a cumulative-effect transition adjustment, representing the cumulative unrealized loss (net-of-tax) within AOCL was recorded, which served to decrease opening retained earnings by $0.6 million. For the years ended December 31, 2019 and 2018, People’s United recorded unrealized gains of $1.5 million and $0.6 million (included in other non-interest income in the Consolidated Statements of Income) relating to the change in fair value of its equity securities during the respective periods.
The Bank, as a member of the FHLB of Boston, is currently required to purchase and hold shares of capital stock in the FHLB of Boston (total cost of $136.6 million and $124.2 million at December 31, 2019 and 2018, respectively) in an amount equal to its membership base investment plus an activity based investment determined according to the Bank’s level of outstanding FHLB advances. As a result of prior acquisitions, the Bank acquired shares of capital stock in the FHLB of New York (total cost of $0.7 million at both December 31, 2019 and 2018). 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 December 31, 2019 and the cost of the investment approximates fair value. Dividend income on FHLB capital stock totaled $7.0 million, $8.3 million and $6.6 million for the years ended December 31, 2019, 2018 and 2017, respectively.
The Bank, as a member of the Federal Reserve Bank system, is currently required to purchase and hold shares of capital stock in the FRB-NY (total cost of $203.8 million and $178.5 million at December 31, 2019 and 2018, 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 December 31, 2019 and the cost of the investment approximates fair value. Dividend income on FRB-NY capital stock totaled $3.8 million, $5.1 million and $3.7 million for the years ended December 31, 2019, 2018 and 2017, respectively.
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’ in Note 1). All other loans are referred to as ‘originated’ loans. Accordingly, selected credit quality disclosures that follow are presented separately for the ‘originated’ loan portfolio and the ‘acquired’ loan portfolio.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
The following table summarizes People’s United’s loans by loan portfolio segment and class:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
|
|
|
2018
|
|
|
|
|
As of December 31 (in millions)
|
|
Originated
|
|
Acquired
|
|
Total
|
|
Originated
|
|
Acquired
|
|
Total
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
$
|
10,012.5
|
|
|
$
|
4,749.8
|
|
|
$
|
14,762.3
|
|
|
$
|
9,798.5
|
|
|
$
|
1,851.1
|
|
|
$
|
11,649.6
|
|
Commercial and industrial
|
|
9,763.1
|
|
|
1,278.5
|
|
|
11,041.6
|
|
|
8,292.3
|
|
|
796.6
|
|
|
9,088.9
|
|
Equipment financing
|
|
4,706.1
|
|
|
204.3
|
|
|
4,910.4
|
|
|
3,937.7
|
|
|
401.5
|
|
|
4,339.2
|
|
Total Commercial Portfolio
|
|
24,481.7
|
|
|
6,232.6
|
|
|
30,714.3
|
|
|
22,028.5
|
|
|
3,049.2
|
|
|
25,077.7
|
|
Retail:
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage:
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustable-rate
|
|
5,366.0
|
|
|
1,698.8
|
|
|
7,064.8
|
|
|
5,854.1
|
|
|
807.9
|
|
|
6,662.0
|
|
Fixed-rate
|
|
1,222.9
|
|
|
2,030.4
|
|
|
3,253.3
|
|
|
935.1
|
|
|
557.1
|
|
|
1,492.2
|
|
Total residential mortgage
|
|
6,588.9
|
|
|
3,729.2
|
|
|
10,318.1
|
|
|
6,789.2
|
|
|
1,365.0
|
|
|
8,154.2
|
|
Home equity and other consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity
|
|
1,625.1
|
|
|
781.4
|
|
|
2,406.5
|
|
|
1,789.5
|
|
|
173.0
|
|
|
1,962.5
|
|
Other consumer
|
|
39.7
|
|
|
117.5
|
|
|
157.2
|
|
|
42.8
|
|
|
4.2
|
|
|
47.0
|
|
Total home equity and
other consumer
|
|
1,664.8
|
|
|
898.9
|
|
|
2,563.7
|
|
|
1,832.3
|
|
|
177.2
|
|
|
2,009.5
|
|
Total Retail Portfolio
|
|
8,253.7
|
|
|
4,628.1
|
|
|
12,881.8
|
|
|
8,621.5
|
|
|
1,542.2
|
|
|
10,163.7
|
|
Total loans
|
|
$
|
32,735.4
|
|
|
$
|
10,860.7
|
|
|
$
|
43,596.1
|
|
|
$
|
30,650.0
|
|
|
$
|
4,591.4
|
|
|
$
|
35,241.4
|
|
Net deferred loan costs, which are included in loans by respective class and accounted for as interest yield adjustments, totaled $87.5 million at December 31, 2019 and $94.6 million at December 31, 2018.
At December 31, 2019, 25%, 22% and 18% of the Company’s loans by outstanding principal amount were to customers located within Connecticut, Massachusetts and New York, respectively. Loans to customers located in the New England states as a group represented 58% and 56% of total loans at December 31, 2019 and 2018, respectively. Substantially the entire equipment financing portfolio (95% at both December 31, 2019 and 2018) was to customers located outside of New England. At December 31, 2019, 30% of the equipment financing portfolio was to customers located in Texas, California and New York, and no other state exposure was greater than 7%.
Included in the Commercial portfolio are construction loans totaling $1.1 billion and $651.2 million at
December 31, 2019 and 2018, respectively, net of the unadvanced portion of such loans totaling $798.3 million and
$588.2 million, respectively.
At December 31, 2019 and 2018, residential mortgage loans included $1.1 billion and $1.2 billion, respectively, of interest-only loans. People’s United’s underwriting guidelines and requirements for such loans are generally more restrictive than those applied to other types of residential mortgage products. Also included in residential mortgage loans are construction loans totaling $40.5 million and $57.3 million at December 31, 2019 and 2018, respectively, net of the unadvanced portion of such loans totaling $14.6 million and $21.5 million, respectively.
People’s United sells newly-originated residential mortgage loans in the secondary market, without recourse. Net gains on sales of residential mortgage loans totaled $1.9 million, $1.2 million and $3.2 million for the years ended
December 31, 2019, 2018 and 2017, respectively. Loans held-for-sale at December 31, 2019 and 2018 included
newly-originated residential mortgage loans with carrying amounts of $19.7 million and $19.5 million, respectively. At December 31, 2019, loans held-for-sale also included $333.7 million of consumer loans and $157.9 million of commercial loans previously acquired in the United Financial acquisition. During 2019, 2018 and 2017, the Company sold acquired loans with outstanding principal balances totaling $10.1 million, $10.0 million and $7.9 million, respectively, (carrying amounts of $7.1 million, $4.4 million and $5.0 million, respectively) and recognized net gains on sales totaling $0.4 million, $1.8 million and $2.4 million, respectively.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
The following table presents a summary, by loan portfolio segment, of activity in the allowance for loan losses for the years ended December 31, 2019, 2018 and 2017. 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
Retail
|
|
|
|
|
|
|
(in millions)
|
|
Originated
|
|
Acquired
|
|
Total
|
|
Originated
|
|
Acquired
|
|
Total
|
|
Total
|
Balance at December 31, 2016
|
|
$
|
198.8
|
|
|
$
|
6.1
|
|
|
$
|
204.9
|
|
|
$
|
24.2
|
|
|
$
|
0.2
|
|
|
$
|
24.4
|
|
|
$
|
229.3
|
|
Charge-offs
|
|
(17.1)
|
|
|
(4.4)
|
|
|
(21.5)
|
|
|
(6.4)
|
|
|
—
|
|
|
(6.4)
|
|
|
(27.9)
|
|
Recoveries
|
|
4.6
|
|
|
0.3
|
|
|
4.9
|
|
|
2.1
|
|
|
—
|
|
|
2.1
|
|
|
7.0
|
|
Net loan charge-offs
|
|
(12.5)
|
|
|
(4.1)
|
|
|
(16.6)
|
|
|
(4.3)
|
|
|
—
|
|
|
(4.3)
|
|
|
(20.9)
|
|
Provision for loan losses
|
|
14.8
|
|
|
1.4
|
|
|
16.2
|
|
|
9.8
|
|
|
—
|
|
|
9.8
|
|
|
26.0
|
|
Balance at December 31, 2017
|
|
201.1
|
|
|
3.4
|
|
|
204.5
|
|
|
29.7
|
|
|
0.2
|
|
|
29.9
|
|
|
234.4
|
|
Charge-offs
|
|
(19.5)
|
|
|
(8.1)
|
|
|
(27.6)
|
|
|
(3.3)
|
|
|
—
|
|
|
(3.3)
|
|
|
(30.9)
|
|
Recoveries
|
|
3.5
|
|
|
1.3
|
|
|
4.8
|
|
|
2.1
|
|
|
—
|
|
|
2.1
|
|
|
6.9
|
|
Net loan charge-offs
|
|
(16.0)
|
|
|
(6.8)
|
|
|
(22.8)
|
|
|
(1.2)
|
|
|
—
|
|
|
(1.2)
|
|
|
(24.0)
|
|
Provision for loan losses
|
|
20.5
|
|
|
7.3
|
|
|
27.8
|
|
|
2.2
|
|
|
—
|
|
|
2.2
|
|
|
30.0
|
|
Balance at December 31, 2018
|
|
205.6
|
|
|
3.9
|
|
|
209.5
|
|
|
30.7
|
|
|
0.2
|
|
|
30.9
|
|
|
240.4
|
|
Charge-offs
|
|
(20.0)
|
|
|
(7.5)
|
|
|
(27.5)
|
|
|
(4.0)
|
|
|
—
|
|
|
(4.0)
|
|
|
(31.5)
|
|
Recoveries
|
|
5.0
|
|
|
1.3
|
|
|
6.3
|
|
|
3.1
|
|
|
—
|
|
|
3.1
|
|
|
9.4
|
|
Net loan charge-offs
|
|
(15.0)
|
|
|
(6.2)
|
|
|
(21.2)
|
|
|
(0.9)
|
|
|
—
|
|
|
(0.9)
|
|
|
(22.1)
|
|
Provision for loan losses
|
|
26.2
|
|
|
3.4
|
|
|
29.6
|
|
|
(1.1)
|
|
|
(0.2)
|
|
|
(1.3)
|
|
|
28.3
|
|
Balance at December 31, 2019
|
|
$
|
216.8
|
|
|
$
|
1.1
|
|
|
$
|
217.9
|
|
|
$
|
28.7
|
|
|
$
|
—
|
|
|
$
|
28.7
|
|
|
$
|
246.6
|
|
The following tables summarize, by loan portfolio segment and impairment methodology, the allowance for loan losses and related portfolio balances:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2019 (in millions)
|
|
Commercial
|
|
|
|
Retail
|
|
|
|
Total
|
|
|
|
|
Portfolio
|
|
Allowance
|
|
Portfolio
|
|
Allowance
|
|
Portfolio
|
|
Allowance
|
Originated loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
Collectively evaluated for impairment
|
|
$
|
22,938.3
|
|
|
$
|
207.8
|
|
|
$
|
9,592.8
|
|
|
$
|
26.5
|
|
|
$
|
32,531.1
|
|
|
$
|
234.3
|
|
Individually evaluated for impairment
|
|
115.0
|
|
|
9.0
|
|
|
89.2
|
|
|
2.2
|
|
|
204.2
|
|
|
11.2
|
|
Acquired loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
PCI (1)
|
|
308.5
|
|
|
—
|
|
|
87.5
|
|
|
—
|
|
|
396.0
|
|
|
—
|
|
Purchased performing:
|
|
|
|
|
|
|
|
|
|
|
|
|
Collectively evaluated for impairment
|
|
7,344.9
|
|
|
1.1
|
|
|
3,104.8
|
|
|
—
|
|
|
10,449.7
|
|
|
1.1
|
|
Individually evaluated for impairment
|
|
7.6
|
|
|
—
|
|
|
7.5
|
|
|
—
|
|
|
15.1
|
|
|
—
|
|
Total
|
|
$
|
30,714.3
|
|
|
$
|
217.9
|
|
|
$
|
12,881.8
|
|
|
$
|
28.7
|
|
|
$
|
43,596.1
|
|
|
$
|
246.6
|
|
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2018 (in millions)
|
|
Commercial
|
|
|
|
Retail
|
|
|
|
Total
|
|
|
|
|
Portfolio
|
|
Allowance
|
|
Portfolio
|
|
Allowance
|
|
Portfolio
|
|
Allowance
|
Originated loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
Collectively evaluated for impairment
|
|
$
|
21,900.1
|
|
|
$
|
198.9
|
|
|
$
|
8,535.0
|
|
|
$
|
28.4
|
|
|
$
|
30,435.1
|
|
|
$
|
227.3
|
|
Individually evaluated for impairment
|
|
128.4
|
|
|
6.7
|
|
|
86.5
|
|
|
2.3
|
|
|
214.9
|
|
|
9.0
|
|
Acquired loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
PCI (1)
|
|
300.3
|
|
|
2.2
|
|
|
99.6
|
|
|
0.1
|
|
|
399.9
|
|
|
2.3
|
|
Purchased performing:
|
|
|
|
|
|
|
|
|
|
|
|
|
Collectively evaluated for impairment
|
|
2,744.4
|
|
|
1.7
|
|
|
1,439.1
|
|
|
—
|
|
|
4,183.5
|
|
|
1.7
|
|
Individually evaluated for impairment
|
|
4.5
|
|
|
—
|
|
|
3.5
|
|
|
0.1
|
|
|
8.0
|
|
|
0.1
|
|
Total
|
|
$
|
25,077.7
|
|
|
$
|
209.5
|
|
|
$
|
10,163.7
|
|
|
$
|
30.9
|
|
|
$
|
35,241.4
|
|
|
$
|
240.4
|
|
(1)PCI loans are evaluated for impairment on a pool basis.
The recorded investments, by class of loan, in originated non-performing loans are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31 (in millions)
|
|
2019
|
|
2018
|
|
2017
|
Commercial:
|
|
|
|
|
|
|
Commercial real estate
|
|
$
|
29.8
|
|
|
$
|
33.5
|
|
|
$
|
23.7
|
|
Commercial and industrial
|
|
32.1
|
|
|
38.0
|
|
|
32.6
|
|
Equipment financing
|
|
46.2
|
|
|
42.0
|
|
|
44.3
|
|
Total (1)
|
|
108.1
|
|
|
113.5
|
|
|
100.6
|
|
Retail:
|
|
|
|
|
|
|
Residential mortgage
|
|
36.3
|
|
|
38.9
|
|
|
32.7
|
|
Home equity
|
|
12.6
|
|
|
15.3
|
|
|
15.4
|
|
Other consumer
|
|
—
|
|
|
—
|
|
|
—
|
|
Total (2)
|
|
48.9
|
|
|
54.2
|
|
|
48.1
|
|
Total
|
|
$
|
157.0
|
|
|
$
|
167.7
|
|
|
$
|
148.7
|
|
(1)Reported net of government guarantees totaling $1.3 million, $1.9 million and $3.1 million at December 31, 2019, 2018 and 2017, respectively. These government guarantees relate, almost entirely, to guarantees provided by the Small Business Administration as well as selected other Federal agencies and represent the carrying value of the loans that are covered by such guarantees, the extent of which (i.e. full or partial) varies by loan. At December 31, 2019, the principal loan classes to which these government guarantees relate are commercial and industrial loans (95%) and commercial real estate loans (5%).
(2)Includes $17.0 million, $24.8 million and $15.2 million of loans in the process of foreclosure at December 31, 2019, 2018 and 2017, respectively.
The preceding table excludes acquired loans that are (i) accounted for as PCI loans and/or (ii) covered by an FDIC
loss-share agreement (“LSA”) which totaled $53.5 million at December 31, 2019; $44.1 million at December 31, 2018; and $25.1 million at December 31, 2017. 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. Accordingly, such loans are generally accounted for on a pool basis and the accretable yield on the pools is being recognized as interest income over the life of the loans based on expected cash flows at the pool level. In addition, the table excludes purchased performing loans totaling $13.6 million, $6.0 million and $4.7 million at December 31, 2019, 2018 and 2017, respectively, of which $13.2 million, $6.0 million and $4.7 million, respectively at those dates, became non-performing subsequent to acquisition.
If interest payments on all loans classified as non-performing at December 31, 2019, 2018 and 2017 had been made during the respective years in accordance with the loan agreements, interest income of $18.5 million, $18.1 million and $16.2 million would have been recognized on such loans for the respective years. Interest income actually recognized on
non-performing loans totaled $2.3 million, $2.9 million and $1.7 million for the years ended December 31, 2019, 2018 and 2017, respectively.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
At December 31, 2019 and 2018, People’s United’s recorded investment in loans classified as TDRs totaled $177.0 million and $179.4 million, respectively. The related allowance for loan losses was $4.3 million at December 31, 2019 and $4.5 million at December 31, 2018. Interest income recognized on TDRs totaled $5.5 million, $6.1 million and $4.7 million for the years ended December 31, 2019, 2018 and 2017, respectively. Fundings under commitments to lend additional amounts to borrowers with loans classified as TDRs were immaterial for the years ended December 31, 2019, 2018 and 2017. Loans that were modified and classified as TDRs during 2019 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).
The following tables summarize, by class of loan, the recorded investments in loans modified as TDRs during the years ended December 31, 2019 and 2018. For purposes of this disclosure, recorded investments represent amounts immediately prior to and subsequent to the restructuring.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2019
|
|
|
|
|
(dollars in millions)
|
|
Number of
Contracts
|
|
Pre-Modification
Outstanding
Recorded
Investment
|
|
Post-Modification
Outstanding
Recorded
Investment
|
Commercial:
|
|
|
|
|
|
|
Commercial real estate (1)
|
|
12
|
|
|
$
|
17.2
|
|
|
$
|
17.2
|
|
Commercial and industrial (2)
|
|
33
|
|
|
31.9
|
|
|
31.9
|
|
Equipment financing (3)
|
|
37
|
|
|
24.9
|
|
|
24.9
|
|
Total
|
|
82
|
|
|
74.0
|
|
|
74.0
|
|
Retail:
|
|
|
|
|
|
|
Residential mortgage (4)
|
|
85
|
|
|
26.3
|
|
|
26.3
|
|
Home equity (5)
|
|
102
|
|
|
9.0
|
|
|
9.0
|
|
Other consumer
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
|
187
|
|
|
35.3
|
|
|
35.3
|
|
Total
|
|
269
|
|
|
$
|
109.3
|
|
|
$
|
109.3
|
|
(1)Represents the following concessions: extension of term (7 contracts; recorded investment of $2.1 million); reduced payment and/or payment deferral (1 contract; recorded investment of $0.6 million); or a combination of concessions
(4 contracts; recorded investment of $14.5 million).
(2)Represents the following concessions: extension of term (26 contracts; recorded investment of $26.4 million); reduced payment and/or payment deferral (3 contracts; recorded investment of $0.8 million); or a combination of concessions (4 contracts; recorded investment of $4.7 million).
(3)Represents the following concessions: extension of term (5 contracts; recorded investment of $1.6 million); reduced payment and/or payment deferral (26 contracts; recorded investment of $18.9 million); or a combination of concessions (6 contracts; recorded investment of $4.4 million).
(4)Represents the following concessions: loans restructured through bankruptcy (45 contracts; recorded investment of $9.9 million); reduced payment and/or payment deferral (24 contracts; recorded investment of $10.1 million); or a combination of concessions (16 contracts; recorded investment of $6.3 million).
(5)Represents the following concessions: loans restructured through bankruptcy (54 contracts; recorded investment of $3.2 million); reduced payment and/or payment deferral (18 contracts; recorded investment of $2.9 million); or a combination of concessions (30 contracts; recorded investment of $2.9 million).
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2018
|
|
|
|
|
(dollars in millions)
|
|
Number of
Contracts
|
|
Pre-Modification
Outstanding
Recorded
Investment
|
|
Post-Modification
Outstanding
Recorded
Investment
|
Commercial:
|
|
|
|
|
|
|
Commercial real estate (1)
|
|
13
|
|
|
$
|
27.6
|
|
|
$
|
27.6
|
|
Commercial and industrial (2)
|
|
47
|
|
|
73.1
|
|
|
73.1
|
|
Equipment financing (3)
|
|
31
|
|
|
31.6
|
|
|
31.6
|
|
Total
|
|
91
|
|
|
132.3
|
|
|
132.3
|
|
Retail:
|
|
|
|
|
|
|
Residential mortgage (4)
|
|
38
|
|
|
9.5
|
|
|
9.5
|
|
Home equity (5)
|
|
79
|
|
|
7.3
|
|
|
7.3
|
|
Other consumer
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
|
117
|
|
|
16.8
|
|
|
16.8
|
|
Total
|
|
208
|
|
|
$
|
149.1
|
|
|
$
|
149.1
|
|
(1)Represents the following concessions: extension of term (9 contracts; recorded investment of $24.1 million); reduced payment and/or payment deferral (1 contract; recorded investment of $0.5 million); or a combination of concessions (3 contracts; recorded investment of $3.0 million).
(2)Represents the following concessions: extension of term (31 contracts; recorded investment of $48.4 million); reduced payment and/or payment deferral (11 contracts; recorded investment of $23.8 million); or a combination of concessions (5 contracts; recorded investment of $0.9 million).
(3)Represents the following concessions: extension of term (3 contracts; recorded investment of $4.2 million); reduced payment and/or payment deferral (16 contracts; recorded investment of $17.6 million); or a combination of concessions (12 contracts; recorded investment of $9.8 million).
(4)Represents the following concessions: loans restructured through bankruptcy (21 contracts; recorded investment of $3.7 million); reduced payment and/or payment deferral (10 contracts; recorded investment of $3.5 million); or a combination of concessions (7 contracts; recorded investment of $2.3 million).
(5)Represents the following concessions: loans restructured through bankruptcy (49 contracts; recorded investment of $3.6 million); reduced payment and/or payment deferral (10 contracts; recorded investment of $1.3 million); or a combination of concessions (20 contracts; recorded investment of $2.4 million).
The following is a summary, by class of loan, of information related to TDRs completed within the previous 12 months that subsequently defaulted during the years ended December 31, 2019 and 2018. For purposes of this disclosure, the previous 12 months is measured from January 1 of the respective prior year and a default represents a previously-modified loan that became past due 30 days or more during 2019 or 2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
|
2018
|
|
|
Years ended December 31 (dollars in millions)
|
|
Number of
Contracts
|
|
Recorded
Investment as of
Period End
|
|
Number of
Contracts
|
|
Recorded
Investment as of
Period End
|
Commercial:
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
Commercial and industrial
|
|
2
|
|
|
2.4
|
|
|
12
|
|
|
6.7
|
|
Equipment financing
|
|
8
|
|
|
5.3
|
|
|
6
|
|
|
3.5
|
|
Total
|
|
10
|
|
|
7.7
|
|
|
18
|
|
|
10.2
|
|
Retail:
|
|
|
|
|
|
|
|
|
Residential mortgage
|
|
5
|
|
|
2.2
|
|
|
7
|
|
|
1.6
|
|
Home equity
|
|
12
|
|
|
1.0
|
|
|
13
|
|
|
0.7
|
|
Other consumer
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
|
17
|
|
|
3.2
|
|
|
20
|
|
|
2.3
|
|
Total
|
|
27
|
|
|
$
|
10.9
|
|
|
38
|
|
|
$
|
12.5
|
|
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
People’s United’s impaired loans consist of certain loans that have been placed on non-accrual status, including all TDRs. The following table summarizes, by class of loan, information related to individually-evaluated impaired loans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
|
|
|
2018
|
|
|
|
|
As of December 31 (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
|
|
$
|
28.9
|
|
|
$
|
25.9
|
|
|
$
|
—
|
|
|
$
|
31.0
|
|
|
$
|
28.1
|
|
|
$
|
—
|
|
Commercial and industrial
|
|
31.0
|
|
|
25.9
|
|
|
—
|
|
|
45.6
|
|
|
42.0
|
|
|
—
|
|
Equipment financing
|
|
24.1
|
|
|
21.8
|
|
|
—
|
|
|
20.2
|
|
|
18.0
|
|
|
—
|
|
Retail:
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
|
68.4
|
|
|
60.8
|
|
|
—
|
|
|
66.8
|
|
|
59.3
|
|
|
—
|
|
Home equity
|
|
26.0
|
|
|
23.0
|
|
|
—
|
|
|
23.8
|
|
|
20.3
|
|
|
—
|
|
Other consumer
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
|
$
|
178.4
|
|
|
$
|
157.4
|
|
|
$
|
—
|
|
|
$
|
187.4
|
|
|
$
|
167.7
|
|
|
$
|
—
|
|
With a related allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
$
|
21.5
|
|
|
$
|
21.0
|
|
|
$
|
3.4
|
|
|
$
|
23.8
|
|
|
$
|
21.8
|
|
|
$
|
1.6
|
|
Commercial and industrial
|
|
20.0
|
|
|
16.4
|
|
|
3.9
|
|
|
12.6
|
|
|
10.2
|
|
|
2.4
|
|
Equipment financing
|
|
12.4
|
|
|
11.6
|
|
|
1.7
|
|
|
16.2
|
|
|
12.8
|
|
|
2.7
|
|
Retail:
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
|
11.6
|
|
|
11.5
|
|
|
1.5
|
|
|
8.8
|
|
|
8.8
|
|
|
1.7
|
|
Home equity
|
|
1.4
|
|
|
1.4
|
|
|
0.7
|
|
|
1.7
|
|
|
1.6
|
|
|
0.7
|
|
Other consumer
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
|
$
|
66.9
|
|
|
$
|
61.9
|
|
|
$
|
11.2
|
|
|
$
|
63.1
|
|
|
$
|
55.2
|
|
|
$
|
9.1
|
|
Total impaired loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
$
|
50.4
|
|
|
$
|
46.9
|
|
|
$
|
3.4
|
|
|
$
|
54.8
|
|
|
$
|
49.9
|
|
|
$
|
1.6
|
|
Commercial and industrial
|
|
51.0
|
|
|
42.3
|
|
|
3.9
|
|
|
58.2
|
|
|
52.2
|
|
|
2.4
|
|
Equipment financing
|
|
36.5
|
|
|
33.4
|
|
|
1.7
|
|
|
36.4
|
|
|
30.8
|
|
|
2.7
|
|
Total
|
|
137.9
|
|
|
122.6
|
|
|
9.0
|
|
|
149.4
|
|
|
132.9
|
|
|
6.7
|
|
Retail:
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
|
$
|
80.0
|
|
|
$
|
72.3
|
|
|
$
|
1.5
|
|
|
$
|
75.6
|
|
|
$
|
68.1
|
|
|
$
|
1.7
|
|
Home equity
|
|
27.4
|
|
|
24.4
|
|
|
0.7
|
|
|
25.5
|
|
|
21.9
|
|
|
0.7
|
|
Other consumer
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
|
107.4
|
|
|
96.7
|
|
|
2.2
|
|
|
101.1
|
|
|
90.0
|
|
|
2.4
|
|
Total
|
|
$
|
245.3
|
|
|
$
|
219.3
|
|
|
$
|
11.2
|
|
|
$
|
250.5
|
|
|
$
|
222.9
|
|
|
$
|
9.1
|
|
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
The following table summarizes, 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
|
2018
|
|
|
|
2017
|
|
|
Years ended December 31 (in millions)
|
|
Average
Recorded
Investment
|
|
Interest
Income
Recognized
|
|
Average
Recorded
Investment
|
|
Interest
Income
Recognized
|
|
Average
Recorded
Investment
|
|
Interest
Income
Recognized
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
$
|
39.6
|
|
|
$
|
1.1
|
|
|
$
|
40.2
|
|
|
$
|
1.1
|
|
|
$
|
55.8
|
|
|
$
|
1.2
|
|
Commercial and industrial
|
|
44.5
|
|
|
1.6
|
|
|
49.6
|
|
|
2.8
|
|
|
63.4
|
|
|
1.9
|
|
Equipment financing
|
|
27.0
|
|
|
0.3
|
|
|
38.4
|
|
|
0.1
|
|
|
44.4
|
|
|
0.4
|
|
Total
|
|
111.1
|
|
|
3.0
|
|
|
128.2
|
|
|
4.0
|
|
|
163.6
|
|
|
3.5
|
|
Retail:
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
|
68.3
|
|
|
2.1
|
|
|
68.7
|
|
|
1.9
|
|
|
71.8
|
|
|
1.7
|
|
Home equity
|
|
23.0
|
|
|
0.6
|
|
|
20.9
|
|
|
0.5
|
|
|
21.2
|
|
|
0.4
|
|
Other consumer
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
|
91.3
|
|
|
2.7
|
|
|
89.6
|
|
|
2.4
|
|
|
93.0
|
|
|
2.1
|
|
Total
|
|
$
|
202.4
|
|
|
$
|
5.7
|
|
|
$
|
217.8
|
|
|
$
|
6.4
|
|
|
$
|
256.6
|
|
|
$
|
5.6
|
|
The following tables summarize, by class of loan, aging information for originated loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Past Due
|
|
|
|
|
|
|
As of December 31, 2019 (in millions)
|
|
Current
|
|
30-89
Days
|
|
90 Days
or More
|
|
Total
|
|
Total
Originated
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
$
|
9,983.5
|
|
|
$
|
7.8
|
|
|
$
|
21.2
|
|
|
$
|
29.0
|
|
|
$
|
10,012.5
|
|
Commercial and industrial
|
|
9,738.0
|
|
|
10.5
|
|
|
14.6
|
|
|
25.1
|
|
|
9,763.1
|
|
Equipment financing
|
|
4,591.4
|
|
|
94.7
|
|
|
20.0
|
|
|
114.7
|
|
|
4,706.1
|
|
Total
|
|
24,312.9
|
|
|
113.0
|
|
|
55.8
|
|
|
168.8
|
|
|
24,481.7
|
|
Retail:
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
|
6,534.3
|
|
|
31.6
|
|
|
23.0
|
|
|
54.6
|
|
|
6,588.9
|
|
Home equity
|
|
1,615.0
|
|
|
5.0
|
|
|
5.1
|
|
|
10.1
|
|
|
1,625.1
|
|
Other consumer
|
|
39.5
|
|
|
0.2
|
|
|
—
|
|
|
0.2
|
|
|
39.7
|
|
Total
|
|
8,188.8
|
|
|
36.8
|
|
|
28.1
|
|
|
64.9
|
|
|
8,253.7
|
|
Total originated loans
|
|
$
|
32,501.7
|
|
|
$
|
149.8
|
|
|
$
|
83.9
|
|
|
$
|
233.7
|
|
|
$
|
32,735.4
|
|
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 $8.6 million, $18.8 million and $26.2 million, respectively, and $20.8 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. and Subsidiaries
Notes to Consolidated Financial Statements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Past Due
|
|
|
|
|
|
|
As of December 31, 2018 (in millions)
|
|
Current
|
|
30-89
Days
|
|
90 Days
or More
|
|
Total
|
|
Total
Originated
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
$
|
9,762.1
|
|
|
$
|
23.0
|
|
|
$
|
13.4
|
|
|
$
|
36.4
|
|
|
$
|
9,798.5
|
|
Commercial and industrial
|
|
8,261.5
|
|
|
6.9
|
|
|
23.9
|
|
|
30.8
|
|
|
8,292.3
|
|
Equipment financing
|
|
3,855.3
|
|
|
68.8
|
|
|
13.6
|
|
|
82.4
|
|
|
3,937.7
|
|
Total
|
|
21,878.9
|
|
|
98.7
|
|
|
50.9
|
|
|
149.6
|
|
|
22,028.5
|
|
Retail:
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
|
6,723.2
|
|
|
38.6
|
|
|
27.4
|
|
|
66.0
|
|
|
6,789.2
|
|
Home equity
|
|
1,776.0
|
|
|
5.8
|
|
|
7.7
|
|
|
13.5
|
|
|
1,789.5
|
|
Other consumer
|
|
42.7
|
|
|
0.1
|
|
|
—
|
|
|
0.1
|
|
|
42.8
|
|
Total
|
|
8,541.9
|
|
|
44.5
|
|
|
35.1
|
|
|
79.6
|
|
|
8,621.5
|
|
Total originated loans
|
|
$
|
30,420.8
|
|
|
$
|
143.2
|
|
|
$
|
86.0
|
|
|
$
|
229.2
|
|
|
$
|
30,650.0
|
|
Included in the “Current” and “30-89 Days” categories above are early non-performing commercial real estate loans, commercial and industrial loans, and equipment financing loans totaling $20.3 million, $15.8 million and $28.4 million, respectively, and $19.1 million of retail loans in the process of foreclosure or bankruptcy. These loans are less than 90 days past due but have been placed 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.
Retail Credit Quality Indicators
Pools of retail loans possessing similar risk and loss characteristics are collectively evaluated for impairment. 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 historical portfolio 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/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.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
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 Loan Credit Quality Indicators
Upon acquiring a loan portfolio, the Company’s internal Loan Review function undertakes the process of assigning risk ratings to all commercial loans in accordance with the Company’s established policy, which may differ in certain respects from the risk rating policy of the predecessor company. The length of time necessary to complete this process varies based on the size of the acquired portfolio, the quality of the documentation maintained in the underlying loan files and the extent to which the predecessor company followed a risk rating approach comparable to People’s United’s. As a result, while acquired loans are risk rated, there are occasions when such ratings may be deemed “preliminary” until the Company’s re-rating process has been completed.
The following tables summarize, by class of loan, credit quality indicators:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2019 (in millions)
|
|
Commercial
Real Estate
|
|
Commercial
and
Industrial
|
|
Equipment
Financing
|
|
Total
|
Commercial:
|
|
|
|
|
|
|
|
|
Originated loans:
|
|
|
|
|
|
|
|
|
Pass
|
|
$
|
9,736.4
|
|
|
$
|
9,223.5
|
|
|
$
|
4,231.6
|
|
|
$
|
23,191.5
|
|
Special mention
|
|
197.6
|
|
|
294.8
|
|
|
76.5
|
|
|
568.9
|
|
Substandard
|
|
75.4
|
|
|
242.7
|
|
|
398.0
|
|
|
716.1
|
|
Doubtful
|
|
3.1
|
|
|
2.1
|
|
|
—
|
|
|
5.2
|
|
Total originated loans
|
|
10,012.5
|
|
|
9,763.1
|
|
|
4,706.1
|
|
|
24,481.7
|
|
Acquired loans:
|
|
|
|
|
|
|
|
|
Pass
|
|
4,485.9
|
|
|
1,168.2
|
|
|
201.9
|
|
|
5,856.0
|
|
Special mention
|
|
136.7
|
|
|
35.6
|
|
|
—
|
|
|
172.3
|
|
Substandard
|
|
127.2
|
|
|
73.1
|
|
|
2.4
|
|
|
202.7
|
|
Doubtful
|
|
—
|
|
|
1.6
|
|
|
—
|
|
|
1.6
|
|
Total acquired loans
|
|
4,749.8
|
|
|
1,278.5
|
|
|
204.3
|
|
|
6,232.6
|
|
Total
|
|
$
|
14,762.3
|
|
|
$
|
11,041.6
|
|
|
$
|
4,910.4
|
|
|
$
|
30,714.3
|
|
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2019 (in millions)
|
|
Residential
Mortgage
|
|
Home
Equity
|
|
Other
Consumer
|
|
Total
|
Retail:
|
|
|
|
|
|
|
|
|
Originated loans:
|
|
|
|
|
|
|
|
|
Low risk
|
|
$
|
3,225.3
|
|
|
$
|
747.3
|
|
|
$
|
24.9
|
|
|
$
|
3,997.5
|
|
Moderate risk
|
|
2,649.0
|
|
|
548.5
|
|
|
5.9
|
|
|
3,203.4
|
|
High risk
|
|
714.6
|
|
|
329.3
|
|
|
8.9
|
|
|
1,052.8
|
|
Total originated loans
|
|
6,588.9
|
|
|
1,625.1
|
|
|
39.7
|
|
|
8,253.7
|
|
Acquired loans:
|
|
|
|
|
|
|
|
|
Low risk
|
|
1,184.7
|
|
|
—
|
|
|
—
|
|
|
1,184.7
|
|
Moderate risk
|
|
2,309.3
|
|
|
—
|
|
|
—
|
|
|
2,309.3
|
|
High risk
|
|
235.2
|
|
|
781.4
|
|
|
117.5
|
|
|
1,134.1
|
|
Total acquired loans
|
|
3,729.2
|
|
|
781.4
|
|
|
117.5
|
|
|
4,628.1
|
|
Total
|
|
$
|
10,318.1
|
|
|
$
|
2,406.5
|
|
|
$
|
157.2
|
|
|
$
|
12,881.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2018 (in millions)
|
|
Commercial
Real Estate
|
|
Commercial
and
Industrial
|
|
Equipment
Financing
|
|
Total
|
Commercial:
|
|
|
|
|
|
|
|
|
Originated loans:
|
|
|
|
|
|
|
|
|
Pass
|
|
$
|
9,607.0
|
|
|
$
|
7,855.7
|
|
|
$
|
3,549.3
|
|
|
$
|
21,012.0
|
|
Special mention
|
|
105.5
|
|
|
196.9
|
|
|
92.1
|
|
|
394.5
|
|
Substandard
|
|
85.2
|
|
|
239.3
|
|
|
296.3
|
|
|
620.8
|
|
Doubtful
|
|
0.8
|
|
|
0.4
|
|
|
—
|
|
|
1.2
|
|
Total originated loans
|
|
9,798.5
|
|
|
8,292.3
|
|
|
3,937.7
|
|
|
22,028.5
|
|
Acquired loans:
|
|
|
|
|
|
|
|
|
Pass
|
|
1,766.2
|
|
|
719.6
|
|
|
394.0
|
|
|
2,879.8
|
|
Special mention
|
|
27.3
|
|
|
14.6
|
|
|
4.7
|
|
|
46.6
|
|
Substandard
|
|
57.6
|
|
|
62.4
|
|
|
2.8
|
|
|
122.8
|
|
Doubtful
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total acquired loans
|
|
1,851.1
|
|
|
796.6
|
|
|
401.5
|
|
|
3,049.2
|
|
Total
|
|
$
|
11,649.6
|
|
|
$
|
9,088.9
|
|
|
$
|
4,339.2
|
|
|
$
|
25,077.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2018 (in millions)
|
|
Residential
Mortgage
|
|
Home
Equity
|
|
Other
Consumer
|
|
Total
|
Retail:
|
|
|
|
|
|
|
|
|
Originated loans:
|
|
|
|
|
|
|
|
|
Low risk
|
|
$
|
2,912.8
|
|
|
$
|
834.5
|
|
|
$
|
27.3
|
|
|
$
|
3,774.6
|
|
Moderate risk
|
|
3,360.9
|
|
|
576.4
|
|
|
5.9
|
|
|
3,943.2
|
|
High risk
|
|
515.5
|
|
|
378.6
|
|
|
9.6
|
|
|
903.7
|
|
Total originated loans
|
|
6,789.2
|
|
|
1,789.5
|
|
|
42.8
|
|
|
8,621.5
|
|
Acquired loans:
|
|
|
|
|
|
|
|
|
Low risk
|
|
506.1
|
|
|
—
|
|
|
—
|
|
|
506.1
|
|
Moderate risk
|
|
639.6
|
|
|
—
|
|
|
—
|
|
|
639.6
|
|
High risk
|
|
219.3
|
|
|
173.0
|
|
|
4.2
|
|
|
396.5
|
|
Total acquired loans
|
|
1,365.0
|
|
|
173.0
|
|
|
4.2
|
|
|
1,542.2
|
|
Total
|
|
$
|
8,154.2
|
|
|
$
|
1,962.5
|
|
|
$
|
47.0
|
|
|
$
|
10,163.7
|
|
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Acquired PCI Loans
At the respective acquisition dates, on an aggregate basis, the PCI loan portfolio had contractually required principal and interest payments receivable of $7.95 billion; expected cash flows of $7.35 billion; and a fair value (initial carrying amount) of $5.62 billion. The difference between the contractually required principal and interest payments receivable and the expected cash flows ($603.1 million) represented the initial nonaccretable difference. The difference between the expected cash flows and fair value ($1.73 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 December 31, 2019, the outstanding principal balance and carrying amount of the PCI loan portfolio were $532.2 million and $396.0 million, respectively ($491.6 million and $399.9 million, respectively, at December 31, 2018).
The following table summarizes activity in the accretable yield for the PCI loan portfolio:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31 (in millions)
|
|
2019
|
|
2018
|
|
2017
|
Balance at beginning of period
|
|
$
|
189.7
|
|
|
$
|
219.7
|
|
|
$
|
255.4
|
|
Acquisitions
|
|
25.5
|
|
|
27.1
|
|
|
13.1
|
|
Accretion
|
|
(21.0)
|
|
|
(24.6)
|
|
|
(29.1)
|
|
Reclassification from nonaccretable difference for loans with improved cash flows (1)
|
|
—
|
|
|
—
|
|
|
—
|
|
Other changes in expected cash flows (2)
|
|
(56.7)
|
|
|
(32.5)
|
|
|
(19.7)
|
|
Balance at end of period
|
|
$
|
137.5
|
|
|
$
|
189.7
|
|
|
$
|
219.7
|
|
(1)Results in increased interest accretion as a prospective yield adjustment over the remaining life of the corresponding pool of loans.
(2)Represents changes in cash flows expected to be collected due to factors other than credit (e.g. changes in prepayment assumptions and/or changes in interest rates on variable rate loans), as well as loan sales, modifications and payoffs.
FDIC Loss-Share Receivable
On April 16, 2010, the Bank entered into a definitive purchase and assumption agreement (the “Agreement”) with the FDIC pursuant to which the Bank assumed all of the deposits, certain assets and the banking operations of Butler Bank. The Agreement also provides for loss-share coverage by the FDIC, up to certain limits, on all covered assets (loans and REO). The FDIC is obligated to reimburse the Bank for 80% of any future losses on covered assets up to $34.0 million. The Bank will reimburse the FDIC for 80% of recoveries with respect to losses for which the FDIC paid 80% reimbursement under the
loss-sharing coverage.
The asset arising from the loss-sharing coverage, referred to as the “FDIC loss-share receivable,” totaled $0.1 million and $0.2 million at December 31, 2019 and 2018, respectively, and is included in other assets in the Consolidated Statements of Condition. The FDIC loss-share receivable is measured separately from the covered loans because the coverage is not contractually embedded in the loans and is not transferable should the Bank choose to dispose of the covered loans. The FDIC loss-share receivable will be reduced as losses are realized on covered assets and as loss-sharing payments are received from the FDIC. Realized losses in excess of the acquisition date estimates will result in an increase in the FDIC loss-share receivable. Conversely, the FDIC loss-share receivable will be reduced if realized losses are less than the estimates at acquisition. The amount ultimately collected for the FDIC loss-share receivable is dependent upon the performance of the underlying covered assets over time and claims submitted to the FDIC. In the event that losses under the loss-share coverage do not reach expected levels, the Bank has agreed to make a cash payment to the FDIC on approximately the tenth anniversary of the Agreement.
Lessor Arrangements
People's United provides equipment financing to its customers through a variety of lessor arrangements, some of which may include options to renew and/or for the lessee to purchase the leased equipment at the end of the lease term. Direct financing leases and sales-type leases (collectively, "lease financing receivables") are carried at the aggregate of lease payments receivable plus the estimated residual value of the leased assets and any IDC incurred to originate these leases, less unearned income, which is accreted to interest income over the lease term using the interest method.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
The residual value component of a lease financing receivable represents the estimated fair value of the leased equipment at the end of the lease term. In establishing residual value estimates, the Company may rely on industry data, historical experience, independent appraisals and, where appropriate, information regarding product life cycle, product upgrades and competing products. Upon expiration of a lease, residual assets are remarketed, resulting in an extension of the lease by the lessee, a lease to a new customer or purchase of the residual asset by the lessee or another party. Impairment of residual values arises if the expected fair value is less than the carrying amount. The Company assesses its net investment in lease financing receivables (including residual values) for impairment on a quarterly basis with any impairment losses recognized in accordance with the impairment guidance for financial instruments. As such, net investment in lease financing receivables may be reduced by an allowance for credit losses with changes recognized as provision expense.
The composition of the Company’s total net investment in lease financing receivables included within equipment financing loans in the Consolidated Statements of Condition was as follows:
|
|
|
|
|
|
|
|
(in millions)
|
December 31, 2019
|
|
|
Lease payments receivable
|
$
|
1,417.1
|
|
|
|
Estimated residual value of leased assets
|
128.0
|
|
|
|
Gross investment in lease financing receivables
|
1,545.1
|
|
|
|
Plus: Deferred origination costs
|
13.4
|
|
|
|
Less: Unearned income
|
(156.9)
|
|
|
|
Total net investment in lease financing receivables
|
$
|
1,401.6
|
|
|
|
The contractual maturities of the Company's lease financing receivables were as follows:
|
|
|
|
|
|
(in millions)
|
December 31, 2019
|
2020
|
$
|
518.8
|
|
2021
|
414.2
|
|
2022
|
303.3
|
|
2023
|
178.5
|
|
2024
|
93.6
|
|
Later years
|
36.7
|
|
Total
|
$
|
1,545.1
|
|
Operating lease income, generated in connection with operating leases for which the Company acts as a lessor, is recognized on a straight-line basis over the lease term as a component of non-interest income in the Consolidated Statements of Income. Depreciation expense for assets under operating leases, which are included in other assets in the Consolidated Statements of Condition, is generally recorded on a straight-line basis over the lease term as a component of non-interest expense in the Consolidated Statements of Income.
For the year ended December 31, 2019, total lease income was $117.9 million, which consisted of $66.7 million from lease financing receivables and $51.2 million from operating leases.
Lessee Arrangements
Substantially all of the Company’s lessee arrangements represent non-cancelable operating leases for real estate (primarily branch locations) and office equipment with terms extending through 2054. Under these arrangements, People's United records ROU assets and corresponding lease liabilities at lease commencement. Lease liabilities are recognized based on the present value of the remaining lease payments and discounted using the Company’s incremental borrowing rate for borrowings of similar term. ROU assets initially equal the related lease liability, adjusted for any lease payments made prior to the lease commencement and any lease incentives. Portions of certain properties are subleased for terms extending through 2024.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
At lease commencement, the Company considers renewal or termination options in the determination of the term of the lease. If it is reasonably certain that a renewal or termination option will be exercised, the effects of such options are included in the determination of the expected lease term. All leases are recorded with the exception of leases with an initial term of twelve months or less for which the Company made the short-term lease election. Within the Consolidated Statements of Condition, ROU assets are reported in other assets and the related lease liabilities are reported in other liabilities.
In recognizing ROU assets and related lease liabilities, lease and non-lease components (such as taxes, insurance and common area maintenance costs) are accounted for separately as such amounts are generally readily determinable under the Company's lease contracts. Lease expense is recognized on a straight-line basis over the lease term and is recorded within occupancy and equipment expense in the Consolidated Statements of Income. Variable lease payments, which generally relate to the non-lease components noted above, are expensed as incurred.
The following tables provide the components of lease cost and supplemental information:
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended
|
|
|
|
|
|
|
(in millions)
|
December 31, 2019
|
|
|
|
|
|
|
Operating lease cost
|
$
|
61.6
|
|
|
|
|
|
|
|
Variable lease cost
|
8.6
|
|
|
|
|
|
|
|
Finance lease cost
|
0.1
|
|
|
|
|
|
|
|
Sublease income
|
(1.4)
|
|
|
|
|
|
|
|
Net lease cost
|
$
|
68.9
|
|
|
|
|
|
|
|
Rent expense under operating leases included in occupancy and equipment in the Consolidated Statements of Income totaled $64.2 million and $62.5 million for the years ended December 31, 2018 and 2017, respectively.
|
|
|
|
|
|
|
|
(dollars in millions)
|
As of and for the Year
Ended December 31, 2019
|
|
|
Lease ROU assets:
|
|
|
|
|
Operating lease
|
$
|
276.6
|
|
|
|
Finance lease
|
2.6
|
|
|
|
Lease liabilities:
|
|
|
|
|
Operating lease
|
$
|
307.9
|
|
|
|
Finance lease
|
5.3
|
|
|
|
|
|
|
|
Cash payments included in the measurement of lease liabilities:
|
|
|
|
|
Reported in operating cash from operating leases
|
61.7
|
|
|
|
Reported in financing cash from finance leases
|
0.1
|
|
|
|
ROU assets obtained in exchange for lessee:
|
|
|
|
|
Operating lease liabilities (1)
|
89.1
|
|
|
|
Finance lease liabilities (1)
|
2.6
|
|
|
|
Weighted-average discount rate:
|
|
|
|
|
Operating leases
|
3.13
|
%
|
|
|
Finance leases
|
2.58
|
|
|
|
Weighted-average remaining lease term (in years):
|
|
|
|
Operating leases
|
7.7
|
|
|
Finance leases
|
12.2
|
|
|
1.Amount excludes related transition adjustment (see Note 1).
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
The contractual maturities of the Company's lease liabilities as of December 31, 2019 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
Operating Leases
|
|
Finance Leases
|
|
|
2020
|
$
|
66.6
|
|
|
$
|
0.5
|
|
|
|
2021
|
63.9
|
|
|
0.5
|
|
|
|
2022
|
46.3
|
|
|
0.5
|
|
|
|
2023
|
33.9
|
|
|
0.5
|
|
|
|
2024
|
28.3
|
|
|
0.5
|
|
|
|
Later years
|
111.8
|
|
|
3.7
|
|
|
|
Total lease payments
|
350.8
|
|
|
6.2
|
|
|
|
Less: Interest
|
(42.9)
|
|
|
(0.9)
|
|
|
|
Total lease liabilities
|
$
|
307.9
|
|
|
$
|
5.3
|
|
|
|
In the fourth quarter of 2019, the Company completed a sale-leaseback transaction on a property located in Burlington, Vermont. The transaction resulted in a gain of $3.3 million, which is included in other non-interest income in the Consolidated Statements of Income.
|
|
|
NOTE 7 – Goodwill and Other Acquisition-Related Intangible Assets
|
Goodwill
Changes in the carrying amount of People’s United’s goodwill are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Segment
|
|
|
|
|
|
|
(in millions)
|
|
Commercial
Banking
|
|
Retail
Banking
|
|
Wealth
Management
|
|
Total
|
Balance at December 31, 2017
|
|
$
|
1,600.3
|
|
|
$
|
720.1
|
|
|
$
|
91.0
|
|
|
$
|
2,411.4
|
|
Acquisition of:
|
|
|
|
|
|
|
|
|
First Connecticut
|
|
135.2
|
|
|
115.2
|
|
|
—
|
|
|
250.4
|
|
Vend Lease
|
|
23.9
|
|
|
—
|
|
|
—
|
|
|
23.9
|
|
Balance at December 31, 2018
|
|
1,759.4
|
|
|
835.3
|
|
|
91.0
|
|
|
2,685.7
|
|
Acquisition of:
|
|
|
|
|
|
|
|
|
United Financial
|
|
120.5
|
|
|
83.8
|
|
|
—
|
|
|
204.3
|
|
BSB Bancorp
|
|
49.3
|
|
|
95.6
|
|
|
—
|
|
|
144.9
|
|
VAR
|
|
37.5
|
|
|
—
|
|
|
—
|
|
|
37.5
|
|
Write-down relating to the sale of branches (1)
|
|
(0.6)
|
|
|
(3.8)
|
|
|
(2.5)
|
|
|
(6.9)
|
|
Balance at December 31, 2019
|
|
$
|
1,966.1
|
|
|
$
|
1,010.9
|
|
|
$
|
88.5
|
|
|
$
|
3,065.5
|
|
(1)See Note 2.
Recent acquisitions have been undertaken with the objective of expanding the Company’s business, both geographically and through product offerings, as well as realizing synergies and economies of scale by combining with the acquired entities. For these reasons, a market-based premium was paid for the acquired entities which, in turn, resulted in the recognition of goodwill, representing the excess of the respective purchase prices over the estimated fair value of the net assets acquired.
All of People’s United’s tax deductible goodwill was created in transactions in which the Company purchased the assets of the target (as opposed to purchasing the issued and outstanding stock of the target). At December 31, 2019 and 2018, tax deductible goodwill totaled $134.4 million and $90.3 million, respectively.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Other Acquisition-Related Intangible Assets
The following is a summary of People’s United’s other acquisition-related intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
|
|
|
2018
|
|
|
|
|
As of December 31 (in millions)
|
|
Gross
Amount
|
|
Accumulated
Amortization
|
|
Carrying
Amount
|
|
Gross
Amount
|
|
Accumulated
Amortization
|
|
Carrying
Amount
|
Intangibles amortized:
|
|
|
|
|
|
|
|
|
|
|
|
|
Core deposit intangible
|
|
$
|
303.9
|
|
|
$
|
177.3
|
|
|
$
|
126.6
|
|
|
$
|
222.9
|
|
|
$
|
157.4
|
|
|
$
|
65.5
|
|
Trade name intangible
|
|
123.9
|
|
|
73.4
|
|
|
50.5
|
|
|
123.9
|
|
|
64.8
|
|
|
59.1
|
|
Client relationships
|
|
24.4
|
|
|
6.4
|
|
|
18.0
|
|
|
24.4
|
|
|
4.4
|
|
|
20.0
|
|
Trust relationships
|
|
42.7
|
|
|
35.1
|
|
|
7.6
|
|
|
42.7
|
|
|
31.3
|
|
|
11.4
|
|
Insurance relationships
|
|
38.1
|
|
|
34.3
|
|
|
3.8
|
|
|
38.1
|
|
|
33.6
|
|
|
4.5
|
|
Favorable lease agreements
|
|
2.9
|
|
|
0.6
|
|
|
2.3
|
|
|
2.9
|
|
|
0.3
|
|
|
2.6
|
|
Non-compete agreements
|
|
0.6
|
|
|
0.3
|
|
|
0.3
|
|
|
0.6
|
|
|
0.2
|
|
|
0.4
|
|
Total
|
|
$
|
536.5
|
|
|
$
|
327.4
|
|
|
209.1
|
|
|
$
|
455.5
|
|
|
$
|
292.0
|
|
|
163.5
|
|
Mutual fund management contracts
(not amortized)
|
|
|
|
|
|
—
|
|
|
|
|
|
|
16.5
|
|
Total other acquisition-related
intangible assets
|
|
|
|
|
|
$
|
209.1
|
|
|
|
|
|
|
$
|
180.0
|
|
Other acquisition-related intangible assets subject to amortization have an original weighted-average amortization period of 12 years. Amortization expense of other acquisition-related intangible assets totaled $32.5 million, $21.8 million and $30.0 million for the years ended December 31, 2019, 2018 and 2017, respectively. Scheduled amortization expense attributable to other acquisition-related intangible assets for each of the next five years is as follows: $40.9 million in 2020; $36.1 million in 2021; $31.7 million in 2022; $24.0 million in 2023; and $20.3 million in 2024. In the fourth quarter of 2019, People's United recorded a complete write-down of the mutual fund management contract intangible asset ($16.5 million) stemming from the liquidation of the Company's public mutual funds. The charge is included in other non-interest expense in the Consolidated Statements of Income. Also in the fourth quarter of 2019, People's United recorded partial write-downs of the trade name and trust relationship intangible assets ($1.9 million and $1.0 million, respectively) as a result of the sale of
eight branches in central Maine. The charge is included in other non-interest income (as a component of the net gain on sale) in the Consolidated Statements of Income. There were no other impairment losses relating to goodwill or other acquisition-related intangible assets recorded in the Consolidated Statements of Income during the years ended December 31, 2019, 2018 and 2017.
|
|
|
NOTE 8 – Premises and Equipment
|
The components of premises and equipment are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31 (in millions)
|
|
2019
|
|
2018
|
Land
|
|
$
|
49.8
|
|
|
$
|
50.1
|
|
Buildings
|
|
330.6
|
|
|
300.0
|
|
Leasehold improvements
|
|
197.4
|
|
|
170.7
|
|
Furniture and equipment
|
|
324.3
|
|
|
279.3
|
|
Total
|
|
902.1
|
|
|
800.1
|
|
Less: Accumulated depreciation and amortization
|
|
596.6
|
|
|
532.8
|
|
Total premises and equipment, net
|
|
$
|
305.5
|
|
|
$
|
267.3
|
|
Depreciation and amortization expense included in occupancy and equipment expense in the Consolidated Statements of Income totaled $41.7 million, $36.3 million and $39.1 million for the years ended December 31, 2019, 2018 and 2017, respectively.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
|
|
|
NOTE 9 – Other Assets and Other Liabilities
|
The components of other assets are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31 (in millions)
|
|
2019
|
|
2018
|
Affordable housing investments (note 13)
|
|
$
|
383.9
|
|
|
$
|
304.1
|
|
Fair value of derivative financial instruments (notes 20 and 22)
|
|
341.0
|
|
|
103.0
|
|
Lease ROU assets (note 6)
|
|
279.2
|
|
|
—
|
|
Leased equipment
|
|
191.3
|
|
|
189.0
|
|
Accrued interest receivable
|
|
156.1
|
|
|
138.2
|
|
Funded status of defined benefit pension plans (note 18)
|
|
121.4
|
|
|
78.0
|
|
Loan disbursements in process
|
|
65.8
|
|
|
17.9
|
|
Current income tax receivable (note 13)
|
|
51.7
|
|
|
31.4
|
|
Assets held in trust for supplemental retirement plans (note 18)
|
|
51.0
|
|
|
56.4
|
|
Net deferred tax asset (note 13)
|
|
33.6
|
|
|
11.4
|
|
Other prepaid expenses
|
|
32.6
|
|
|
27.5
|
|
Economic development investments
|
|
29.2
|
|
|
26.2
|
|
Investment in joint venture
|
|
16.3
|
|
|
17.2
|
|
Receivables arising from securities brokerage and insurance businesses
|
|
13.0
|
|
|
26.4
|
|
REO:
|
|
|
|
|
Residential
|
|
11.9
|
|
|
5.5
|
|
Commercial
|
|
7.3
|
|
|
8.7
|
|
Mortgage servicing rights
|
|
10.6
|
|
|
—
|
|
Repossessed assets
|
|
4.2
|
|
|
3.9
|
|
Other
|
|
52.9
|
|
|
46.8
|
|
Total other assets
|
|
$
|
1,853.0
|
|
|
$
|
1,091.6
|
|
The components of other liabilities are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31 (in millions)
|
|
2019
|
|
2018
|
Lease liabilities (note 6)
|
|
$
|
313.2
|
|
|
$
|
—
|
|
Future contingent commitments for affordable housing investments (note 13)
|
|
141.1
|
|
|
119.7
|
|
Accrued expenses payable
|
|
104.3
|
|
|
87.9
|
|
Fair value of derivative financial instruments (notes 20 and 22)
|
|
96.2
|
|
|
139.0
|
|
Liabilities for supplemental retirement plans (note 18)
|
|
84.4
|
|
|
86.6
|
|
Accrued employee benefits
|
|
74.8
|
|
|
66.6
|
|
Accrued interest payable
|
|
21.7
|
|
|
25.4
|
|
Loan payments in process
|
|
18.8
|
|
|
51.2
|
|
Other postretirement plans (note 18)
|
|
18.7
|
|
|
15.3
|
|
Payables arising from securities brokerage and insurance businesses
|
|
9.6
|
|
|
29.7
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
22.7
|
|
|
73.8
|
|
Total other liabilities
|
|
$
|
905.5
|
|
|
$
|
695.2
|
|
The following is an analysis of People’s United’s total deposits by product type:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
|
2018
|
|
|
As of December 31 (dollars in millions)
|
|
Amount
|
|
Weighted-
Average Rate
|
|
Amount
|
|
Weighted-
Average Rate
|
Non-interest-bearing
|
|
$
|
9,803.7
|
|
|
—
|
%
|
|
$
|
8,543.0
|
|
|
—
|
%
|
Savings
|
|
4,987.7
|
|
|
0.23
|
|
|
4,116.5
|
|
|
0.09
|
|
Interest-bearing checking and money market
|
|
19,592.6
|
|
|
0.92
|
|
|
16,583.3
|
|
|
1.04
|
|
Time deposits maturing:
|
|
|
|
|
|
|
|
|
Within 3 months
|
|
$
|
3,984.7
|
|
|
1.90
|
|
|
1,480.0
|
|
|
1.66
|
|
After 3 but within 6 months
|
|
2,659.3
|
|
|
2.12
|
|
|
1,375.6
|
|
|
1.67
|
|
After 6 months but within 1 year
|
|
1,354.8
|
|
|
1.77
|
|
|
2,511.5
|
|
|
1.83
|
|
After 1 but within 2 years
|
|
816.3
|
|
|
1.82
|
|
|
1,275.5
|
|
|
1.98
|
|
After 2 but within 3 years
|
|
275.4
|
|
|
2.23
|
|
|
153.5
|
|
|
1.97
|
|
After 3 but within 4 years
|
|
97.8
|
|
|
2.37
|
|
|
102.1
|
|
|
1.63
|
|
After 4 but within 5 years
|
|
17.2
|
|
|
1.09
|
|
|
18.0
|
|
|
1.29
|
|
After 5 years (1)
|
|
—
|
|
|
0.99
|
|
|
—
|
|
|
1.01
|
|
Total
|
|
9,205.5
|
|
|
1.95
|
|
|
6,916.2
|
|
|
1.78
|
|
Total deposits
|
|
$
|
43,589.5
|
|
|
0.85
|
%
|
|
$
|
36,159.0
|
|
|
0.83
|
%
|
(1)Amount totaled less than $0.1 million at both December 31, 2019 and 2018.
Time deposits issued in amounts that exceed $250,000 totaled $1.9 billion and $1.1 billion at December 31, 2019 and 2018, respectively. Overdrafts of non-interest-bearing deposit accounts totaling $4.0 million and $2.7 million at December 31, 2019 and 2018, respectively, have been classified as loans.
Interest expense on deposits is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31 (in millions)
|
|
2019
|
|
2018
|
|
2017
|
Savings
|
|
$
|
13.4
|
|
|
$
|
7.2
|
|
|
$
|
9.7
|
|
Interest-bearing checking and money market
|
|
195.9
|
|
|
120.2
|
|
|
70.4
|
|
Time
|
|
147.6
|
|
|
88.7
|
|
|
50.6
|
|
Total
|
|
$
|
356.9
|
|
|
$
|
216.1
|
|
|
$
|
130.7
|
|
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
People’s United’s borrowings are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
|
2018
|
|
|
As of December 31 (dollars in millions)
|
|
Amount
|
|
Weighted-
Average Rate
|
|
Amount
|
|
Weighted-
Average Rate
|
Fixed-rate FHLB advances maturing:
|
|
|
|
|
|
|
|
|
Within 1 month
|
|
$
|
3,060.8
|
|
|
1.79
|
%
|
|
$
|
2,270.3
|
|
|
2.59
|
%
|
After 1 month but within 1 year
|
|
44.8
|
|
|
1.79
|
|
|
61.0
|
|
|
1.76
|
|
After 1 but within 2 years
|
|
6.8
|
|
|
2.11
|
|
|
54.2
|
|
|
1.75
|
|
After 2 but within 3 years
|
|
1.2
|
|
|
0.51
|
|
|
6.8
|
|
|
2.11
|
|
After 3 but within 4 years
|
|
0.6
|
|
|
0.05
|
|
|
1.3
|
|
|
0.52
|
|
After 4 but within 5 years
|
|
—
|
|
|
—
|
|
|
0.6
|
|
|
0.05
|
|
After 5 years
|
|
11.2
|
|
|
1.50
|
|
|
10.3
|
|
|
1.64
|
|
Total FHLB advances
|
|
3,125.4
|
|
|
1.79
|
|
|
2,404.5
|
|
|
2.54
|
|
Federal funds purchased maturing:
|
|
|
|
|
|
|
|
|
Within 1 month
|
|
1,620.0
|
|
|
1.61
|
|
|
845.0
|
|
|
2.53
|
|
Total federal funds purchased
|
|
1,620.0
|
|
|
1.61
|
|
|
845.0
|
|
|
2.53
|
|
Customer repurchase agreements maturing:
|
|
|
|
|
|
|
|
|
Within 1 month
|
|
409.1
|
|
|
0.69
|
|
|
332.9
|
|
|
0.61
|
|
Total customer repurchase agreements
|
|
409.1
|
|
|
0.69
|
|
|
332.9
|
|
|
0.61
|
|
Other borrowings maturing:
|
|
|
|
|
|
|
|
|
Within 1 year
|
|
—
|
|
|
—
|
|
|
11.0
|
|
|
2.40
|
|
|
|
|
|
|
|
|
|
|
Total other borrowings
|
|
—
|
|
|
—
|
|
|
11.0
|
|
|
2.40
|
|
Total borrowings
|
|
$
|
5,154.5
|
|
|
1.64
|
%
|
|
$
|
3,593.4
|
|
|
2.36
|
%
|
At December 31, 2019, the Bank’s total borrowing capacity from (i) the FHLB of Boston and the FRB-NY for advances and (ii) repurchase agreements was $12.7 billion based on the level of qualifying collateral available for these borrowings. In addition, the Bank had unsecured borrowing capacity of $1.7 billion at that date. FHLB advances are secured by the Bank’s investment in FHLB stock and by a security agreement that requires the Bank to maintain, as collateral, sufficient qualifying assets not otherwise pledged (principally single-family residential mortgage loans, home equity lines of credit and loans, and commercial real estate loans).
Interest expense on borrowings consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31 (in millions)
|
|
2019
|
|
2018
|
|
2017
|
FHLB advances
|
|
$
|
50.1
|
|
|
$
|
54.5
|
|
|
$
|
31.5
|
|
Federal funds purchased
|
|
24.6
|
|
|
13.6
|
|
|
7.1
|
|
Customer repurchase agreements
|
|
2.2
|
|
|
1.0
|
|
|
0.6
|
|
Other borrowings
|
|
0.1
|
|
|
1.8
|
|
|
2.1
|
|
Total
|
|
$
|
77.0
|
|
|
$
|
70.9
|
|
|
$
|
41.3
|
|
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Information concerning People’s United’s borrowings is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the years ended December 31 (dollars in millions)
|
|
2019
|
|
2018
|
|
2017
|
FHLB advances:
|
|
|
|
|
|
|
Balance at year end
|
|
$
|
3,125.4
|
|
|
$
|
2,404.5
|
|
|
$
|
2,774.4
|
|
Average outstanding during the year
|
|
2,098.0
|
|
|
2,653.6
|
|
|
2,677.5
|
|
Maximum outstanding at any month end
|
|
3,125.5
|
|
|
3,510.1
|
|
|
3,130.8
|
|
Average interest rate during the year
|
|
2.39
|
%
|
|
2.05
|
%
|
|
1.17
|
%
|
Federal funds purchased:
|
|
|
|
|
|
|
Balance at year end
|
|
$
|
1,620.0
|
|
|
$
|
845.0
|
|
|
$
|
820.0
|
|
Average outstanding during the year
|
|
1,127.5
|
|
|
682.2
|
|
|
643.5
|
|
Maximum outstanding at any month end
|
|
1,665.0
|
|
|
855.0
|
|
|
820.0
|
|
Average interest rate during the year
|
|
2.18
|
%
|
|
2.00
|
%
|
|
1.11
|
%
|
Customer repurchase agreements:
|
|
|
|
|
|
|
Balance at year end
|
|
$
|
409.1
|
|
|
$
|
332.9
|
|
|
$
|
301.6
|
|
Carrying amount of collateral securities at year end
|
|
418.0
|
|
|
342.3
|
|
|
307.7
|
|
Average outstanding during the year
|
|
296.6
|
|
|
252.7
|
|
|
311.0
|
|
Maximum outstanding at any month end
|
|
409.1
|
|
|
332.9
|
|
|
331.6
|
|
Average interest rate during the year
|
|
0.75
|
%
|
|
0.40
|
%
|
|
0.19
|
%
|
Other borrowings:
|
|
|
|
|
|
|
Balance at year end
|
|
$
|
—
|
|
|
$
|
11.0
|
|
|
$
|
207.8
|
|
Average outstanding during the year
|
|
3.3
|
|
|
104.5
|
|
|
132.0
|
|
Maximum outstanding at any month end
|
|
10.4
|
|
|
207.6
|
|
|
237.4
|
|
Average interest rate during the year
|
|
1.87
|
%
|
|
1.66
|
%
|
|
1.60
|
%
|
|
|
|
NOTE 12 – Notes and Debentures
|
Notes and debentures are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31 (in millions)
|
|
2019
|
|
2018
|
People’s United Financial, Inc.:
|
|
|
|
|
3.65% senior notes due 2022
|
|
$
|
498.3
|
|
|
$
|
497.7
|
|
5.75% subordinated notes due 2024
|
|
81.6
|
|
|
|
—
|
|
People’s United Bank:
|
|
|
|
|
4.00% subordinated notes due 2024
|
|
413.2
|
|
|
398.1
|
|
Total notes and debentures
|
|
$
|
993.1
|
|
|
$
|
895.8
|
|
The 3.65% senior notes represent fixed-rate unsecured and unsubordinated obligations of People’s United with interest payable semi-annually. The Company may redeem the senior notes at its option, in whole or in part, at any time prior to September 6, 2022, at a redemption price equal to the greater of (i) 100% of the principal amount of the senior notes to be redeemed or (ii) a “make-whole” amount, plus in either case accrued and unpaid interest to the redemption date. In addition, the Company may redeem the senior notes at its option, in whole or in part, at any time on or following September 6, 2022, at a redemption price equal to 100% of the principal amount of the senior notes to be redeemed, plus accrued and unpaid interest to the redemption date.
People's United assumed the 5.75% subordinated notes in connection with its acquisition of United Financial. These subordinated notes, which were issued in September 2014, represent fixed-rate unsecured and unsubordinated obligations of People’s United with interest payable semi-annually. People's United may not redeem the subordinated notes prior to maturity without the prior approval of the FRB.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
The 4.00% subordinated notes represent fixed-rate unsecured and subordinated obligations of the Bank with interest payable semi-annually. The Bank may redeem the notes, in whole or in part, on or after April 16, 2024 at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. The Bank may redeem the notes in whole, but not in part, at its option at a redemption price equal to 100% of the principal amount of the notes together with accrued but unpaid interest to, but excluding, the date fixed for redemption, within 90 days of the occurrence of a “regulatory event” (as defined). Pursuant to capital regulations of the OCC, effective January 1, 2015, the Bank may not redeem the notes prior to maturity without the prior approval of the OCC. The Bank has entered into a pay floating/receive fixed interest rate swap to hedge the change in fair value of the subordinated notes due to changes in interest rates (see Note 22). For regulatory capital purposes, subordinated note issuances qualify, up to certain limits, as Tier 2 capital for both People's United's and the Bank's Total risk-based capital (see Note 15).
The following is a summary of total income tax expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31 (in millions)
|
|
2019
|
|
2018
|
|
2017
|
Income tax expense applicable to pre-tax income
|
|
$
|
132.0
|
|
|
$
|
108.2
|
|
|
$
|
129.9
|
|
Deferred income tax expense (benefit) applicable to items reported in
total other comprehensive income (loss) (note 17)
|
|
27.2
|
|
|
(12.2)
|
|
|
8.3
|
|
Total
|
|
$
|
159.2
|
|
|
$
|
96.0
|
|
|
$
|
138.2
|
|
The components of income tax expense applicable to pre-tax income are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31 (in millions)
|
|
2019
|
|
2018
|
|
2017
|
Current tax expense:
|
|
|
|
|
|
|
Federal
|
|
$
|
90.8
|
|
|
$
|
83.0
|
|
|
$
|
88.9
|
|
State
|
|
26.9
|
|
|
23.3
|
|
|
15.2
|
|
Total current tax expense
|
|
117.7
|
|
|
106.3
|
|
|
104.1
|
|
Deferred tax expense (1)
|
|
14.3
|
|
|
1.9
|
|
|
25.8
|
|
Total income tax expense
|
|
$
|
132.0
|
|
|
$
|
108.2
|
|
|
$
|
129.9
|
|
(1)Includes the effect of (decreases) increases in the valuation allowance for state deferred tax assets of $(7.7) million, $0.3 million and $(0.6) million in 2019, 2018 and 2017, respectively.
The following is a reconciliation of expected income tax expense, computed at the U.S. federal statutory rate of 21% in both 2019 and 2018, and 35% in 2017, to actual income tax expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
|
2018
|
|
|
|
2017
|
|
|
Years ended December 31 (dollars in millions)
|
|
Amount
|
|
Rate
|
|
Amount
|
|
Rate
|
|
Amount
|
|
Rate
|
Expected income tax expense
|
|
$
|
137.0
|
|
|
21.0
|
%
|
|
$
|
121.0
|
|
|
21.0
|
%
|
|
$
|
163.5
|
|
|
35.0
|
%
|
State income tax, net of federal tax effect
|
|
22.6
|
|
|
3.4
|
|
|
23.2
|
|
|
4.1
|
|
|
12.2
|
|
|
2.6
|
|
Non-deductible FDIC insurance premiums
|
|
4.4
|
|
|
0.7
|
|
|
6.5
|
|
|
1.1
|
|
|
—
|
|
|
—
|
|
Tax-exempt interest
|
|
(21.4)
|
|
|
(3.3)
|
|
|
(19.4)
|
|
|
(3.4)
|
|
|
(26.6)
|
|
|
(5.7)
|
|
Federal income tax credits
|
|
(12.7)
|
|
|
(2.0)
|
|
|
(12.3)
|
|
|
(2.1)
|
|
|
(11.6)
|
|
|
(2.5)
|
|
Tax-exempt income from BOLI
|
|
(2.2)
|
|
|
(0.3)
|
|
|
(1.5)
|
|
|
(0.3)
|
|
|
(2.2)
|
|
|
(0.5)
|
|
Tax benefits recognized in connection with:
|
|
|
|
|
|
|
|
|
|
|
|
|
The Tax Cuts and Jobs Act
|
|
—
|
|
|
—
|
|
|
(9.2)
|
|
|
(1.6)
|
|
|
(6.5)
|
|
|
(1.4)
|
|
Equity-based compensation
|
|
(0.1)
|
|
|
—
|
|
|
(1.3)
|
|
|
(0.2)
|
|
|
(1.1)
|
|
|
(0.2)
|
|
Other, net
|
|
4.4
|
|
|
0.7
|
|
|
1.2
|
|
|
0.2
|
|
|
2.2
|
|
|
0.5
|
|
Actual income tax expense
|
|
$
|
132.0
|
|
|
|
|
$
|
108.2
|
|
|
|
|
$
|
129.9
|
|
|
|
Effective income tax rate
|
|
|
|
20.2
|
%
|
|
|
|
18.8
|
%
|
|
|
|
27.8
|
%
|
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Tax Reform
The Tax Cuts and Jobs Act (the "Act") was enacted on December 22, 2017. The most significant provision of the Act applicable to the Company served to reduce the U.S. federal corporate income tax rate, effective January 1, 2018, from 35% to 21%. In connection with its accounting for enactment of the Act, the Company recognized an income tax benefit of $6.5 million during the quarter ended December 31, 2017. This benefit, which served to reduce income tax expense, reflected the revaluation of certain deferred tax assets ($58.0 million) and deferred tax liabilities ($64.5 million) based on the rates at which they are expected to reverse in the future (generally 21%). During the quarter ended December 31, 2018, the Company recognized an income tax benefit of $9.2 million related, primarily, to voluntary employer contributions totaling $50 million made to the Company’s defined benefit pension plans in February 2018 and deducted (as permitted) on the Company’s 2017 federal income tax return (see Note 18).
Under GAAP, the effect of a change in tax law is recorded discretely as a component of the income tax provision related to continuing operations in the period of enactment. This is true even if the deferred taxes being revalued were established through a financial statement component other than continuing operations (e.g. accumulated other comprehensive income). Adjusting the deferred taxes for temporary differences that arose from items of income or loss that were originally recorded in accumulated other comprehensive income through continuing operations may result in a disproportionate tax effect lodged in accumulated other comprehensive income. In other words, the original deferred tax amount recorded through accumulated other comprehensive income at the old tax rate will remain in accumulated other comprehensive income despite the fact that its related deferred tax asset/liability will be reduced through continuing operations to reflect the new tax rate. The amounts lodged in accumulated other comprehensive income are often referred to as “stranded tax effects.”
In February 2018, as a result of the enactment of the Act, the FASB issued new accounting guidance that provided entities with the option to reclassify, from accumulated other comprehensive income to retained earnings, certain “stranded tax effects” resulting from application of the Act. The guidance became effective for all organizations for fiscal years beginning after December 15, 2018 (January 1, 2019 for People’s United), including interim periods within those fiscal years, and early adoption was permitted. The Company elected to early adopt this amendment effective January 1, 2018 (see Note 1).
Affordable Housing Investments
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 VIEs, are not consolidated into the Company's Consolidated Financial Statements. These investments have historically played a role in enabling 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 ($383.9 million and $304.1 million at December 31, 2019 and 2018, respectively). Included in other liabilities in the Consolidated Statements of Condition is a liability for all legally binding unfunded commitments to fund future investments ($141.1 million and $119.7 million at those dates). The cost of the Company's investments is amortized on a straight-line basis over the period during which the related federal income tax credits are realized (generally ten years). Amortization expense, which is included as a component of income tax expense in the Consolidated Statements of Income, totaled $25.0 million, $19.1 million and $16.7 million for the years ended
December 31, 2019, 2018 and 2017, respectively.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
D.C. Solar Tax-Advantaged Investments
As a result of its acquisition of United Financial, People’s United became a limited liability member in three
tax-advantaged funds – Solar Eclipse Investment Fund X, LLC; Solar Eclipse Investment Fund XV, LLC; and Solar Eclipse Investment Fund XXII, LLC (collectively, the “LLCs”) – each of which previously generated solar investment tax credits for United Financial. Solarmore Management Services, Inc. (“Solarmore”) originally served as the managing member for each of the LLCs, and also acted as the managing member of a number of other solar investment tax credit LLC funds (collectively, the “Funds”). In December 2019, Solarmore was replaced as the manager of the LLCs. The LLCs were established to participate in a government-sponsored program to promote solar technology and obtain financing to acquire approximately 500 mobile solar generators and place those generators in service to qualify for a federal tax credit based upon the fair value of the generators. Each Fund (and each LLC) obtained financing from D.C. Solar Solutions, Inc. (“Solutions”), which is also the manufacturer and seller of the generators, and entered into a master lease arrangement with D.C. Solar Distribution, Inc. (“Distribution”), the entity that is responsible for the end sub-lease activity supporting the fair value of the master lease agreement. Solutions and Distribution are indirectly related.
In December 2018, Solutions and Distribution (collectively, “D.C. Solar”) had certain assets seized by the
U.S. Government. In late January and early February 2019, D.C. Solar and certain affiliated companies filed voluntary petitions for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code in an attempt to reorganize. On March 22, 2019, primarily as a result of a lack of financing to maintain the on-going operations of these companies, ambiguity around actual inventory in existence and the U.S. Government’s seizure of certain assets, the bankruptcy cases were converted to cases under Chapter 7. Prior to conversion of the bankruptcy cases, an FBI affidavit filed in the bankruptcy cases contained allegations of a potential fraud perpetrated by the principals of D.C. Solar, including allegations of fictitious or overstated sales of mobile solar generators sold to the Funds (including the LLCs) as well as the fabrication of sublease revenue streams for the generators.
At the time of the Company’s acquisition of United Financial, further developments had occurred which served to increase the level of uncertainty with respect to the existence, condition and fair value of the generators. These factors were considered by the Company and, as a result, it was concluded that there was sufficient evidence to support that a full loss was probable. Accordingly, in connection with the related purchase accounting for United Financial, People’s United recorded a full write-down of the balance of the remaining investments in the LLCs of $8.4 million (after-tax) and established a reserve against tax benefits and credits of $18.9 million to reflect a full loss on the generators and the associated tax benefits previously realized by United Financial.
In January 2020, the principals of D.C. Solar plead guilty in federal court to conspiracy to commit wire fraud and money laundering in connection with their role in a Ponzi scheme in which they: (i) sold solar generators that did not exist; (ii) made it appear as though solar generators existed in locations where they did not; (iii) created false financial statements; and
(iv) obtained false lease contracts. In connection with the guilty plea, the U.S. Securities and Exchange Commission filed related civil charges against the principals.
Connecticut Passive Investment Company
In 1998, the Bank formed a passive investment company, People's Mortgage Investment Company ("PMIC"), in accordance with Connecticut tax laws, which permit transfers of mortgage loans to such subsidiaries on or after
January 1, 1999. The related earnings of PMIC, and any dividends it pays to the Bank, are not subject to Connecticut income tax. As a result of the exclusion of such earnings and dividends from Connecticut taxable income beginning in 1999, the Bank has established a valuation allowance for the full amount of its Connecticut deferred tax asset attributable to net temporary differences and state net operating loss carryforwards. Connecticut tax net operating loss carryforwards totaled $1.2 billion at December 31, 2019 and expire between 2020 and 2032.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
The tax effects of temporary differences that give rise to People’s United’s deferred tax assets and liabilities are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31 (in millions)
|
|
2019
|
|
2018
|
Deferred tax assets:
|
|
|
|
|
State tax net operating loss carryforwards, net of federal tax effect
|
|
$
|
71.8
|
|
|
$
|
79.4
|
|
Allowance for loan losses and non-accrual interest
|
|
65.5
|
|
|
62.3
|
|
Acquisition-related deferred tax assets
|
|
30.5
|
|
|
13.3
|
|
Tax credits and net operating loss carryforwards
|
|
24.7
|
|
|
—
|
|
Equity-based compensation
|
|
18.1
|
|
|
15.6
|
|
ROU lease assets, net of lease liabilities
|
|
7.5
|
|
|
—
|
|
D.C. Solar investment basis difference
|
|
6.8
|
|
|
—
|
|
Unrealized loss on debt securities transferred to held-to-maturity
|
|
3.6
|
|
|
4.7
|
|
Unrealized loss on debt securities available-for-sale
|
|
—
|
|
|
15.4
|
|
Other deductible temporary differences
|
|
28.2
|
|
|
28.5
|
|
Total deferred tax assets
|
|
256.7
|
|
|
219.2
|
|
Less: valuation allowance for state deferred tax assets
|
|
(72.4)
|
|
|
(80.1)
|
|
Total deferred tax assets, net of the valuation allowance
|
|
184.3
|
|
|
139.1
|
|
Deferred tax liabilities:
|
|
|
|
|
Leasing activities
|
|
(92.7)
|
|
|
(82.0)
|
|
Pension and other postretirement benefits
|
|
(20.0)
|
|
|
(9.7)
|
|
Book over tax income recognized on consumer loans
|
|
(18.0)
|
|
|
(17.5)
|
|
Unrealized gain on debt securities available-for-sale
|
|
(6.6)
|
|
|
—
|
|
Mark-to-market and original issue discounts for tax purposes
|
|
(5.2)
|
|
|
(10.4)
|
|
Temporary differences related to merchant services joint venture
|
|
(3.5)
|
|
|
(3.7)
|
|
|
|
|
|
|
Other taxable temporary differences
|
|
(4.7)
|
|
|
(4.4)
|
|
Total deferred tax liabilities
|
|
(150.7)
|
|
|
(127.7)
|
|
Net deferred tax asset
|
|
$
|
33.6
|
|
|
$
|
11.4
|
|
Based on People's United’s recent historical and anticipated future pre-tax earnings and the reversal of taxable temporary differences, management believes it is more likely than not that People's United will realize its total deferred tax assets, net of the valuation allowance.
People's United’s current income tax receivable at December 31, 2019 and 2018 totaled $51.7 million and $31.4 million, respectively.
The following is a reconciliation of the beginning and ending balances of People's United’s unrecognized income tax benefits related to uncertain tax positions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31 (in millions)
|
|
2019
|
|
2018
|
|
2017
|
Balance at beginning of year
|
|
$
|
5.2
|
|
|
$
|
2.7
|
|
|
$
|
2.8
|
|
Additions for tax positions taken in prior years
|
|
0.5
|
|
|
2.5
|
|
|
0.1
|
|
Additions related to D.C. Solar:
|
|
|
|
|
|
|
Established by United Financial prior to acquisition
|
|
8.7
|
|
|
—
|
|
|
—
|
|
Established by People's United subsequent to acquisition
|
|
18.9
|
|
|
—
|
|
|
—
|
|
Reductions attributable to audit settlements/lapse of statute of limitations
|
|
—
|
|
|
—
|
|
|
(0.2)
|
|
Balance at end of year
|
|
$
|
33.3
|
|
|
$
|
5.2
|
|
|
$
|
2.7
|
|
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
If recognized, the unrecognized income tax benefits at December 31, 2019 would minimally affect People’s United's annualized income tax rate. Accrued interest expense related to the unrecognized income tax benefits totaled $0.1 million and $0.9 million at December 31, 2019 and 2018, respectively. People’s United recognizes accrued interest related to unrecognized income tax benefits and penalties, if incurred, as components of income tax expense in the Consolidated Statements of Income. The amount of total unrecognized income tax benefits, excluding those related to D.C. Solar, is not expected to change significantly within the next twelve months. With respect to unrecognized income tax benefits related to D.C. Solar, timing remains uncertain given the nature of the matter, including the ongoing federal criminal investigation. People's United files a consolidated U.S. federal income tax return and various state income tax returns and is no longer subject to federal or state income tax examinations through 2013.
|
|
|
NOTE 14 – Stockholders’ Equity and Dividends
|
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 December 31, 2019, and (ii) 1.95 billion shares of common stock, par value of
$0.01 per share, of which 532.8 million shares were issued at December 31, 2019.
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 (86.6 million shares at December 31, 2019) and (ii) common stock purchased in the open market by a trustee with funds provided by People’s United and originally intended for awards under the People’s United Financial, Inc. 2007 Recognition and Retention Plan (the “RRP”) (2.6 million shares at December 31, 2019). Following shareholder approval of the People’s United Financial, Inc. 2014 Long-Term Incentive Plan (the “2014 Plan”) in 2014, no new awards may be granted under the RRP (see Note 19).
In June 2019, the Company’s Board of Directors authorized the repurchase of up to 20.0 million shares of People’s
United’s outstanding common stock. Such shares may be repurchased, either directly or through agents, in the open market at prices and terms satisfactory to management. During 2019, the Company repurchased 0.2 million shares of People's United common stock under this authorization at a total cost of $2.5 million.
In April 2007, People’s United established an Employee Stock Ownership Plan (the “ESOP”) (see Note 17). At that time, People’s United loaned the ESOP $216.8 million to purchase 10.5 million shares of People’s United common stock in the open market. 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. At December 31, 2019, 5.9 million shares of People’s United common stock, with a contra-equity balance of $122.9 million, have not been allocated or committed to be released.
Common dividends declared and paid per common share totaled $0.7075, $0.6975 and $0.6875 for the years ended December 31, 2019, 2018 and 2017, respectively. People’s United’s common dividend payout ratio (common dividends paid as a percentage of net income available to common shareholders) was 54.3%, 53.7% and 70.6% for the years ended
December 31, 2019, 2018 and 2017, respectively.
In the ordinary course of business, People’s United (parent company) is dependent upon dividends from the Bank to provide funds for the payment of dividends to shareholders and other general corporate purposes. People’s United’s ability to pay cash dividends is governed by federal law, regulations and related guidance. The Bank’s ability to pay cash dividends directly or indirectly to People’s United also is governed by federal law and regulations. These provide that the Bank must receive OCC approval to declare a dividend if the total amount of all dividends (common and preferred), including the proposed dividend, declared by the Bank in any current year exceeds the total of the Bank’s net income for the current year to date, combined with its retained net income for the previous two years, less the sum of any transfers required by the OCC and any transfers required to be made to a fund for the retirement of any preferred stock. The term “retained net income” as defined by federal regulations means the Bank’s net income for a specified period less the total amount of all dividends declared in that period.
The Bank may not pay dividends to People’s United if, after paying those dividends, it would fail to meet the required minimum levels under risk-based capital guidelines or if the OCC has notified the Bank that it is in need of more than normal supervision. See Note 15 for a discussion of regulatory capital requirements. Under the Federal Deposit Insurance Act, an insured depository institution such as the Bank is prohibited from making capital distributions, including the payment of dividends, if, after making such distribution, the institution would become “undercapitalized” (as such term is used in the Federal Deposit Insurance Act). Payment of dividends by the Bank also may be restricted at any time at the discretion of the appropriate regulator if it deems the payment to constitute an unsafe and unsound banking practice.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
In 2019, 2018 and 2017, the Bank paid a total of $457.0 million, $342.0 million and $292.0 million, respectively, in cash dividends to People’s United (parent company). At December 31, 2019, the Bank’s retained net income, as defined by federal regulations, totaled $233.3 million.
|
|
|
NOTE 15 – Regulatory Capital Requirements
|
Bank holding companies and banks are subject to various regulations regarding capital requirements administered by
U.S. banking agencies. The FRB (in the case of a bank holding company) and the OCC (in the case of a bank) may initiate certain actions if a bank holding company or a bank fails to meet minimum capital requirements. In addition, under its prompt corrective action regulations, the OCC is required to take certain supervisory actions (and may take additional discretionary actions) with respect to an undercapitalized bank. These actions could have a direct material effect on a bank’s financial statements. People’s United and the Bank are subject to regulatory capital requirements administered by the FRB and the OCC, respectively.
Both People's United and the Bank are subject to capital rules (the “Basel III capital rules”) issued by U.S. banking agencies. The Basel III capital rules, which are now fully phased-in, require U.S. financial institutions to maintain: (i) a minimum ratio of “Common Equity Tier 1” (“CET 1”) 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 2019, the final year of the phase-in period, and thereafter, the capital conservation buffer was to 2.50%. For 2018, the capital conservation buffer was 1.875%. In July 2019, U.S. banking agencies issued a final rule intended to simplify certain aspects of the regulatory capital rules. Management does not expect the impact of this final rule will have a material effect on the Company's or the Bank's risk-based capital ratios.
For regulatory capital purposes, subordinated note issuances qualify, up to certain limits, as Tier 2 capital for Total
risk-based capital. In accordance with regulatory capital rules, beginning in 2019 and for each of the next four years, the eligible amount of the Bank's $400 million subordinated notes due 2024 and People's United's $75 million subordinated notes due 2024 included in Tier 2 capital will be reduced each year by 20%, or $80 million and $15 million, respectively.
The foregoing capital ratios are based in part on specific quantitative measures of assets, liabilities and certain
off-balance-sheet items as calculated under regulatory accounting guidelines. Capital amounts and classifications are also subject to qualitative judgments by federal regulators about capital components, risk weightings and other factors.
Management believes that, as of December 31, 2019, both People's United and the Bank met all capital adequacy requirements to which each is subject. Further, the most recent regulatory notification categorized the Bank as a
well-capitalized institution under the prompt corrective action regulations. Since that notification, no conditions or events have occurred that have caused management to believe any change in the Bank's capital classification would be warranted.
As discussed in Note 1 to the Consolidated Financial Statements, People's United adopted, effective January 1, 2019, new accounting guidance relating to leases. Upon adoption, the Company recorded (i) operating lease liabilities totaling $268.8 million and (ii) corresponding ROU assets totaling $248.5 million. This transition adjustment served to increase
risk-weighted assets, resulting in an approximate 5 to 10 basis point decrease in the risk-based capital ratios of both the Company and the Bank at that time. As also discussed in Note 1, the Company's adoption of a new accounting standard related to credit losses on financial instruments, effective January 1, 2020, will result in an approximate 10 basis point decrease in the capital ratios at both People's United and the Bank. People's United has elected to phase-in, over three years, the day-one regulatory capital effects of the credit losses standard in accordance with Federal banking agencies final rule issued in December 2018.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
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 December 31, 2019 and 2018 are based on the capital conservation buffer phase-in provisions (as applicable for each year) 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 December 31, 2019, both People's United's and the Bank's total risk-weighted assets, as defined, were $45.2 billion, compared to $35.9 billion for both at December 31, 2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2019
|
|
|
|
Minimum Capital
Required
|
|
|
|
Classification as
Well-Capitalized
|
|
|
(dollars in millions)
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
Tier 1 Leverage Capital (1):
|
|
|
|
|
|
|
|
|
|
|
|
|
People’s United
|
|
$
|
4,846.1
|
|
|
9.1
|
%
|
|
$
|
2,119.7
|
|
|
4.0
|
%
|
|
N/A
|
|
N/A
|
Bank
|
|
4,902.0
|
|
|
9.3
|
|
|
2,119.1
|
|
|
4.0
|
|
|
$
|
2,648.8
|
|
|
5.0
|
%
|
CET 1 Risk-Based Capital (2):
|
|
|
|
|
|
|
|
|
|
|
|
|
People’s United
|
|
4,602.1
|
|
|
10.2
|
|
|
3,164.5
|
|
|
7.0
|
|
|
N/A
|
|
N/A
|
Bank
|
|
4,902.0
|
|
|
10.9
|
|
|
3,162.2
|
|
|
7.0
|
|
|
2,936.3
|
|
|
6.5
|
|
Tier 1 Risk-Based Capital (3):
|
|
|
|
|
|
|
|
|
|
|
|
|
People’s United
|
|
4,846.1
|
|
|
10.7
|
|
|
3,842.6
|
|
|
8.5
|
|
|
2,712.5
|
|
|
6.0
|
|
Bank
|
|
4,902.0
|
|
|
10.9
|
|
|
3,839.8
|
|
|
8.5
|
|
|
3,614.0
|
|
|
8.0
|
|
Total Risk-Based Capital (4):
|
|
|
|
|
|
|
|
|
|
|
|
|
People’s United
|
|
5,435.6
|
|
|
12.0
|
|
|
4,746.8
|
|
|
10.5
|
|
|
4,520.8
|
|
|
10.0
|
|
Bank
|
|
5,474.2
|
|
|
12.1
|
|
|
4,743.3
|
|
|
10.5
|
|
|
4,517.4
|
|
|
10.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2018
|
|
|
|
Minimum Capital
Required Basel III
Phase-In (2018)
|
|
|
|
Classification as
Well-Capitalized
|
|
|
(dollars in millions)
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
Tier 1 Leverage Capital (1):
|
|
|
|
|
|
|
|
|
|
|
|
|
People’s United
|
|
$
|
3,927.2
|
|
|
8.7
|
%
|
|
$
|
1,806.0
|
|
|
4.0
|
%
|
|
N/A
|
|
N/A
|
Bank
|
|
4,076.0
|
|
|
9.0
|
|
|
1,805.4
|
|
|
4.0
|
|
|
$
|
2,256.8
|
|
|
5.0
|
%
|
CET 1 Risk-Based Capital (2):
|
|
|
|
|
|
|
|
|
|
|
|
|
People’s United
|
|
3,683.1
|
|
|
10.3
|
|
|
2,289.3
|
|
|
6.375
|
|
|
N/A
|
|
N/A
|
Bank
|
|
4,076.0
|
|
|
11.4
|
|
|
2,287.1
|
|
|
6.375
|
|
|
2,331.9
|
|
|
6.5
|
|
Tier 1 Risk-Based Capital (3):
|
|
|
|
|
|
|
|
|
|
|
|
|
People’s United
|
|
3,927.2
|
|
|
10.9
|
|
|
2,827.9
|
|
|
7.875
|
|
|
2,154.6
|
|
|
6.0
|
|
Bank
|
|
4,076.0
|
|
|
11.4
|
|
|
2,825.2
|
|
|
7.875
|
|
|
2,870.0
|
|
|
8.0
|
|
Total Risk-Based Capital (4):
|
|
|
|
|
|
|
|
|
|
|
|
|
People’s United
|
|
4,505.7
|
|
|
12.5
|
|
|
3,546.1
|
|
|
9.875
|
|
|
3,591.0
|
|
|
10.0
|
|
Bank
|
|
4,719.1
|
|
|
13.2
|
|
|
3,542.7
|
|
|
9.875
|
|
|
3,587.5
|
|
|
10.0
|
|
(1)Tier 1 Leverage Capital ratio represents CET 1 Capital plus Additional Tier 1 Capital instruments (together,
"Tier 1 Capital") divided by Average Total Assets (less goodwill, other acquisition-related intangibles and other deductions from CET 1 Capital).
(2)CET 1 Risk-Based Capital ratio represents equity capital, as defined, less: (i) after-tax net unrealized gains (losses) on certain securities classified as available-for-sale; (ii) after-tax net unrealized gains (losses) on securities transferred to held-to-maturity; (iii) goodwill and other acquisition-related intangible assets; and (iv) the amount recorded in 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.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
|
|
|
NOTE 16 – Earnings Per Common Share
|
The following is an analysis of People’s United’s basic and diluted EPS, reflecting the application of the two-class method, as described in Note 1:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31 (in millions, except per common share data)
|
|
2019
|
|
2018
|
|
2017
|
Net income available to common shareholders
|
|
$
|
506.3
|
|
|
$
|
454.0
|
|
|
$
|
323.1
|
|
Dividends paid on and undistributed earnings allocated to participating securities
|
|
(0.2)
|
|
|
(0.2)
|
|
|
(0.5)
|
|
Earnings attributable to common shareholders
|
|
$
|
506.1
|
|
|
$
|
453.8
|
|
|
$
|
322.6
|
|
Weighted average common shares outstanding for basic EPS
|
|
394.0
|
|
|
348.1
|
|
|
330.3
|
|
Effect of dilutive equity-based awards
|
|
3.2
|
|
|
3.6
|
|
|
2.6
|
|
Weighted average common shares and common-equivalent shares for diluted EPS
|
|
397.2
|
|
|
351.7
|
|
|
332.9
|
|
EPS:
|
|
|
|
|
|
|
Basic
|
|
$
|
1.28
|
|
|
$
|
1.30
|
|
|
$
|
0.98
|
|
Diluted
|
|
1.27
|
|
|
1.29
|
|
|
0.97
|
|
All unallocated 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 6.7 million shares, 6.8 million shares and 8.9 million shares for the years ended December 31, 2019, 2018 and 2017, respectively, have also been excluded from the calculation of diluted EPS.
|
|
|
NOTE 17 – 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 debt securities available-for-sale; (iii) net unrealized gains and losses on debt 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 years ended December 31, 2019, 2018 and 2017 is reported in the Consolidated Statements of Comprehensive Income.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
The following is a summary of the changes in the components of 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 Debt Securities
Available-for-Sale
|
|
Net Unrealized
Gains (Losses)
on Debt Securities
Transferred to
Held-to-Maturity
|
|
Net Unrealized
Gains (Losses)
on Derivatives
Accounted for as
Cash Flow Hedges
|
|
Total
AOCL
|
Balance at December 31, 2016
|
|
$
|
(145.6)
|
|
|
$
|
(32.3)
|
|
|
$
|
(17.4)
|
|
|
$
|
0.3
|
|
|
$
|
(195.0)
|
|
Other comprehensive income (loss)
before reclassifications
|
|
(2.8)
|
|
|
(5.3)
|
|
|
—
|
|
|
(0.6)
|
|
|
(8.7)
|
|
Amounts reclassified from AOCL (1)
|
|
4.3
|
|
|
16.0
|
|
|
2.3
|
|
|
(0.6)
|
|
|
22.0
|
|
Current period other comprehensive
income (loss)
|
|
1.5
|
|
|
10.7
|
|
|
2.3
|
|
|
(1.2)
|
|
|
13.3
|
|
Balance at December 31, 2017
|
|
(144.1)
|
|
|
(21.6)
|
|
|
(15.1)
|
|
|
(0.9)
|
|
|
(181.7)
|
|
Other comprehensive income (loss)
before reclassifications
|
|
(24.7)
|
|
|
(29.0)
|
|
|
—
|
|
|
(1.3)
|
|
|
(55.0)
|
|
Amounts reclassified from AOCL (1)
|
|
6.3
|
|
|
7.5
|
|
|
3.0
|
|
|
0.4
|
|
|
17.2
|
|
Current period other comprehensive
income (loss)
|
|
(18.4)
|
|
|
(21.5)
|
|
|
3.0
|
|
|
(0.9)
|
|
|
(37.8)
|
|
Transition adjustments related to adoption
of new accounting standards (2)
|
|
(30.0)
|
|
|
(3.9)
|
|
|
(3.2)
|
|
|
(0.2)
|
|
|
(37.3)
|
|
Balance at December 31, 2018
|
|
(192.5)
|
|
|
(47.0)
|
|
|
(15.3)
|
|
|
(2.0)
|
|
|
(256.8)
|
|
Other comprehensive income (loss)
before reclassifications
|
|
9.7
|
|
|
67.9
|
|
|
—
|
|
|
1.5
|
|
|
79.1
|
|
Amounts reclassified from AOCL (1)
|
|
6.6
|
|
|
(0.1)
|
|
|
3.5
|
|
|
0.8
|
|
|
10.8
|
|
Current period other comprehensive
income (loss)
|
|
16.3
|
|
|
67.8
|
|
|
3.5
|
|
|
2.3
|
|
|
89.9
|
|
Balance at December 31, 2019
|
|
$
|
(176.2)
|
|
|
$
|
20.8
|
|
|
$
|
(11.8)
|
|
|
$
|
0.3
|
|
|
$
|
(166.9)
|
|
(1)See the following table for details about these reclassifications.
(2)See Notes 1 and 4.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
The following is a summary of the amounts reclassified from AOCL:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31 (in millions)
|
|
Amounts Reclassified
from AOCL
|
|
|
|
|
|
Affected Line Item
in the Statement Where
Net Income is Presented
|
|
|
2019
|
|
2018
|
|
2017
|
|
|
Details about components of AOCL:
|
|
|
|
|
|
|
|
|
Amortization of pension and
other postretirement plans items:
|
|
|
|
|
|
|
|
|
Net actuarial loss
|
|
$
|
(8.3)
|
|
|
$
|
(8.6)
|
|
|
$
|
(9.3)
|
|
|
(1)
|
|
Prior service credit
|
|
—
|
|
|
0.3
|
|
|
0.8
|
|
|
(1)
|
|
|
|
(8.3)
|
|
|
(8.3)
|
|
|
(8.5)
|
|
|
Income before income tax expense
|
|
|
1.7
|
|
|
2.0
|
|
|
4.2
|
|
|
Income tax expense
|
|
|
(6.6)
|
|
|
(6.3)
|
|
|
(4.3)
|
|
|
Net income
|
Reclassification adjustment for net
realized losses on debt securities
available-for-sale
|
|
0.1
|
|
|
(9.9)
|
|
|
(25.4)
|
|
|
Income before income tax expense (2)
|
|
|
—
|
|
|
2.4
|
|
|
9.4
|
|
|
Income tax expense
|
|
|
0.1
|
|
|
(7.5)
|
|
|
(16.0)
|
|
|
Net income
|
Amortization of unrealized losses on
debt securities transferred to
held-to-maturity
|
|
(4.6)
|
|
|
(3.9)
|
|
|
(3.7)
|
|
|
Income before income tax expense (3)
|
|
|
1.1
|
|
|
0.9
|
|
|
1.4
|
|
|
Income tax expense
|
|
|
(3.5)
|
|
|
(3.0)
|
|
|
(2.3)
|
|
|
Net income
|
Amortization of unrealized gains and
losses on cash flow hedges:
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
(1.2)
|
|
|
(0.6)
|
|
|
0.8
|
|
|
(4)
|
|
Interest rate locks
|
|
0.1
|
|
|
0.1
|
|
|
0.1
|
|
|
(4)
|
|
|
|
(1.1)
|
|
|
(0.5)
|
|
|
0.9
|
|
|
Income before income tax expense
|
|
|
0.3
|
|
|
0.1
|
|
|
(0.3)
|
|
|
Income tax expense
|
|
|
(0.8)
|
|
|
(0.4)
|
|
|
0.6
|
|
|
Net income
|
Total reclassifications for the period
|
|
$
|
(10.8)
|
|
|
$
|
(17.2)
|
|
|
$
|
(22.0)
|
|
|
|
(1)Included in the computation of net periodic benefit income (expense) reflected in other non-interest expense (see Note 17 for additional details).
(2)Included in non-interest income.
(3)Included in interest and dividend income — securities.
(4)Included in interest expense — notes and debentures.
Deferred income taxes applicable to the components of AOCL are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31 (in millions)
|
|
2019
|
|
2018
|
|
2017
|
Net actuarial loss and other amounts related to pension and
other postretirement plans
|
|
$
|
55.3
|
|
|
$
|
59.4
|
|
|
$
|
83.5
|
|
Net unrealized (gain) loss on debt securities available-for-sale
|
|
(6.6)
|
|
|
14.7
|
|
|
12.7
|
|
Net unrealized loss on debt securities transferred to held-to-maturity
|
|
3.6
|
|
|
4.7
|
|
|
8.8
|
|
Net unrealized (gain) loss on derivatives accounted for as cash flow hedges
|
|
(0.1)
|
|
|
0.6
|
|
|
0.5
|
|
Total deferred income taxes
|
|
$
|
52.2
|
|
|
$
|
79.4
|
|
|
$
|
105.5
|
|
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
The following is a summary of the components of People’s United’s total other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2019 (in millions)
|
|
Pre-Tax
Amount
|
|
Tax Effect
|
|
After-Tax
Amount
|
|
|
|
|
|
|
|
Net actuarial gains and losses on pension and other postretirement plans:
|
|
|
|
|
|
|
Net actuarial gain arising during the year
|
|
$
|
12.1
|
|
|
$
|
(2.4)
|
|
|
$
|
9.7
|
|
Reclassification adjustment for net actuarial loss included in net income
|
|
8.3
|
|
|
(1.7)
|
|
|
6.6
|
|
Net actuarial gain
|
|
20.4
|
|
|
(4.1)
|
|
|
16.3
|
|
Net unrealized gains and losses on debt securities available-for-sale:
|
|
|
|
|
|
|
Net unrealized holding gains arising during the year
|
|
89.2
|
|
|
(21.3)
|
|
|
67.9
|
|
Reclassification adjustment for net realized losses included in net income
|
|
(0.1)
|
|
|
—
|
|
|
(0.1)
|
|
Net unrealized gains
|
|
89.1
|
|
|
(21.3)
|
|
|
67.8
|
|
Net unrealized gains and losses on debt securities transferred to held-to-maturity:
|
|
|
|
|
|
|
Reclassification adjustment for amortization of unrealized losses on debt securities transferred to held-to-maturity included in net income
|
|
4.6
|
|
|
(1.1)
|
|
|
3.5
|
|
Net unrealized gains
|
|
4.6
|
|
|
(1.1)
|
|
|
3.5
|
|
Net unrealized gains and losses on derivatives accounted for as cash flow hedges:
|
|
|
|
|
|
|
Net unrealized gains arising during the year
|
|
1.9
|
|
|
(0.4)
|
|
|
1.5
|
|
Reclassification adjustment for net realized losses included in net income
|
|
1.1
|
|
|
(0.3)
|
|
|
0.8
|
|
Net unrealized gains
|
|
3.0
|
|
|
(0.7)
|
|
|
2.3
|
|
Total other comprehensive income
|
|
$
|
117.1
|
|
|
$
|
(27.2)
|
|
|
$
|
89.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2018 (in millions)
|
|
Pre-Tax
Amount
|
|
Tax Effect
|
|
After-Tax
Amount
|
Net actuarial gains and losses on pension and other postretirement plans:
|
|
|
|
|
|
|
Net actuarial loss arising during the year
|
|
$
|
(32.6)
|
|
|
$
|
7.9
|
|
|
$
|
(24.7)
|
|
Reclassification adjustment for net actuarial loss included in net income
|
|
8.6
|
|
|
(2.1)
|
|
|
6.5
|
|
Net actuarial loss
|
|
(24.0)
|
|
|
5.8
|
|
|
(18.2)
|
|
Prior service credit on pension and other postretirement plans:
|
|
|
|
|
|
|
Reclassification adjustment for prior service credit included in net income
|
|
(0.3)
|
|
|
0.1
|
|
|
(0.2)
|
|
Net actuarial loss and prior service credit
|
|
(24.3)
|
|
|
5.9
|
|
|
(18.4)
|
|
Net unrealized gains and losses on debt securities available-for-sale:
|
|
|
|
|
|
|
Net unrealized holding losses arising during the year
|
|
(38.3)
|
|
|
9.3
|
|
|
(29.0)
|
|
Reclassification adjustment for net realized losses included in net income
|
|
9.9
|
|
|
(2.4)
|
|
|
7.5
|
|
Net unrealized losses
|
|
(28.4)
|
|
|
6.9
|
|
|
(21.5)
|
|
Net unrealized gains and losses on debt securities transferred to held-to-maturity:
|
|
|
|
|
|
|
Reclassification adjustment for amortization of unrealized losses on debt securities transferred to held-to-maturity included in net income
|
|
3.9
|
|
|
(0.9)
|
|
|
3.0
|
|
Net unrealized gains
|
|
3.9
|
|
|
(0.9)
|
|
|
3.0
|
|
Net unrealized gains and losses on derivatives accounted for as cash flow hedges:
|
|
|
|
|
|
|
Net unrealized losses arising during the year
|
|
(1.7)
|
|
|
0.4
|
|
|
(1.3)
|
|
Reclassification adjustment for net realized losses included in net income
|
|
0.5
|
|
|
(0.1)
|
|
|
0.4
|
|
Net unrealized losses
|
|
(1.2)
|
|
|
0.3
|
|
|
(0.9)
|
|
Total other comprehensive loss
|
|
$
|
(50.0)
|
|
|
$
|
12.2
|
|
|
$
|
(37.8)
|
|
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2017 (in millions)
|
|
Pre-Tax
Amount
|
|
Tax Effect
|
|
After-Tax
Amount
|
Net actuarial gains and losses on pension and other postretirement plans:
|
|
|
|
|
|
|
Net actuarial loss arising during the year
|
|
$
|
(5.5)
|
|
|
$
|
2.7
|
|
|
$
|
(2.8)
|
|
Reclassification adjustment for net actuarial loss included in net income
|
|
9.3
|
|
|
(4.6)
|
|
|
4.7
|
|
Net actuarial gain
|
|
3.8
|
|
|
(1.9)
|
|
|
1.9
|
|
Prior service credit on pension and other postretirement plans:
|
|
|
|
|
|
|
Reclassification adjustment for prior service credit included in net income
|
|
(0.8)
|
|
|
0.4
|
|
|
(0.4)
|
|
Net actuarial gain and prior service credit
|
|
3.0
|
|
|
(1.5)
|
|
|
1.5
|
|
Net unrealized gains and losses on debt securities available-for-sale:
|
|
|
|
|
|
|
Net unrealized holding losses arising during the year
|
|
(8.6)
|
|
|
3.3
|
|
|
(5.3)
|
|
Reclassification adjustment for net realized losses included in net income
|
|
25.4
|
|
|
(9.4)
|
|
|
16.0
|
|
Net unrealized gains
|
|
16.8
|
|
|
(6.1)
|
|
|
10.7
|
|
Net unrealized gains and losses on debt securities transferred to held-to-maturity:
|
|
|
|
|
|
|
Reclassification adjustment for amortization of unrealized losses on debt securities transferred to held-to-maturity included in net income
|
|
3.7
|
|
|
(1.4)
|
|
|
2.3
|
|
Net unrealized gains
|
|
3.7
|
|
|
(1.4)
|
|
|
2.3
|
|
Net unrealized gains and losses on derivatives accounted for as cash flow hedges:
|
|
|
|
|
|
|
Net unrealized losses arising during the year
|
|
(1.0)
|
|
|
0.4
|
|
|
(0.6)
|
|
Reclassification adjustment for net realized gains included in net income
|
|
(0.9)
|
|
|
0.3
|
|
|
(0.6)
|
|
Net unrealized losses
|
|
(1.9)
|
|
|
0.7
|
|
|
(1.2)
|
|
Total other comprehensive income
|
|
$
|
21.6
|
|
|
$
|
(8.3)
|
|
|
$
|
13.3
|
|
|
|
|
NOTE 18 – 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 1000 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.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
In addition to the People’s Qualified Plan, People’s United continues to maintain qualified defined benefit pension plans that cover (i) former First Connecticut employees who meet certain eligibility requirements (the “First Connecticut Qualified Plan”) and (ii) former United Financial employees who meet certain eligibility requirements (the “United Financial Qualified Plan”). All benefits under these plans were frozen effective February 28, 2013 and December 31, 2012, respectively. Effective October 1, 2018, both the Chittenden Qualified Plan and the Suffolk Qualified Plan were merged into the People’s Qualified Plan.
People’s United also maintains (i) unfunded, nonqualified supplemental plans to provide retirement benefits to certain senior officers (the “People’s Supplemental Plans”) and (ii) an unfunded plan that provides retirees with optional medical, dental and life insurance benefits (the “People’s Postretirement Plan”). People’s United accrues the cost of these postretirement benefits over the employees’ years of service to the date of their eligibility for such benefit. People’s United also continues to maintain: (1) for certain eligible former First Connecticut employees (i) an unfunded, nonqualified supplemental retirement plan (the “First Connecticut Supplemental Plan”) and (ii) unfunded plans that provide medical, dental and life insurance benefits (the “First Connecticut Postretirement Plans”); (2) for certain eligible former BSB Bancorp employees (i) an unfunded, nonqualified supplemental retirement plan (the “BSB Bancorp Supplemental Plan”) and (ii) unfunded plans that provide life insurance benefits (the “BSB Bancorp Post Retirement Welfare (Life Insurance) Plan”); and (3) for certain former United Financial employees (i) an unfunded, nonqualified supplemental retirement plan (the “United Financial Supplemental Plan”) and (ii) unfunded plans that provide medical, dental and life insurance benefits (the “United Financial Postretirement Benefit Plan”).
An employer is required to recognize an asset or a liability for the funded status of pension and other postretirement plans. The funded status is measured as the difference between the fair value of plan assets and the applicable benefit obligation, which is the projected benefit obligation for a pension plan and the accumulated postretirement benefit obligation for another postretirement plan. Plan assets and benefit obligations are required to be measured as of the date of the employer’s fiscal year-end.
The following table summarizes changes in the benefit obligations and plan assets of (i) the People’s Qualified Plan (including the Chittenden Qualified Plan and the Suffolk Qualified Plan), the First Connecticut Qualified Plan, the People's Supplemental Plans, the First Connecticut Supplemental Plan, the BSB Bancorp Supplemental Plan and the United Financial Supplemental Plan (together the “Pension Plans”) and (ii) the People’s Postretirement Plan, the First Connecticut Postretirement Plans, the BSB Bancorp Post Retirement Welfare (Life Insurance) Plan and the United Financial Postretirement Plan (together the “Other Postretirement Plans”). The table also shows the funded status (or the difference between benefit obligations and plan assets) recognized in the Consolidated Statements of Condition. All plans have a December 31 measurement date.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Plans
|
|
|
|
Other
Postretirement Plans
|
|
|
(in millions)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Benefit obligations: (1)
|
|
|
|
|
|
|
|
|
Beginning of year
|
|
$
|
562.7
|
|
|
$
|
584.8
|
|
|
$
|
15.3
|
|
|
$
|
14.6
|
|
Service cost
|
|
—
|
|
|
—
|
|
|
0.3
|
|
|
0.3
|
|
Interest cost
|
|
22.9
|
|
|
20.2
|
|
|
0.6
|
|
|
0.5
|
|
Actuarial loss (gain)
|
|
80.2
|
|
|
(51.0)
|
|
|
1.2
|
|
|
(1.7)
|
|
Benefits paid
|
|
(28.2)
|
|
|
(21.4)
|
|
|
(0.7)
|
|
|
(0.8)
|
|
Settlements
|
|
(13.1)
|
|
|
(2.7)
|
|
|
—
|
|
|
—
|
|
Acquisitions (2)
|
|
41.0
|
|
|
35.2
|
|
|
2.0
|
|
|
2.4
|
|
Plan revaluations (3)
|
|
—
|
|
|
(2.4)
|
|
|
—
|
|
|
—
|
|
End of year
|
|
665.5
|
|
|
562.7
|
|
|
18.7
|
|
|
15.3
|
|
Fair value of plan assets:
|
|
|
|
|
|
|
|
|
Beginning of year
|
|
596.4
|
|
|
584.9
|
|
|
—
|
|
|
—
|
|
Actual return on assets
|
|
138.6
|
|
|
(40.9)
|
|
|
—
|
|
|
—
|
|
Employer contributions
|
|
18.7
|
|
|
52.7
|
|
|
0.7
|
|
|
0.8
|
|
Benefits paid
|
|
(28.2)
|
|
|
(21.4)
|
|
|
(0.7)
|
|
|
(0.8)
|
|
Settlements
|
|
(13.1)
|
|
|
(2.7)
|
|
|
—
|
|
|
—
|
|
Acquisitions (2)
|
|
34.3
|
|
|
23.8
|
|
|
—
|
|
|
—
|
|
End of year
|
|
746.7
|
|
|
596.4
|
|
|
—
|
|
|
—
|
|
Funded status at end of year
|
|
$
|
81.2
|
|
|
$
|
33.7
|
|
|
$
|
(18.7)
|
|
|
$
|
(15.3)
|
|
Amounts recognized in the Consolidated Statements
of Condition:
|
|
|
|
|
|
|
|
|
Other assets
|
|
$
|
121.4
|
|
|
$
|
78.0
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Other liabilities
|
|
(40.2)
|
|
|
(44.3)
|
|
|
(18.7)
|
|
|
(15.3)
|
|
Funded status at end of year
|
|
$
|
81.2
|
|
|
$
|
33.7
|
|
|
$
|
(18.7)
|
|
|
$
|
(15.3)
|
|
(1)Represents the projected benefit obligation for the Pension Plans and the accumulated benefit obligation for the Other Postretirement Plans.
(2)Represents the benefit obligations and plan assets of the United Financial Qualified Plan and the United Financial Supplemental Plan as of November 1, 2019, the BSB Bancorp Supplemental Plan as of April 1, 2019, the First Connecticut Qualified Plan as of October 1, 2018, and the benefit obligations of the United Financial Postretirement Plan as of November 1, 2019, the BSB Bancorp Post Retirement Welfare (Life Insurance) Plan as of April 1, 2019 and the First Connecticut Postretirement Plans as of October 1, 2018
(3)Represents the revaluations of the Chittenden Qualified Plan and the Suffolk Qualified Plan, effective October 1, 2018, upon merging into the People’s Qualified Plan.
Plan assets for the People’s Qualified Plan, the United Financial Qualified Plan and the First Connecticut Qualified Plan (together the “Qualified Plans”) were $687.8 million, $34.0 million and $24.9 million, respectively, as of December 31, 2019. The related projected benefit obligation of each plan was $569.1 million, $31.9 million and $24.3 million, respectively, at the same date.
Although the People’s Supplemental Plans and the First Connecticut Supplemental Plan (together the “Supplemental Plans”) hold no assets, People’s United has funded trusts to provide benefit payments to the extent such benefits are not paid directly by People’s United. Trust assets of $33.1 million as of December 31, 2019 (which are included in other assets in the Consolidated Statements of Condition) were exceeded by the related projected benefit obligation of $40.2 million at that date.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
The following table summarizes the accumulated and projected benefit obligations for the Pension Plans at the respective measurement dates:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Plans
|
|
|
As of December 31 (in millions)
|
|
2019
|
|
2018
|
Accumulated benefit obligations:
|
|
|
|
|
Qualified Plans
|
|
$
|
625.3
|
|
|
$
|
518.7
|
|
Supplemental Plans
|
|
40.0
|
|
|
43.6
|
|
Total
|
|
$
|
665.3
|
|
|
$
|
562.3
|
|
Projected benefit obligations:
|
|
|
|
|
Qualified Plans
|
|
$
|
625.3
|
|
|
$
|
518.7
|
|
Supplemental Plans
|
|
40.2
|
|
|
44.0
|
|
Total
|
|
$
|
665.5
|
|
|
$
|
562.7
|
|
Components of net periodic benefit (income) expense and other amounts recognized in other comprehensive income (loss) are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Plans
|
|
|
|
|
|
Other
Postretirement Plans
|
|
|
|
|
Years ended December 31 (in millions)
|
|
2019
|
|
2018
|
|
2017
|
|
2019
|
|
2018
|
|
2017
|
Net periodic benefit (income) expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest cost
|
|
$
|
22.9
|
|
|
$
|
20.2
|
|
|
$
|
19.1
|
|
|
$
|
0.9
|
|
|
$
|
0.8
|
|
|
$
|
0.8
|
|
Expected return on plan assets
|
|
(46.1)
|
|
|
(44.3)
|
|
|
(37.9)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Recognized net actuarial loss
|
|
5.3
|
|
|
7.3
|
|
|
6.5
|
|
|
0.1
|
|
|
0.3
|
|
|
0.2
|
|
Recognized prior service credit
|
|
—
|
|
|
(0.3)
|
|
|
(0.8)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Settlements (1)
|
|
2.9
|
|
|
1.0
|
|
|
2.6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Net periodic benefit (income) expense
|
|
(15.0)
|
|
|
(16.1)
|
|
|
(10.5)
|
|
|
1.0
|
|
|
1.1
|
|
|
1.0
|
|
Other changes in plan assets and benefit obligations recognized in other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
Net actuarial (gain) loss
|
|
(20.5)
|
|
|
26.0
|
|
|
(4.8)
|
|
|
1.1
|
|
|
(2.0)
|
|
|
1.0
|
|
Prior service credit
|
|
—
|
|
|
0.3
|
|
|
0.8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total pre-tax changes recognized in other comprehensive income (loss)
|
|
(20.5)
|
|
|
26.3
|
|
|
(4.0)
|
|
|
1.1
|
|
|
(2.0)
|
|
|
1.0
|
|
Total recognized in net periodic benefit (income) expense and other comprehensive income (loss)
|
|
$
|
(35.5)
|
|
|
$
|
10.2
|
|
|
$
|
(14.5)
|
|
|
$
|
2.1
|
|
|
$
|
(0.9)
|
|
|
$
|
2.0
|
|
(1)Settlement charges are a result of lump-sum benefit payments in excess of the sum of a plan’s annual interest and service costs. When an employer settles the full amount of its obligation for vested benefits with respect to some of a plan’s participants, the employer is required to recognize in income a pro-rata portion of the aggregate gain or loss recorded in AOCL.
The pre-tax amounts in AOCL that have not been recognized as components of net periodic benefit (income) expense are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Plans
|
|
|
|
Other
Postretirement Plans
|
|
|
As of December 31 (in millions)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Net actuarial loss
|
|
$
|
228.5
|
|
|
$
|
249.0
|
|
|
$
|
3.9
|
|
|
$
|
2.8
|
|
|
|
|
|
|
|
|
|
|
Total pre-tax amounts included in AOCL
|
|
$
|
228.5
|
|
|
$
|
249.0
|
|
|
$
|
3.9
|
|
|
$
|
2.8
|
|
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
The Company uses a corridor approach in the valuation of its Qualified Plans, which results in the deferral of actuarial gains and losses resulting from differences between actual results and actuarial assumptions. Amortization of actuarial gains and losses occurs when the accumulated unrecognized gain or loss balance, as of the beginning of the year, exceeds 10% of the greater of the projected benefit obligation or the market-related value of plan assets. The excess unrecognized gain or loss balance is amortized over the average remaining life expectancy of plan participants for the People’s Qualified Plan (approximately 26 years) and over the average working lifetime of active participants for both the First Connecticut Qualified Plan (approximately 28 years) and the United Financial Qualified Plan (approximately 30 years) as of December 31, 2019.
The following assumptions were used in determining the benefit obligations and net periodic benefit (income) expense as of and for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qualified Plans
|
|
|
|
|
|
Other Postretirement Plans
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
|
2019
|
|
2018
|
|
2017
|
Weighted-average assumptions used to determine
benefit obligations at December 31:
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate:
|
|
|
|
|
|
|
|
|
|
|
|
People’s Qualified Plan
|
3.38
|
%
|
|
4.41
|
%
|
|
3.74
|
%
|
|
3.40
|
%
|
|
4.40
|
%
|
|
3.70
|
%
|
First Connecticut Qualified Plan
|
3.39
|
|
|
4.41
|
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
United Financial Qualified Plan
|
3.42
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
Chittenden Qualified Plan (1)
|
n/a
|
|
n/a
|
|
|
3.62
|
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
Suffolk Qualified Plan (1)
|
n/a
|
|
n/a
|
|
|
3.72
|
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
Rate of compensation increase
|
n/a
|
|
n/a
|
|
|
n/a
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
Weighted-average assumptions used to determine net
periodic benefit (income) expense for the years
ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate:
|
|
|
|
|
|
|
|
|
|
|
|
People’s Qualified Plan (2)
|
4.41
|
%
|
|
3.74%/4.34%
|
|
4.41
|
%
|
|
4.40
|
%
|
|
3.70
|
%
|
|
4.40
|
%
|
First Connecticut Qualified Plan
|
4.41
|
|
|
4.35
|
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
United Financial Qualified Plan
|
3.33
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
Chittenden Qualified Plan (1)
|
n/a
|
|
|
n/a
|
|
|
4.16
|
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
Suffolk Qualified Plan (1)
|
n/a
|
|
|
n/a
|
|
|
4.24
|
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
Expected return on plan assets
|
|
|
|
|
|
|
|
|
|
|
|
People’s Qualified Plan
|
7.25
|
|
|
7.25
|
|
|
7.25
|
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
First Connecticut Qualified Plan
|
6.00
|
|
|
6.00
|
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
United Financial Qualified Plan
|
5.25
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
Rate of compensation increase
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
Assumed health care cost trend rates at December 31:
|
|
|
|
|
|
|
|
|
|
|
|
Health care cost trend rate assumed for next year
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
|
5.70
|
%
|
|
6.00
|
%
|
|
6.20
|
%
|
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
|
4.50
|
|
|
4.50
|
|
|
4.50
|
|
Year that the rate reaches the ultimate trend rate
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
|
2037
|
|
2037
|
|
2037
|
n/a — not applicable
(1)Effective October 1, 2018, the Chittenden Qualified Plan and the Suffolk Qualified Plan were merged into the People’s Qualified Plan.
(2)Rate of 3.74% through September 30, 2018 and 4.34% through December 31, 2018.
The discount rates used to determine the benefit obligation of the Supplemental Plans at December 31, 2019 ranged from 2.76% to 3.40%, while the discount rate used to determine net periodic benefit (income) expense for 2019 ranged from 3.33% to 4.40%. The discount rates used to determine the benefit obligation of the People’s Supplemental Plans at December 31, 2018 ranged from 4.00% to 4.40%, while the discount rate used to determine net periodic benefit (income) expense for 2018 ranged from 3.32% to 4.30%.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
The discount rates reflect the then current rates available on long-term high-quality fixed-income debt instruments, and are reset annually on the measurement date. To determine the discount rates, People’s United reviews, along with its independent actuary, spot interest rate yield curves based upon yields from a broad population of high-quality bonds adjusted to match the timing and amounts of expected benefit payments. People’s United uses a full yield curve approach to estimate the interest cost component of net periodic benefit income by applying the specific spot rates along the yield curve, used in the determination of the benefit obligations, to the relevant projected cash flows.
In developing an expected long-term rate of return on asset assumption for the Qualified Plans for purposes of determining 2019 net periodic benefit income, People’s United considered the historical returns and the future expectations for returns within each asset class, as well as the target asset allocation of the pension portfolio. This resulted in an expected
long-term rate of return assumption of 7.25% for the People’s Qualified Plan, 6.00% for the First Connecticut Qualified Plan and 5.25% for the United Financial Qualified Plan. This was intended to reflect expected asset returns over the life of the related pension benefits expected to be paid.
In 2020, $22.3 million in net periodic benefit income is expected to be recognized related to the Qualified Plans. This amount was determined using the following assumptions: (i) expected long-term rates of return of 7.25% for both the People’s Qualified Plan and the First Connecticut Qualified Plan, and 5.25% for the United Financial Qualified Plan; (ii) discount rates of 3.38%, 3.39% and 3.42% for the People's Qualified Plan, the First Connecticut Qualified Plan and the United Financial Qualified Plan, respectively; and (iii) updated mortality tables issued by the Society of Actuaries in the fourth quarter of 2019. The mortality rate is a key assumption used in valuing retirement benefit obligations as it reflects the probability of future benefit payments that are contingent upon the longevity of plan participants and their beneficiaries.
People’s United’s funding policy is to contribute the amounts required by applicable regulations, although additional amounts may be contributed from time to time. In February 2018, People’s United made voluntary employer contributions of $40 million to the People’s Qualified Plan and $10 million to the Chittenden Qualified Plan (none to the Suffolk Qualified Plan) in response to tax reform (see Note 13). Employer contributions for the Supplemental Plans and the Other Postretirement Plans in 2020 are expected to total $4.9 million, representing net benefit payments expected to be paid under these plans.
Expected future net benefit payments for the Pension Plans as of December 31, 2019 are: $28.5 million in 2020; $30.0 million in 2021; $30.6 million in 2022; $31.2 million in 2023; $33.0 million in 2024; and an aggregate of $181.2 million in 2025 through 2029. As of December 31, 2019, expected future net benefit payments for the Other Postretirement Plans are
(i) $1.1 million in each of the years 2020 through 2023, $1.0 million for 2024 and (ii) an aggregate of $4.7 million in 2025 through 2029.
The investment strategy of the Qualified Plans is to develop a diversified portfolio, representing a variety of asset classes of varying duration, in order to effectively fund expected near-term and long-term benefit payments. All investment decisions are governed by an established policy that contains the following asset allocation guidelines:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Class
|
|
|
|
|
Policy Target %
|
|
Policy Range %
|
Cash equivalents
|
|
1
|
|
|
0-20
|
Equity securities
|
|
65
|
|
|
55-75
|
Fixed income securities
|
|
24
|
|
|
10-40
|
Equity investments are required to be diversified among industries and economic sectors and may be invested directly in individual securities or indirectly through the use of mutual funds, trust company common funds, REIT's, investment partnerships, LLCs or exchange traded funds. Limitations have been established on the overall allocation to any individual security representing more than 3% of the market value of plan assets. A limit of 50% of equity holdings may be invested in international equities. Short sales, margin purchases, physical commodities and future contracts, and exchange traded or
over-the-counter options are prohibited.
Fixed income securities are oriented toward risk-averse, investment-grade securities rated “A” or higher. A limit of up to 30% of the fixed income holdings may be purchased and held indirectly in issues rated below “Baa3” by Moody’s or “BBB-” by Standard & Poor’s, if the higher investment risk is compensated for by the prospect of a positive incremental investment return. With the exception of U.S. government securities, in which the Qualified Plans may invest the entire fixed income allocation, fixed income securities require diversification among individual securities and sectors. Limitations have been established on the overall investment in securities of a single issuer to no more than 2.5% of the market value of total plan assets. There is no limit on the maximum maturity of securities held.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
The following table summarizes the percentages of fair value for the major categories of assets in the Qualified Plans as of the respective measurement dates:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Assets
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
|
|
|
2018
|
|
|
As of December 31
|
|
People’s
Qualified
Plan
|
|
First Connecticut
Qualified
Plan
|
|
United Financial
Qualified
Plan (1)
|
|
People’s
Qualified
Plan
|
|
First
Connecticut
Qualified
Plan
|
Equity securities
|
|
66
|
%
|
|
66
|
%
|
|
|
9
|
%
|
|
70
|
%
|
|
73
|
%
|
Cash and fixed income securities
|
|
34
|
|
|
34
|
|
|
|
91
|
|
|
30
|
|
|
27
|
|
Total
|
|
100
|
%
|
|
100
|
%
|
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
(1)The United Financial Qualified Plan is not yet aligned with the Company's investment strategy and asset allocation guidelines as the acquisition of United Financial occurred effective November 1, 2019.
The following tables present the Qualified Plans’ assets measured at fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using
|
|
|
|
|
|
|
As of December 31, 2019 (in millions)
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Cash and cash equivalents
|
|
$
|
18.9
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
18.9
|
|
Equity securities:
|
|
|
|
|
|
|
|
|
Common stocks
|
|
261.2
|
|
|
—
|
|
|
—
|
|
|
261.2
|
|
Mutual funds
|
|
—
|
|
|
215.2
|
|
|
—
|
|
|
215.2
|
|
Fixed income securities:
|
|
|
|
|
|
|
|
|
U.S. Treasury
|
|
—
|
|
|
104.8
|
|
|
—
|
|
|
104.8
|
|
Corporate
|
|
—
|
|
|
73.0
|
|
|
—
|
|
|
73.0
|
|
Mutual funds
|
|
—
|
|
|
72.5
|
|
|
—
|
|
|
72.5
|
|
Other
|
|
—
|
|
|
1.1
|
|
|
—
|
|
|
1.1
|
|
Total
|
|
$
|
280.1
|
|
|
$
|
466.6
|
|
|
$
|
—
|
|
|
$
|
746.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using
|
|
|
|
|
|
|
As of December 31, 2018 (in millions)
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Cash and cash equivalents
|
|
$
|
15.2
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
15.2
|
|
Equity securities:
|
|
|
|
|
|
|
|
|
Common stocks
|
|
216.6
|
|
|
—
|
|
|
—
|
|
|
216.6
|
|
Mutual funds
|
|
—
|
|
|
201.1
|
|
|
—
|
|
|
201.1
|
|
Fixed income securities:
|
|
|
|
|
|
|
|
|
Corporate
|
|
—
|
|
|
68.5
|
|
|
—
|
|
|
68.5
|
|
U.S. Treasury
|
|
—
|
|
|
58.6
|
|
|
—
|
|
|
58.6
|
|
Mutual funds
|
|
—
|
|
|
32.9
|
|
|
—
|
|
|
32.9
|
|
Other
|
|
—
|
|
|
3.5
|
|
|
—
|
|
|
3.5
|
|
Total
|
|
$
|
231.8
|
|
|
$
|
364.6
|
|
|
$
|
—
|
|
|
$
|
596.4
|
|
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 $4.4 million in 2019, $4.6 million in 2018 and $4.8 million in 2017. At December 31, 2019, the loan balance totaled $171.8 million.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Employee participation in this plan is restricted to those employees who (i) are at least 18 years of age and (ii) worked at least 1000 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 4,529,883 shares of People’s United common stock have been allocated or committed to be released to participants’ accounts. At
December 31, 2019, 5,923,692 shares of People’s United common stock, with a fair value of $100.1 million at that date, have not been allocated or committed to be released.
Compensation expense related to the ESOP is recognized at an amount equal to the number of common shares committed to be released by the ESOP for allocation to participants’ accounts multiplied by the average fair value of People’s United’s common stock during the reporting period. The difference between the fair value of the shares of People’s United’s common stock committed to be released and the cost of those common shares is recorded as a credit to 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 $5.7 million, $6.2 million and $6.4 million for the years ended December 31, 2019, 2018 and 2017, respectively.
Employee Savings Plans
People’s United sponsors an employee savings plan that qualifies as a 401(k) plan under the Internal Revenue Code. Employees may contribute up to 50% of their pre-tax compensation up to certain limits, and People’s United makes a matching contribution equal to 100% of a participant’s contributions up to 4% of pre-tax compensation. Participants vest immediately in their own contributions and after one year in People’s United’s contributions. A supplemental savings plan has also been established for certain senior officers and the Company has funded a trust to provide benefit payments to the extent such benefits are not paid directly by People’s United. People’s United also continues to maintain, for former First Connecticut participants who met certain eligibility requirements, a funded plan that provides supplemental retirement benefits. Combined trust assets of $17.9 million as of December 31, 2019 (which are included in other assets in the Consolidated Statements of Condition) were exceeded by the related combined benefit obligations of $44.2 million at that date. Expense recognized for these employee savings plans totaled $32.3 million, $29.1 million and $25.4 million for the years ended December 31, 2019, 2018 and 2017, respectively.
|
|
|
NOTE 19 – Stock-Based Compensation Plans
|
Long-Term Incentive Plan
People's United’s 2014 Plan, as amended and restated in 2017, and the predecessor 2008 Long-Term Incentive Plan (together the "Incentive Plans") provide for awards to officers and employees in the form of: (i) incentive stock options that may afford tax benefits to recipients; (ii) non-statutory stock options that do not afford tax benefits to recipients but may provide tax benefits to People's United; and (iii) stock appreciation rights, restricted stock and performance shares. A total of 75,850,000 shares of People's United common stock are reserved for issuance under the 2014 Plan. The number of shares of common stock reserved under the 2014 Plan is depleted by one share for each option or stock appreciation right, by 5.32 shares for each restricted stock award and by 7.98 shares for each performance share. At December 31, 2019, a total of
35,633,607 reserved shares remain available for future awards.
Non-statutory stock options have been granted under the Incentive Plans at exercise prices equal to the fair value of People’s United common stock at the grant dates. Option expiration dates are fixed at the grant date, with a maximum term of ten years. Prior to 2013, options granted under the Incentive Plans generally vested 50% after two years, 75% after three years and 100% after four years. Beginning in 2013, options granted under the Incentive Plans vest 33% after one year, 66% after
two years and 100% after three years. Unvested options become fully exercisable in the event of a change of control, as defined in the Incentive Plans.
People's United has also granted restricted stock awards under the Incentive Plans. Employees become fully vested in these shares generally after a three-year period, with requisite service conditions and no performance-based conditions to such vesting. During the vesting period, dividends are paid on the restricted stock (for grants occurring prior to February 2017) or accrued to the employees’ benefit (for grants occurring in or after February 2017) and the recipients are entitled to vote these restricted shares. The fair value of all restricted stock awards is measured at the grant date based on quoted market prices. Unvested restricted stock awards become fully vested in the event of a change in control, as defined in the Incentive Plans.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
People's United has also granted performance shares under the 2014 Plan. A performance share represents the right to receive a share of People’s United common stock contingent upon the Company achieving certain pre-established performance goals and the employee satisfying requisite service conditions. Employees become fully vested in these performance shares upon completion of a three-year performance period beginning with the year in which the performance shares are granted. At the end of the three-year performance period, if performance goals have been achieved, the number of performance shares earned by each employee is determined by the level of achievement against the pre-established performance goals. During the performance period, dividend equivalents are accrued to the employees' benefit. Such dividends are paid out at the end of the performance period based on the number of performance shares earned. Unvested performance shares and dividend equivalents become fully vested in the event of a change in control, as defined in the Incentive Plans.
Performance Shares Awarded
The following is a summary of performance share activity under the 2014 Plan:
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Weighted-Average
Grant Date Fair
Value
|
Unvested performance shares outstanding at December 31, 2016
|
551,985
|
|
|
$
|
15.22
|
|
Granted
|
466,923
|
|
|
18.61
|
|
Forfeited
|
(34,073)
|
|
|
16.28
|
|
Unvested performance shares outstanding at December 31, 2017
|
984,835
|
|
|
16.80
|
|
Granted
|
532,740
|
|
|
19.78
|
|
Forfeited
|
(62,124)
|
|
|
17.82
|
|
Vested
|
(2,079)
|
|
|
16.70
|
|
Unvested performance shares outstanding at December 31, 2018
|
1,453,372
|
|
|
17.85
|
|
Granted
|
637,118
|
|
|
17.84
|
|
Forfeited
|
(80,319)
|
|
|
18.66
|
|
Vested
|
(505,755)
|
|
|
15.23
|
|
Unvested performance shares outstanding at December 31, 2019
|
1,504,416
|
|
|
$
|
18.68
|
|
Expense related to unvested performance shares is recognized on a straight-line basis, generally over the applicable service period, and totaled $12.2 million, $10.5 million and $7.0 million for the years ended December 31, 2019, 2018 and 2017, respectively. Unamortized cost for unvested performance shares, which reflects an estimated forfeiture rate of 5% per year over the vesting period, totaled $10.8 million at December 31, 2019, and is expected to be recognized over the remaining weighted-average vesting period of 1.8 years. The fair value of performance shares vested during the years ended December 31, 2019 and 2018 was $7.7 million and less than $0.1 million, respectively.
Recognition and Retention Plan and Stock Option Plan
Following shareholder approval of the 2014 Plan in 2014, no new awards may be granted under the 2008 Long-Term Incentive Plan, the 2007 Stock Option Plan (the "SOP") or the RRP (together the "Prior Plans"). All awards granted under the Prior Plans and the 1998 Long-Term Incentive Plan that were unvested (in the case of stock options and restricted stock awards) or unexercised (in the case of stock options) as of the date of shareholder approval of the 2014 Plan continue to be governed by the terms of the plan under which such awards were granted and the applicable grant agreements.
The RRP and SOP (together the "2007 Plans") provided for awards to directors, officers and employees in the form of: (i) incentive stock options that may afford tax benefits to recipients; (ii) non-statutory stock options that do not afford tax benefits to recipients but may provide tax benefits to People's United; and (iii) restricted stock. Shares of People's United common stock were purchased in the open market in October 2007 by a trustee with funds provided by People's United for the maximum number of shares available to be awarded in the form of restricted stock.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Previously, non-statutory stock options were granted under the SOP at exercise prices equal to the fair value of People's United's common stock at the grant date based on quoted market prices. The fair value of all restricted stock awarded under the RRP was measured at the grant date based on quoted market prices. Prior to 2014, most restricted stock awards and stock options granted under the 2007 Plans were scheduled to vest in 20% annual increments over a five-year period with requisite service conditions and no performance-based conditions to such vesting. Beginning in 2014, awards made under the 2007 Plans in 2014 are scheduled to vest in one-third annual increments over a three-year period with requisite service conditions and no performance-based conditions to such vesting. During the vesting period, dividends are paid on the restricted stock and the recipients are entitled to vote these restricted shares. All restricted stock awards and stock options become fully vested and exercisable, respectively, in the event of a change of control, as defined in the 2007 Plans.
Stock Options Granted
People's United granted a total of 2,807,692 stock options in 2019, 2,450,861 stock options in 2018 and 2,261,586 stock options in 2017 under the Incentive Plans. The estimated weighted-average grant-date fair value of all stock options granted in 2019, 2018 and 2017 was $2.04 per option, $2.31 per option and $1.97 per option, respectively, using the Black-Scholes
option-pricing model with assumptions as follows: dividend yield of 4.0% in 2019, 3.5% in 2018 and 3.6% in 2017; expected volatility rate of 19% in 2019 and 18% in both 2018 and 2017; risk-free interest rate of 2.6% in both 2019 and 2018, and
1.9% in 2017; and expected option life of approximately 4 years in 2019, 2018 and 2017.
In arriving at the grant date fair value of stock options using the Black-Scholes option-pricing model, expected volatilities were based on the historical volatilities of People's United traded common stock. The expected term of stock options represents the period of time that options granted are expected to be outstanding. People’s United used historical data to estimate voluntary suboptimal (early) exercises by continuing employees, and estimates of post-vest option exercise or forfeiture by terminated employees. Suboptimal exercise data and employee termination estimates are incorporated into Monte Carlo simulations of People’s United common stock prices to calculate the expected term. The risk-free interest rate approximated the U.S. Treasury rate curve matched to the expected option term at the time of the grant.
The following is a summary of stock option activity under the Incentive Plans and the SOP:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
Subject To
Option
|
|
Weighted-Average
Exercise
Price
|
|
Weighted-Average
Remaining
Contractual Term
(in years)
|
|
Aggregate
Intrinsic
Value (1)
(in millions)
|
Options outstanding at December 31, 2016
|
16,555,925
|
|
|
$
|
14.84
|
|
|
|
|
|
Granted
|
2,261,586
|
|
|
19.14
|
|
|
|
|
|
Forfeited
|
(459,576)
|
|
|
17.87
|
|
|
|
|
|
Exercised
|
(3,920,294)
|
|
|
15.97
|
|
|
|
|
|
Options outstanding at December 31, 2017
|
14,437,641
|
|
|
15.11
|
|
|
|
|
|
Granted
|
2,450,861
|
|
|
19.61
|
|
|
|
|
|
Forfeited
|
(294,474)
|
|
|
17.87
|
|
|
|
|
|
Exercised
|
(1,916,961)
|
|
|
14.55
|
|
|
|
|
|
Options outstanding at December 31, 2018
|
14,677,067
|
|
|
15.87
|
|
|
|
|
|
Granted
|
2,807,692
|
|
|
17.62
|
|
|
|
|
|
Forfeited
|
(652,965)
|
|
|
18.28
|
|
|
|
|
|
Exercised
|
(1,632,971)
|
|
|
14.77
|
|
|
|
|
|
Options outstanding at December 31, 2019
|
15,198,823
|
|
|
$
|
16.20
|
|
|
6.2
|
|
$
|
22.7
|
|
Options exercisable at December 31, 2019
|
10,551,014
|
|
|
$
|
15.21
|
|
|
5.2
|
|
$
|
22.7
|
|
(1)Reflects only those stock options with intrinsic value at December 31, 2019.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Expense relating to stock options granted is recognized on a straight-line basis, generally over the applicable service period, and totaled $5.2 million, $5.2 million and $5.5 million for the years ended December 31, 2019, 2018 and 2017, respectively. Unamortized cost for unvested stock options, which reflects an estimated forfeiture rate of 5.0% per year over the vesting period, totaled $5.1 million at December 31, 2019, and is expected to be recognized over the remaining
weighted-average vesting period of 1.6 years. The total intrinsic value of stock options exercised was $3.2 million, $8.7 million and $11.2 million for the years ended December 31, 2019, 2018 and 2017, respectively.
Additional information concerning options outstanding and options exercisable at December 31, 2019 is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise Price Range
|
|
Options Outstanding
|
|
|
|
|
|
Options Exercisable
|
|
|
|
|
|
|
Weighted-Average
|
|
|
|
|
|
|
|
|
Number
|
|
Remaining
Life
(in years)
|
|
Exercise
Price
|
|
Number
|
|
Weighted-Average
Exercise Price
|
$11.53 — $14.54
|
|
3,531,960
|
|
|
3.4
|
|
$
|
13.53
|
|
|
3,525,520
|
|
|
$
|
13.53
|
|
14.55 — 14.88
|
|
4,970,387
|
|
|
5.0
|
|
14.73
|
|
|
4,970,387
|
|
|
14.73
|
|
14.89 — 18.40
|
|
2,689,105
|
|
|
9.0
|
|
17.60
|
|
|
57,997
|
|
|
16.47
|
|
18.41 — 19.71
|
|
4,007,371
|
|
|
7.6
|
|
19.45
|
|
|
1,997,110
|
|
|
19.36
|
|
Restricted Stock Awarded
The following is a summary of restricted stock award activity under the Incentive Plans and the RRP:
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Weighted-Average
Grant Date
Fair Value
|
Unvested restricted shares outstanding at December 31, 2016
|
886,082
|
|
|
$
|
14.59
|
|
Granted
|
303,090
|
|
|
18.84
|
|
Forfeited
|
(31,828)
|
|
|
15.56
|
|
Vested
|
(485,023)
|
|
|
14.49
|
|
Unvested restricted shares outstanding at December 31, 2017
|
672,321
|
|
|
16.53
|
|
Granted
|
489,789
|
|
|
18.50
|
|
Forfeited
|
(29,426)
|
|
|
17.81
|
|
Vested
|
(402,134)
|
|
|
16.04
|
|
Unvested restricted shares outstanding at December 31, 2018
|
730,550
|
|
|
18.03
|
|
Granted
|
383,420
|
|
|
17.44
|
|
Forfeited
|
(68,091)
|
|
|
17.11
|
|
Vested
|
(347,078)
|
|
|
17.49
|
|
Unvested restricted shares outstanding at December 31, 2019
|
698,801
|
|
|
$
|
18.07
|
|
Expense relating to unvested restricted stock awards is recognized on a straight-line basis, generally over the applicable service period, and totaled $6.6 million, $5.8 million and $6.4 million for the years ended December 31, 2019, 2018 and 2017, respectively. Unamortized cost for unvested restricted stock awards, which reflects an estimated forfeiture rate of 5.0% per year over the vesting period, totaled $7.0 million at December 31, 2019, and is expected to be recognized over the remaining weighted-average vesting period of 1.5 years. The total fair value of restricted stock awards vested during the years ended December 31, 2019, 2018 and 2017 was $6.0 million, $7.5 million and $9.3 million, respectively.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
During 2019, 2018 and 2017, employees of People's United tendered a total of 115,632 shares, 136,426 shares and 216,969 shares of common stock, respectively, in satisfaction of their related 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 tax withholding obligations upon the exercise of stock options granted in prior periods. 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 stock option exercise price or in satisfaction of 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. Rather, 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. The total cost of shares repurchased and retired applicable to restricted stock awards during the years ended December 31, 2019, 2018 and 2017 was $2.0 million, $2.5 million and $3.3 million, respectively.
Directors’ Equity Compensation Plan
The People's United Financial, Inc. Directors' Equity Compensation Plan (the "Directors' Plan") provides for an annual award of shares of People's United common stock with a fair value of approximately $95,000 to each non-employee director immediately following each annual meeting of shareholders. Shares of People's United common stock issued pursuant to the Directors' Plan are subject to a one-year vesting period, with no post-vesting transfer restrictions. A total of 1,492,500 shares of People's United common stock are reserved for issuance under the Directors' Plan.
In 2019, 2018 and 2017, directors were granted a total of 58,340 shares, 51,680 shares and 49,050 shares, respectively, of People’s United common stock, with grant date fair values of $16.31 per share, $18.21 per share and $17.65 per share, respectively, at those dates. Expense totaling $0.9 million for the Directors’ Plan was recognized for each of the years ended December 31, 2019, 2018 and 2017. At December 31, 2019, a total of 333,981 shares remain available for issuance.
|
|
|
NOTE 20 – Fair Value Measurements
|
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. For those financial instruments not measured at fair value either on a recurring or non-recurring basis, disclosure of each instrument’s carrying amount and estimated fair value has been provided.
Recurring Fair Value Measurements
Trading Debt Securities, Equity Securities and Debt 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 and equity securities that are included in Level 1. When quoted market prices for identical securities are unavailable, People’s United uses prices provided by the independent pricing service based on recent trading activity and other observable information including, but not limited to, market interest rate curves, referenced credit spreads and estimated prepayment rates where applicable. These investments include certain U.S. and government agency debt securities, corporate and municipal debt securities and GSE mortgage-backed and CMO securities, all of which are included in Level 2.
The Company’s available-for-sale debt securities are primarily comprised of GSE mortgage-backed securities. The fair value of these securities is based on prices obtained from the independent pricing service. The pricing service uses various techniques to determine pricing for the Company’s mortgage-backed securities, including option pricing and discounted cash flow analysis. The inputs include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, benchmark securities, bids, offers, reference data, monthly payment information and collateral performance. At December 31, 2019, the entire available-for-sale mortgage-backed securities portfolio was comprised of GSE mortgage-backed and CMO securities with original final maturities ranging from 10 to 40 years. At December 31, 2018, the entire available-for-sale mortgage-backed securities portfolio was comprised of GSE mortgage-backed securities with original final maturities of 10- and 15-years. An active market exists for securities that are similar to the Company’s GSE mortgage-backed and CMO securities, making observable inputs readily available.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
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, 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 18, certain unfunded, nonqualified supplemental plans have been established to provide retirement benefits to certain senior officers. People’s United has funded two trusts to provide benefit payments to the extent such benefits are not paid directly by People’s United, the assets of which are included in other assets in the Consolidated Statements of Condition. When available, People’s United determines the fair value of the trust assets using quoted market prices for identical securities received from a third-party nationally recognized pricing service.
Derivatives
People’s United values its derivatives using internal models that are based on market or observable inputs, including interest rate curves and forward/spot prices for selected currencies. Derivative assets and liabilities included in Level 2 represent interest rate swaps and caps, foreign exchange contracts, risk participation agreements, forward commitments to sell residential mortgage loans and interest rate-lock commitments on residential mortgage loans.
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 December 31, 2019 (in millions)
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Financial assets:
|
|
|
|
|
|
|
|
|
Trading debt securities:
|
|
|
|
|
|
|
|
|
U.S. Treasury
|
|
$
|
7.1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7.1
|
|
Debt securities available-for-sale:
|
|
|
|
|
|
|
|
|
U.S. Treasury and agency
|
|
687.1
|
|
|
—
|
|
|
—
|
|
|
687.1
|
|
GSE mortgage-backed and CMO securities
|
|
—
|
|
|
2,877.2
|
|
|
—
|
|
|
2,877.2
|
|
Equity securities
|
|
8.2
|
|
|
—
|
|
|
—
|
|
|
8.2
|
|
Other assets:
|
|
|
|
|
|
|
|
|
Exchange-traded funds
|
|
47.7
|
|
|
—
|
|
|
—
|
|
|
47.7
|
|
Mutual funds
|
|
3.3
|
|
|
—
|
|
|
—
|
|
|
3.3
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
—
|
|
|
337.6
|
|
|
—
|
|
|
337.6
|
|
Interest rate caps
|
|
—
|
|
|
1.7
|
|
|
—
|
|
|
1.7
|
|
Foreign exchange contracts
|
|
—
|
|
|
1.2
|
|
|
—
|
|
|
1.2
|
|
Forward commitments to sell residential mortgage loans
|
|
—
|
|
|
0.5
|
|
|
—
|
|
|
0.5
|
|
Total
|
|
$
|
753.4
|
|
|
$
|
3,218.2
|
|
|
$
|
—
|
|
|
$
|
3,971.6
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
$
|
—
|
|
|
$
|
92.1
|
|
|
$
|
—
|
|
|
$
|
92.1
|
|
Interest rate caps
|
|
—
|
|
|
1.7
|
|
|
—
|
|
|
1.7
|
|
Risk participation agreements
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|
0.1
|
|
Foreign exchange contracts
|
|
—
|
|
|
1.8
|
|
|
—
|
|
|
1.8
|
|
Interest rate-lock commitments on residential mortgage loans
|
|
—
|
|
|
0.5
|
|
|
—
|
|
|
0.5
|
|
Total
|
|
$
|
—
|
|
|
$
|
96.2
|
|
|
$
|
—
|
|
|
$
|
96.2
|
|
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using
|
|
|
|
|
|
|
As of December 31, 2018 (in millions)
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Financial assets:
|
|
|
|
|
|
|
|
|
Trading debt securities:
|
|
|
|
|
|
|
|
|
U.S. Treasury
|
|
$
|
8.4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8.4
|
|
Debt securities available-for-sale:
|
|
|
|
|
|
|
|
|
U.S. Treasury and agency
|
|
678.0
|
|
|
—
|
|
|
—
|
|
|
678.0
|
|
GSE mortgage-backed securities
|
|
—
|
|
|
2,443.0
|
|
|
—
|
|
|
2,443.0
|
|
Equity securities
|
|
8.1
|
|
|
—
|
|
|
—
|
|
|
8.1
|
|
Other assets:
|
|
|
|
|
|
|
|
|
Exchange-traded funds
|
|
35.5
|
|
|
—
|
|
|
—
|
|
|
35.5
|
|
Mutual funds
|
|
20.6
|
|
|
—
|
|
|
—
|
|
|
20.6
|
|
Fixed income securities
|
|
—
|
|
|
0.3
|
|
|
—
|
|
|
0.3
|
|
Interest rate swaps
|
|
—
|
|
|
98.9
|
|
|
—
|
|
|
98.9
|
|
Interest rate caps
|
|
—
|
|
|
3.1
|
|
|
—
|
|
|
3.1
|
|
Foreign exchange contracts
|
|
—
|
|
|
0.9
|
|
|
—
|
|
|
0.9
|
|
Forward commitments to sell residential mortgage loans
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|
0.1
|
|
Total
|
|
$
|
750.6
|
|
|
$
|
2,546.3
|
|
|
$
|
—
|
|
|
$
|
3,296.9
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
$
|
—
|
|
|
$
|
135.0
|
|
|
$
|
—
|
|
|
$
|
135.0
|
|
Interest rate caps
|
|
—
|
|
|
3.1
|
|
|
—
|
|
|
3.1
|
|
Risk participation agreements (1)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Foreign exchange contracts
|
|
—
|
|
|
0.8
|
|
|
—
|
|
|
0.8
|
|
Interest rate-lock commitments on residential mortgage loans
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|
0.1
|
|
Total
|
|
$
|
—
|
|
|
$
|
139.0
|
|
|
$
|
—
|
|
|
$
|
139.0
|
|
(1)At December 31, 2018, the fair value of risk participation agreements totaled less than $0.1 million (see Note 22).
Non-Recurring Fair Value Measurements
Loans Held-for-Sale
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: (i) the present value of expected future cash flows discounted at the loan’s original effective interest rate; (ii) the loan’s observable market price; or (iii) the fair value of the collateral (less estimated cost to sell) if the loan is collateral dependent. Accordingly, certain impaired loans may be subject to measurement at fair value on 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%.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
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.
Mortgage Servicing Rights
Mortgage servicing rights are evaluated for impairment based upon the fair value of the servicing rights as compared to their amortized cost. The fair value of mortgage servicing rights is based on a valuation model that calculates the present value of estimated net servicing income. This model incorporates certain assumptions that market participants would likely use in estimating future net servicing income, such as interest rates, prepayment speeds and the cost to service (including delinquency and foreclosure costs), all of which require a degree of management judgment. Adjustments are only recorded when the discounted cash flows derived from the valuation model are less than the carrying value of the asset. As such, mortgage servicing rights are subject to measurement at fair value on a non-recurring basis and are classified as Level 3 assets.
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 December 31, 2019 (in millions)
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Loans held-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial (1)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
157.9
|
|
|
$
|
157.9
|
|
Other consumer (1)
|
|
—
|
|
|
—
|
|
|
333.7
|
|
|
333.7
|
|
Residential (2)
|
|
—
|
|
|
19.7
|
|
|
—
|
|
|
19.7
|
|
Impaired loans (3)
|
|
—
|
|
|
—
|
|
|
61.9
|
|
|
61.9
|
|
REO and repossessed assets (4)
|
|
—
|
|
|
—
|
|
|
23.4
|
|
|
23.4
|
|
Mortgage servicing rights (1)
|
|
—
|
|
|
—
|
|
|
10.3
|
|
|
10.3
|
|
Total
|
|
$
|
—
|
|
|
$
|
19.7
|
|
|
$
|
587.2
|
|
|
$
|
606.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using
|
|
|
|
|
|
|
As of December 31, 2018 (in millions)
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Loans held-for-sale - Residential (2)
|
|
$
|
—
|
|
|
$
|
19.5
|
|
|
$
|
—
|
|
|
$
|
19.5
|
|
Impaired loans (3)
|
|
—
|
|
|
—
|
|
|
55.2
|
|
|
55.2
|
|
REO and repossessed assets (4)
|
|
—
|
|
|
—
|
|
|
18.1
|
|
|
18.1
|
|
Total
|
|
$
|
—
|
|
|
$
|
19.5
|
|
|
$
|
73.3
|
|
|
$
|
92.8
|
|
(1)Fair value adjustments recorded for the year ended December 31, 2019 were immaterial.
(2)No fair value adjustments were recorded for the years ended December 31, 2019 and 2018.
(3)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 $49.0 million of Commercial loans and $12.9 million of Retail loans at December 31, 2019. The provision for loan losses on impaired loans totaled $9.3 million and $8.6 million for the years ended December 31, 2019 and 2018, respectively.
(4)Represents: (i) $11.9 million of residential REO; (ii) $7.3 million of commercial REO; and (iii) $4.2 million of repossessed assets at December 31, 2019. Charge-offs to the allowance for loan losses related to loans that were transferred to REO or repossessed assets totaled $2.8 million and $1.7 million for the years ended December 31, 2019 and 2018, respectively. Write downs and net loss on sale of foreclosed/repossessed assets charged to non-interest expense totaled $1.1 million and $0.2 million for the same periods.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Financial Assets and Financial Liabilities Not Measured At Fair Value
The following tables summarize the carrying amounts, estimated fair values and placement in the fair value hierarchy of People’s United’s financial instruments that are not measured at fair value either on a recurring or non-recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying
Amount
|
|
Estimated Fair Value
Measurements Using
|
|
|
|
|
|
|
As of December 31, 2019 (in millions)
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
484.2
|
|
|
$
|
484.2
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
484.2
|
|
Short-term investments
|
|
316.8
|
|
|
—
|
|
|
316.8
|
|
|
—
|
|
|
316.8
|
|
Debt securities held-to-maturity
|
|
3,869.2
|
|
|
—
|
|
|
4,018.5
|
|
|
1.5
|
|
|
4,020.0
|
|
FHLB and FRB stock
|
|
341.1
|
|
|
—
|
|
|
341.1
|
|
|
—
|
|
|
341.1
|
|
Total loans, net (1)
|
|
43,287.6
|
|
|
—
|
|
|
10,072.1
|
|
|
33,282.9
|
|
|
43,355.0
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
Time deposits
|
|
9,205.5
|
|
|
—
|
|
|
9,218.1
|
|
|
—
|
|
|
9,218.1
|
|
Other deposits
|
|
34,384.0
|
|
|
—
|
|
|
34,384.0
|
|
|
—
|
|
|
34,384.0
|
|
FHLB advances
|
|
3,125.4
|
|
|
—
|
|
|
3,125.5
|
|
|
—
|
|
|
3,125.5
|
|
Federal funds purchased
|
|
1,620.0
|
|
|
—
|
|
|
1,620.0
|
|
|
—
|
|
|
1,620.0
|
|
Customer repurchase agreements
|
|
409.1
|
|
|
—
|
|
|
409.1
|
|
|
—
|
|
|
409.1
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes and debentures
|
|
993.1
|
|
|
—
|
|
|
1,021.3
|
|
|
—
|
|
|
1,021.3
|
|
(1)Excludes impaired loans totaling $61.9 million measured at fair value on a non-recurring basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying
Amount
|
|
Estimated Fair Value
Measurements Using
|
|
|
|
|
|
|
As of December 31, 2018 (in millions)
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
665.7
|
|
|
$
|
665.7
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
665.7
|
|
Short-term investments
|
|
266.3
|
|
|
—
|
|
|
266.3
|
|
|
—
|
|
|
266.3
|
|
Debt securities held-to-maturity
|
|
3,792.3
|
|
|
—
|
|
|
3,774.4
|
|
|
1.5
|
|
|
3,775.9
|
|
FHLB and FRB stock
|
|
303.4
|
|
|
—
|
|
|
303.4
|
|
|
—
|
|
|
303.4
|
|
Total loans, net (1)
|
|
34,945.8
|
|
|
—
|
|
|
7,806.1
|
|
|
26,800.2
|
|
|
34,606.3
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
Time deposits
|
|
6,916.2
|
|
|
—
|
|
|
6,884.0
|
|
|
—
|
|
|
6,884.0
|
|
Other deposits
|
|
29,242.8
|
|
|
—
|
|
|
29,242.8
|
|
|
—
|
|
|
29,242.8
|
|
FHLB advances
|
|
2,404.5
|
|
|
—
|
|
|
2,404.5
|
|
|
—
|
|
|
2,404.5
|
|
Federal funds purchased
|
|
845.0
|
|
|
—
|
|
|
845.0
|
|
|
—
|
|
|
845.0
|
|
Customer repurchase agreements
|
|
332.9
|
|
|
—
|
|
|
332.9
|
|
|
—
|
|
|
332.9
|
|
Other borrowings
|
|
11.0
|
|
|
—
|
|
|
11.0
|
|
|
—
|
|
|
11.0
|
|
Notes and debentures
|
|
895.8
|
|
|
—
|
|
|
893.4
|
|
|
—
|
|
|
893.4
|
|
(1)Excludes impaired loans totaling $55.2 million measured at fair value on a non-recurring basis.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
|
|
|
NOTE 21 – Legal Proceedings
|
In the normal course of business, People’s United is subject to various legal proceedings. Management has discussed with legal counsel the nature of these legal proceedings and, based on the advice of counsel and the information currently available, believes that the eventual outcome of these legal proceedings will not have a material adverse effect on People’s United’s financial condition, results of operations or liquidity.
|
|
|
NOTE 22 – Financial Instruments
|
In the normal course of business, People’s United is a party to both on-balance-sheet and off-balance-sheet financial instruments involving, to varying degrees, elements of credit risk and IRR in addition to the amounts recognized in the Consolidated Statements of Condition. The contractual amounts of off-balance-sheet instruments reflect the extent of People’s United’s involvement in particular classes of financial instruments.
A summary of the contractual or notional amounts of People’s United’s lending-related and derivative financial instruments follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31 (in millions)
|
|
2019
|
|
2018
|
Lending-Related Financial Instruments: (1)
|
|
|
|
|
Loan origination commitments and unadvanced lines of credit:
|
|
|
|
|
Commercial and industrial
|
|
$
|
5,549.9
|
|
|
$
|
4,937.1
|
|
Home equity and other consumer
|
|
3,401.9
|
|
|
2,646.6
|
|
Commercial real estate
|
|
1,614.9
|
|
|
1,095.4
|
|
Equipment financing
|
|
471.0
|
|
|
459.7
|
|
Residential mortgage
|
|
54.7
|
|
|
78.7
|
|
Letters of credit:
|
|
|
|
|
Stand-by
|
|
185.2
|
|
|
139.4
|
|
Commercial
|
|
4.4
|
|
|
5.0
|
|
Derivative Financial Instruments: (2)
|
|
|
|
|
Interest rate swaps:
|
|
|
|
|
For market risk management
|
|
585.0
|
|
|
585.0
|
|
For commercial customers:
|
|
|
|
|
Customer
|
|
8,847.7
|
|
|
7,455.9
|
|
Institutional counterparties
|
|
8,851.8
|
|
|
7,161.3
|
|
Interest rate caps:
|
|
|
|
|
For commercial customers:
|
|
|
|
|
Customer
|
|
246.0
|
|
|
329.1
|
|
Institutional counterparties
|
|
246.0
|
|
|
329.1
|
|
Risk participation agreements
|
|
882.8
|
|
|
576.5
|
|
Foreign exchange contracts
|
|
180.4
|
|
|
145.2
|
|
Forward commitments to sell residential mortgage loans
|
|
23.3
|
|
|
9.5
|
|
Interest rate-lock commitments on residential mortgage loans
|
|
33.6
|
|
|
13.6
|
|
(1)The contractual amounts of these financial instruments represent People’s United’s maximum potential exposure to credit loss, assuming: (i) the instruments are fully funded at a later date; (ii) the borrower does not meet contractual repayment obligations; and (iii) any collateral or other security proves to be worthless.
(2)The contractual or notional amounts of these financial instruments are substantially greater than People’s United’s maximum potential exposure to credit loss.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Lending-Related Financial Instruments
The contractual amounts of People’s United’s lending-related financial instruments do not necessarily represent future cash requirements since certain of these instruments may expire without being funded and others may not be fully drawn upon. These instruments are subject to People’s United’s credit approval process, including an evaluation of the customer’s creditworthiness and related collateral requirements. Commitments generally have fixed expiration dates or other termination clauses and may require the payment of a fee by the customer. The geographic distribution of People’s United’s lending-related financial instruments is similar to the distribution of its loan portfolio as described in Note 5.
People’s United issues both stand-by and commercial letters of credit. Stand-by letters of credit are conditional commitments issued by People’s United to guarantee the performance of a customer to a third party. The letter of credit is generally extended for an average term of one year and is secured in a manner similar to existing extensions of credit. For each letter of credit issued, if the customer fails to perform under the terms of the agreement, People’s United would have to fulfill the terms of the letter of credit. The credit risk involved in issuing stand-by letters of credit is essentially the same as that involved in extending loan facilities to customers.
A commercial letter of credit is normally a short-term instrument issued by a financial institution on behalf of its customer. The letter of credit authorizes a beneficiary to draw drafts on the financial institution or one of its correspondent banks, provided the terms and conditions of the letter of credit have been met. In issuing a commercial letter of credit, the financial institution has substituted its credit standing for that of its customer. After drafts are paid by the financial institution, the customer is charged or an obligation is created under an existing reimbursement agreement. An advance under a reimbursement agreement is recorded as a loan by the financial institution and is subject to terms and conditions similar to other commercial obligations.
The fair value of People’s United’s obligations relating to its unfunded loan commitments and letters of credit was $5.6 million and $2.7 million at December 31, 2019 and 2018, respectively, and is included in other liabilities in the Consolidated Statements of Condition.
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.
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 1), 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). The aggregate fair value of derivative instruments with such credit-related contingent features that were in a net liability position at December 31, 2019 was $0.5 million, for which People’s United had posted no collateral in the normal course of business. If the Company’s senior unsecured debt rating had fallen below investment grade as of that date, $0.5 million in additional collateral would have been required.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
The following sections further discuss each class of derivative financial instrument used by People’s United, including management’s principal objectives and risk management strategies.
Interest Rate Swaps
People’s United may, from time to time, enter into interest rate swaps that are used to manage IRR associated with certain interest-earning assets and interest-bearing liabilities.
The Bank has entered into pay floating/receive fixed interest rate swaps to reduce its IRR exposure to the variability in interest cash flows on certain floating-rate commercial loans. The Bank has agreed with the swap counterparties to exchange, at specified intervals, the difference between fixed-rate and floating-rate interest amounts calculated based on notional amounts totaling $210 million. The floating-rate interest payments made under the swaps are calculated using the same floating rate received on the commercial loans. The swaps effectively convert the floating-rate one-month LIBOR interest payments received on the commercial loans to a fixed rate and consequently reduce the Bank’s exposure to variability in short-term interest rates. These swaps are accounted for as cash flow hedges.
The Bank has entered into a pay floating/receive fixed interest rate swap to hedge the change in fair value due to changes in interest rates of the Bank’s $400 million subordinated notes. The Bank has agreed with the swap counterparty to exchange, at specified intervals, the difference between fixed-rate and floating-rate interest amounts calculated based on a notional amount of $375 million. The fixed-rate interest payments received on the swap will essentially offset the fixed-rate interest payments made on these notes, notwithstanding the notional difference between these notes and the swap. The floating-rate interest amounts paid under the swap are calculated based on three-month LIBOR plus 126.5 basis points. The swap effectively converts the fixed-rate subordinated notes to a floating-rate liability. This swap is accounted for as a fair value hedge.
Customer Derivatives
People’s United enters into interest rate swaps and caps with certain of its commercial customers. In order to minimize its risk, these customer interest rate swaps (pay floating/receive fixed) and caps have been offset with essentially matching interest rate swaps (pay fixed/receive floating) and caps with People’s United’s institutional counterparties. Hedge accounting has not been applied for these derivatives. Accordingly, changes in the fair value of all such interest rate swaps and caps are recognized in current earnings.
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.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
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.
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 portion of the unrecognized gain at December 31, 2019 that is expected to be recognized over the next 12 months totals approximately $0.1 million.
The table below provides a summary of the notional amounts and fair values (presented on a gross basis) of derivatives outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Values (1)
|
|
|
|
|
|
|
|
|
Type of
Hedge
|
|
Notional Amounts
|
|
|
|
Assets
|
|
|
|
Liabilities
|
|
|
As of December 31 (in millions)
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Derivatives Not Designated as Hedging
Instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial customers
|
|
N/A
|
|
$
|
8,847.7
|
|
|
$
|
7,455.9
|
|
|
$
|
320.5
|
|
|
$
|
76.3
|
|
|
$
|
13.9
|
|
|
$
|
102.6
|
|
Institutional counterparties
|
|
N/A
|
|
8,851.8
|
|
|
7,161.3
|
|
|
17.1
|
|
|
22.6
|
|
|
78.2
|
|
|
32.4
|
|
Interest rate caps:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial customers
|
|
N/A
|
|
246.0
|
|
|
329.1
|
|
|
1.6
|
|
|
0.6
|
|
|
0.1
|
|
|
2.5
|
|
Institutional counterparties
|
|
N/A
|
|
246.0
|
|
|
329.1
|
|
|
0.1
|
|
|
2.5
|
|
|
1.6
|
|
|
0.6
|
|
Risk participation agreements (2)
|
|
N/A
|
|
882.8
|
|
|
576.5
|
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
Foreign exchange contracts
|
|
N/A
|
|
180.4
|
|
|
145.2
|
|
|
1.2
|
|
|
0.9
|
|
|
1.8
|
|
|
0.8
|
|
Forward commitments to sell
residential mortgage loans
|
|
N/A
|
|
23.3
|
|
|
9.5
|
|
|
0.5
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
Interest rate-lock commitments on
residential mortgage loans
|
|
N/A
|
|
33.6
|
|
|
13.6
|
|
|
—
|
|
|
—
|
|
|
0.5
|
|
|
0.1
|
|
Total
|
|
|
|
|
|
|
|
341.0
|
|
|
103.0
|
|
|
96.2
|
|
|
139.0
|
|
Derivatives Designated as Hedging
Instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subordinated notes
|
|
Fair value
|
|
375.0
|
|
|
375.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Loans
|
|
Cash flow
|
|
210.0
|
|
|
210.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
|
|
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total fair value of
derivatives
|
|
|
|
|
|
|
|
$
|
341.0
|
|
|
$
|
103.0
|
|
|
$
|
96.2
|
|
|
$
|
139.0
|
|
(1)Assets are recorded in other assets and liabilities are recorded in other liabilities.
(2)Fair value totaled less than $0.1 million at December 31, 2018.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
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
|
|
|
|
|
Years ended December 31 (in millions)
|
|
|
|
2019
|
|
2018
|
|
2017
|
|
2019
|
|
2018
|
|
2017
|
Derivatives Not Designated as
Hedging Instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial customers
|
|
N/A
|
|
$
|
374.9
|
|
|
$
|
(3.6)
|
|
|
$
|
5.3
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Institutional counterparties
|
|
N/A
|
|
(350.3)
|
|
|
17.1
|
|
|
6.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Interest rate caps:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial customers
|
|
N/A
|
|
1.4
|
|
|
1.1
|
|
|
0.7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Institutional counterparties
|
|
N/A
|
|
(1.5)
|
|
|
(1.0)
|
|
|
(0.3)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Foreign exchange contracts
|
|
N/A
|
|
1.0
|
|
|
0.9
|
|
|
0.5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Risk participation agreements
|
|
N/A
|
|
(0.4)
|
|
|
0.2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Forward commitments to sell
residential mortgage loans
|
|
N/A
|
|
0.3
|
|
|
(0.1)
|
|
|
(0.2)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Interest rate-lock commitments on
residential mortgage loans
|
|
N/A
|
|
(0.4)
|
|
|
0.1
|
|
|
0.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
|
|
|
25.0
|
|
|
14.7
|
|
|
12.4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Derivatives Designated as
Hedging Instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
Fair value
|
|
0.3
|
|
|
2.1
|
|
|
5.9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Interest rate swaps
|
|
Cash flow
|
|
(1.2)
|
|
|
(0.6)
|
|
|
0.8
|
|
|
1.9
|
|
|
(1.7)
|
|
|
(1.0)
|
|
Interest rate locks
|
|
Cash flow
|
|
0.1
|
|
|
0.1
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
|
|
|
(0.8)
|
|
|
1.6
|
|
|
6.8
|
|
|
1.9
|
|
|
(1.7)
|
|
|
(1.0)
|
|
Total
|
|
|
|
$
|
24.2
|
|
|
$
|
16.3
|
|
|
$
|
19.2
|
|
|
$
|
1.9
|
|
|
$
|
(1.7)
|
|
|
$
|
(1.0)
|
|
(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.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
|
|
|
NOTE 23 – Balance Sheet Offsetting
|
The Chicago Mercantile Exchange (“CME”) legally characterizes variation margin payments for over-the-counter derivatives that clear as settlements rather than collateral. Accordingly, the Company’s accounting policies classify, for accounting and presentation purposes, variation margin payments deemed to be legal settlements as a single unit of account with the related derivative(s). At both December 31, 2019 and 2018, this presentation impacted one of the Company’s institutional counterparties. As such, People’s United has, subject to the corresponding enforceable master netting arrangement, netted the institutional counterparty’s CME derivative position and offset the counterparty’s variation margin payments in the Consolidated Statement of Condition as of both dates.
The following tables provide a gross presentation, the effects of offsetting, and a net presentation of the Company’s financial instruments that are eligible for offset in the Consolidated Statements of Condition. The collateral amounts in these tables are limited to the outstanding balances of the related asset or liability (after netting is applied) and, therefore, instances of overcollateralization are not presented. In the tables below, the Net Amount Presented of the derivative assets and liabilities can be reconciled to the fair value of the Company’s derivative financial instruments in Note 22. 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 December 31, 2019 (in millions)
|
|
|
|
|
|
|
|
Financial
Instruments
|
|
Collateral
|
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps/caps:
|
|
|
|
|
|
|
|
|
|
|
|
|
Counterparty A
|
|
$
|
0.2
|
|
|
$
|
—
|
|
|
$
|
0.2
|
|
|
$
|
(0.2)
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Counterparty B
|
|
0.1
|
|
|
—
|
|
|
0.1
|
|
|
(0.1)
|
|
|
—
|
|
|
—
|
|
Counterparty C
|
|
0.4
|
|
|
—
|
|
|
0.4
|
|
|
(0.4)
|
|
|
—
|
|
|
—
|
|
Counterparty D
|
|
0.1
|
|
|
—
|
|
|
0.1
|
|
|
(0.1)
|
|
|
—
|
|
|
—
|
|
Counterparty E
|
|
15.3
|
|
|
—
|
|
|
15.3
|
|
|
—
|
|
|
—
|
|
|
15.3
|
|
Other counterparties
|
|
1.1
|
|
|
—
|
|
|
1.1
|
|
|
(1.1)
|
|
|
—
|
|
|
—
|
|
Foreign exchange contracts
|
|
1.2
|
|
|
—
|
|
|
1.2
|
|
|
—
|
|
|
—
|
|
|
1.2
|
|
Total
|
|
$
|
18.4
|
|
|
$
|
—
|
|
|
$
|
18.4
|
|
|
$
|
(1.9)
|
|
|
$
|
—
|
|
|
$
|
16.5
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps/caps:
|
|
|
|
|
|
|
|
|
|
|
|
|
Counterparty A
|
|
$
|
2.3
|
|
|
$
|
—
|
|
|
$
|
2.3
|
|
|
$
|
(0.2)
|
|
|
$
|
(2.1)
|
|
|
$
|
—
|
|
Counterparty B
|
|
5.5
|
|
|
—
|
|
|
5.5
|
|
|
(0.1)
|
|
|
(5.4)
|
|
|
—
|
|
Counterparty C
|
|
28.2
|
|
|
—
|
|
|
28.2
|
|
|
(0.4)
|
|
|
(27.8)
|
|
|
—
|
|
Counterparty D
|
|
10.9
|
|
|
—
|
|
|
10.9
|
|
|
(0.1)
|
|
|
(10.8)
|
|
|
—
|
|
Counterparty E
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Other counterparties
|
|
32.9
|
|
|
—
|
|
|
32.9
|
|
|
(1.1)
|
|
|
(31.8)
|
|
|
—
|
|
Foreign exchange contracts
|
|
1.8
|
|
|
—
|
|
|
1.8
|
|
|
—
|
|
|
—
|
|
|
1.8
|
|
Total
|
|
$
|
81.6
|
|
|
$
|
—
|
|
|
$
|
81.6
|
|
|
$
|
(1.9)
|
|
|
$
|
(77.9)
|
|
|
$
|
1.8
|
|
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Amount
Recognized
|
|
Gross
Amount
Offset
|
|
Net
Amount
Presented
|
|
Gross Amounts Not Offset
|
|
|
|
Net
Amount
|
As of December 31, 2018 (in millions)
|
|
|
|
|
|
|
|
Financial
Instruments
|
|
Collateral
|
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps/caps:
|
|
|
|
|
|
|
|
|
|
|
|
|
Counterparty A
|
|
$
|
3.1
|
|
|
$
|
—
|
|
|
$
|
3.1
|
|
|
$
|
(1.4)
|
|
|
$
|
(1.7)
|
|
|
$
|
—
|
|
Counterparty B
|
|
2.5
|
|
|
—
|
|
|
2.5
|
|
|
(2.5)
|
|
|
—
|
|
|
—
|
|
Counterparty C
|
|
4.8
|
|
|
—
|
|
|
4.8
|
|
|
(3.7)
|
|
|
(1.1)
|
|
|
—
|
|
Counterparty D
|
|
3.6
|
|
|
—
|
|
|
3.6
|
|
|
(2.7)
|
|
|
(0.1)
|
|
|
0.8
|
|
Counterparty E
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Other counterparties
|
|
11.1
|
|
|
—
|
|
|
11.1
|
|
|
(5.4)
|
|
|
(5.7)
|
|
|
—
|
|
Foreign exchange contracts
|
|
0.9
|
|
|
—
|
|
|
0.9
|
|
|
—
|
|
|
—
|
|
|
0.9
|
|
Total
|
|
$
|
26.0
|
|
|
$
|
—
|
|
|
$
|
26.0
|
|
|
$
|
(15.7)
|
|
|
$
|
(8.6)
|
|
|
$
|
1.7
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps/caps:
|
|
|
|
|
|
|
|
|
|
|
|
|
Counterparty A
|
|
$
|
1.4
|
|
|
$
|
—
|
|
|
$
|
1.4
|
|
|
$
|
(1.4)
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Counterparty B
|
|
3.8
|
|
|
—
|
|
|
3.8
|
|
|
(2.5)
|
|
|
(1.2)
|
|
|
0.1
|
|
Counterparty C
|
|
3.7
|
|
|
—
|
|
|
3.7
|
|
|
(3.7)
|
|
|
—
|
|
|
—
|
|
Counterparty D
|
|
2.7
|
|
|
—
|
|
|
2.7
|
|
|
(2.7)
|
|
|
—
|
|
|
—
|
|
Counterparty E
|
|
16.0
|
|
|
—
|
|
|
16.0
|
|
|
—
|
|
|
—
|
|
|
16.0
|
|
Other counterparties
|
|
5.4
|
|
|
—
|
|
|
5.4
|
|
|
(5.4)
|
|
|
—
|
|
|
—
|
|
Foreign exchange contracts
|
|
0.8
|
|
|
—
|
|
|
0.8
|
|
|
—
|
|
|
—
|
|
|
0.8
|
|
Total
|
|
$
|
33.8
|
|
|
$
|
—
|
|
|
$
|
33.8
|
|
|
$
|
(15.7)
|
|
|
$
|
(1.2)
|
|
|
$
|
16.9
|
|
The following tables show the extent to which assets and liabilities exchanged under resale and repurchase agreements have been offset in the Consolidated Statements of Condition. These agreements: (i) are entered into simultaneously with the same financial institution counterparty; (ii) have the same principal amounts and inception/maturity dates; and (iii) are subject to a master netting arrangement that contains a conditional right of offset upon default. At December 31, 2019 and 2018, the Company posted as collateral marketable securities with fair values of $462.4 million and $461.3 million, respectively, and, in turn, accepted as collateral marketable securities with fair values of $457.5 million and $457.0 million, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2019 (in millions)
|
|
Gross
Amount
Recognized
|
|
Gross
Amount
Offset
|
|
Net
Amount
Presented
|
Total resale agreements
|
|
$
|
450.0
|
|
|
$
|
(450.0)
|
|
|
$
|
—
|
|
Total repurchase agreements
|
|
$
|
450.0
|
|
|
$
|
(450.0)
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2018 (in millions)
|
|
Gross
Amount
Recognized
|
|
Gross
Amount
Offset
|
|
Net
Amount
Presented
|
Total resale agreements
|
|
$
|
450.0
|
|
|
$
|
(450.0)
|
|
|
$
|
—
|
|
Total repurchase agreements
|
|
$
|
450.0
|
|
|
$
|
(450.0)
|
|
|
$
|
—
|
|
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
|
|
|
NOTE 24 – Segment Information
|
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.
Commercial Banking consists principally of commercial real estate lending, commercial and industrial lending, and commercial deposit gathering activities. This segment also includes equipment financing operations, as well as cash management, correspondent banking, municipal banking, institutional trust services, corporate trust, commercial insurance services provided by PUIA and private banking.
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 PSI, investment advisory services and financial management and planning services provided by PUA and non-institutional trust services.
People’s United’s segment disclosure is based on an internal profitability reporting system, which generates information by operating segment based on a series of management estimates and allocations regarding funds transfer pricing (“FTP”), the provision for loan losses, non-interest expense and income taxes. These estimates and allocations, some of which are subjective in nature, are subject to periodic review and refinement. Any changes in estimates and allocations that may affect the reported results of any segment will not affect the consolidated financial position or results of operations of People’s United as a whole.
FTP, which is used in the calculation of each operating segment’s net interest income, measures the value of funds used in and provided by an operating segment. The difference between the interest income on earning assets and the interest expense on funding liabilities, and the corresponding FTP charge for interest income or credit for interest expense, results in net spread income. 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 IRR from the operating segments and better facilitate pricing decisions, thereby allowing management to assess the longer-term profitability of an operating segment more effectively, 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 assess the longer-term profitability of an operating segment more effectively, it may result in a measure of an operating segment’s provision for loan losses that does not reflect actual incurred losses for the periods presented.
People’s United allocates a majority 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.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
The "Other" category 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. The "Other" category also includes (i) gains of $7.6 million, net of expenses, resulting from the sale of eight branches in central Maine and $3.3 million on a sale-leaseback transaction, both for the year ended December 31, 2019, and $10.0 million of security losses in each of the years ended December 31, 2018 and 2017 incurred in response to tax reform-related benefits recognized in each period (all included in non-interest income); and (ii) merger-related expenses totaling $49.1 million, $11.4 million and $30.6 million for the years ended December 31, 2019, 2018 and 2017, respectively, and a $16.5 million charge for the year ended December 31, 2019 associated with the complete write-down of an acquisition-related intangible asset stemming from the liquidation of the Company's public mutual funds (all included in non-interest expense). The increases in average total assets and average total liabilities in 2019 compared to 2018 primarily reflect the recognition of ROU assets and corresponding operating lease liabilities upon adoption of the FASB leasing standard on January 1, 2019 (see Notes 1 and 6 to the Consolidated Financial Statements for a further discussion regarding the accounting for leases).
The following tables provide selected financial information for People’s United’s reportable segments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2019 (in millions)
|
|
Commercial
Banking
|
|
Retail
Banking
|
|
Total
Reportable
Segments
|
|
Treasury
|
|
Other
|
|
Total
Consolidated
|
Net interest income (loss)
|
|
$
|
807.1
|
|
|
$
|
555.1
|
|
|
$
|
1,362.2
|
|
|
$
|
66.5
|
|
|
$
|
(16.4)
|
|
|
$
|
1,412.3
|
|
Provision for loan losses
|
|
44.1
|
|
|
8.9
|
|
|
53.0
|
|
|
—
|
|
|
(24.7)
|
|
|
28.3
|
|
Total non-interest income
|
|
206.5
|
|
|
195.9
|
|
|
402.4
|
|
|
14.1
|
|
|
14.6
|
|
|
431.1
|
|
Total non-interest expense
|
|
448.7
|
|
|
600.2
|
|
|
1,048.9
|
|
|
13.8
|
|
|
100.0
|
|
|
1,162.7
|
|
Income (loss) before income tax
expense (benefit)
|
|
520.8
|
|
|
141.9
|
|
|
662.7
|
|
|
66.8
|
|
|
(77.1)
|
|
|
652.4
|
|
Income tax expense (benefit)
|
|
104.3
|
|
|
28.5
|
|
|
132.8
|
|
|
13.5
|
|
|
(14.3)
|
|
|
132.0
|
|
Net income (loss)
|
|
$
|
416.5
|
|
|
$
|
113.4
|
|
|
$
|
529.9
|
|
|
$
|
53.3
|
|
|
$
|
(62.8)
|
|
|
$
|
520.4
|
|
Average total assets
|
|
$
|
29,746.8
|
|
|
$
|
12,560.9
|
|
|
$
|
42,307.7
|
|
|
$
|
7,882.3
|
|
|
$
|
1,468.0
|
|
|
$
|
51,658.0
|
|
Average total liabilities
|
|
11,490.2
|
|
|
23,397.7
|
|
|
34,887.9
|
|
|
9,011.9
|
|
|
686.9
|
|
|
44,586.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2018 (in millions)
|
|
Commercial
Banking
|
|
Retail
Banking
|
|
Total
Reportable
Segments
|
|
Treasury
|
|
Other
|
|
Total
Consolidated
|
Net interest income (loss)
|
|
$
|
699.2
|
|
|
$
|
467.2
|
|
|
$
|
1,166.4
|
|
|
$
|
93.0
|
|
|
$
|
(23.4)
|
|
|
$
|
1,236.0
|
|
Provision for loan losses
|
|
38.7
|
|
|
9.0
|
|
|
47.7
|
|
|
—
|
|
|
(17.7)
|
|
|
30.0
|
|
Total non-interest income
|
|
177.8
|
|
|
186.7
|
|
|
364.5
|
|
|
8.3
|
|
|
(6.4)
|
|
|
366.4
|
|
Total non-interest expense
|
|
383.7
|
|
|
565.3
|
|
|
949.0
|
|
|
17.8
|
|
|
29.3
|
|
|
996.1
|
|
Income (loss) before income tax
expense (benefit)
|
|
454.6
|
|
|
79.6
|
|
|
534.2
|
|
|
83.5
|
|
|
(41.4)
|
|
|
576.3
|
|
Income tax expense (benefit)
|
|
85.0
|
|
|
14.9
|
|
|
99.9
|
|
|
15.8
|
|
|
(7.5)
|
|
|
108.2
|
|
Net income (loss)
|
|
$
|
369.6
|
|
|
$
|
64.7
|
|
|
$
|
434.3
|
|
|
$
|
67.7
|
|
|
$
|
(33.9)
|
|
|
$
|
468.1
|
|
Average total assets
|
|
$
|
25,956.7
|
|
|
$
|
10,103.3
|
|
|
$
|
36,060.0
|
|
|
$
|
7,955.8
|
|
|
$
|
1,013.9
|
|
|
$
|
45,029.7
|
|
Average total liabilities
|
|
9,305.0
|
|
|
20,699.1
|
|
|
30,004.1
|
|
|
8,544.3
|
|
|
444.1
|
|
|
38,992.5
|
|
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2017 (in millions)
|
|
Commercial
Banking
|
|
Retail
Banking
|
|
Total
Reportable
Segments
|
|
Treasury
|
|
Other
|
|
Total
Consolidated
|
Net interest income (loss)
|
|
$
|
631.0
|
|
|
$
|
403.9
|
|
|
$
|
1,034.9
|
|
|
$
|
107.4
|
|
|
$
|
(41.8)
|
|
|
$
|
1,100.5
|
|
Provision for loan losses
|
|
43.7
|
|
|
13.4
|
|
|
57.1
|
|
|
—
|
|
|
(31.1)
|
|
|
26.0
|
|
Total non-interest income
|
|
165.0
|
|
|
183.4
|
|
|
348.4
|
|
|
11.2
|
|
|
(6.7)
|
|
|
352.9
|
|
Total non-interest expense
|
|
357.1
|
|
|
547.0
|
|
|
904.1
|
|
|
15.6
|
|
|
40.6
|
|
|
960.3
|
|
Income (loss) before income tax
expense (benefit)
|
|
395.2
|
|
|
26.9
|
|
|
422.1
|
|
|
103.0
|
|
|
(58.0)
|
|
|
467.1
|
|
Income tax expense (benefit)
|
|
110.0
|
|
|
7.5
|
|
|
117.5
|
|
|
28.6
|
|
|
(16.2)
|
|
|
129.9
|
|
Net income (loss)
|
|
$
|
285.2
|
|
|
$
|
19.4
|
|
|
$
|
304.6
|
|
|
$
|
74.4
|
|
|
$
|
(41.8)
|
|
|
$
|
337.2
|
|
Average total assets
|
|
$
|
24,533.9
|
|
|
$
|
9,695.1
|
|
|
$
|
34,229.0
|
|
|
$
|
7,512.1
|
|
|
$
|
840.5
|
|
|
$
|
42,581.6
|
|
Average total liabilities
|
|
7,938.6
|
|
|
20,202.8
|
|
|
28,141.4
|
|
|
8,450.6
|
|
|
398.0
|
|
|
36,990.0
|
|
|
|
|
NOTE 25 – Parent Company Financial Information
|
Condensed financial information of People’s United (parent company only) is presented below:
CONDENSED STATEMENTS OF CONDITION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31 (in millions)
|
|
2019
|
|
2018
|
Assets:
|
|
|
|
|
Cash at bank subsidiary
|
|
$
|
455.2
|
|
|
$
|
291.6
|
|
Total cash and cash equivalents
|
|
455.2
|
|
|
291.6
|
|
Equity securities, at fair value
|
|
8.2
|
|
|
8.1
|
|
Investments in subsidiaries:
|
|
|
|
|
Bank subsidiary
|
|
7,800.0
|
|
|
6,485.3
|
|
Non-bank subsidiaries
|
|
4.8
|
|
|
2.8
|
|
Goodwill
|
|
203.0
|
|
|
197.1
|
|
Due from bank subsidiary
|
|
4.6
|
|
|
5.5
|
|
Other assets
|
|
56.0
|
|
|
45.9
|
|
Total assets
|
|
$
|
8,531.8
|
|
|
$
|
7,036.3
|
|
Liabilities and Stockholders’ Equity:
|
|
|
|
|
Notes and debentures
|
|
$
|
579.9
|
|
|
$
|
497.7
|
|
Other liabilities
|
|
4.7
|
|
|
4.7
|
|
Stockholders’ equity
|
|
7,947.2
|
|
|
6,533.9
|
|
Total liabilities and stockholders’ equity
|
|
$
|
8,531.8
|
|
|
$
|
7,036.3
|
|
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
CONDENSED STATEMENTS OF INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31(in millions)
|
|
2019
|
|
2018
|
|
2017
|
Revenues:
|
|
|
|
|
|
|
Interest income:
|
|
|
|
|
|
|
Securities
|
|
$
|
0.4
|
|
|
$
|
0.4
|
|
|
$
|
1.1
|
|
|
|
|
|
|
|
|
Total interest income
|
|
0.4
|
|
|
0.4
|
|
|
1.1
|
|
Dividend income from bank subsidiary
|
|
457.0
|
|
|
342.0
|
|
|
292.0
|
|
Net security losses
|
|
—
|
|
|
—
|
|
|
(1.2)
|
|
Other non-interest income
|
|
1.7
|
|
|
2.3
|
|
|
16.9
|
|
Total revenues
|
|
459.1
|
|
|
344.7
|
|
|
308.8
|
|
Expenses:
|
|
|
|
|
|
|
Interest on notes and debentures
|
|
19.2
|
|
|
18.7
|
|
|
19.0
|
|
Non-interest expense
|
|
14.1
|
|
|
11.4
|
|
|
13.9
|
|
Total expenses
|
|
33.3
|
|
|
30.1
|
|
|
32.9
|
|
Income before income tax benefit and
subsidiaries undistributed income
|
|
425.8
|
|
|
314.6
|
|
|
275.9
|
|
Income tax benefit
|
|
(6.2)
|
|
|
(5.5)
|
|
|
(5.7)
|
|
Income before subsidiaries undistributed income
|
|
432.0
|
|
|
320.1
|
|
|
281.6
|
|
Subsidiaries undistributed income
|
|
88.4
|
|
|
148.0
|
|
|
55.6
|
|
Net income
|
|
$
|
520.4
|
|
|
$
|
468.1
|
|
|
$
|
337.2
|
|
CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31 (in millions)
|
|
2019
|
|
2018
|
|
2017
|
Net income
|
|
$
|
520.4
|
|
|
$
|
468.1
|
|
|
$
|
337.2
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
Net unrealized losses on securities available-for-sale
|
|
—
|
|
|
—
|
|
|
(0.1)
|
|
Net unrealized losses on derivatives accounted for as cash flow hedges
|
|
(0.1)
|
|
|
—
|
|
|
—
|
|
Other comprehensive income (loss) of bank subsidiary
|
|
90.0
|
|
|
(37.8)
|
|
|
13.4
|
|
Total other comprehensive income (loss), net of tax
|
|
89.9
|
|
|
(37.8)
|
|
|
13.3
|
|
Total comprehensive income
|
|
$
|
610.3
|
|
|
$
|
430.3
|
|
|
$
|
350.5
|
|
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
CONDENSED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31 (in millions)
|
|
2019
|
|
2018
|
|
2017
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
Net income
|
|
$
|
520.4
|
|
|
$
|
468.1
|
|
|
$
|
337.2
|
|
Adjustments to reconcile net income to net cash provided
by operating activities:
|
|
|
|
|
|
|
Subsidiaries undistributed income
|
|
(88.4)
|
|
|
(148.0)
|
|
|
(55.6)
|
|
Net security losses
|
|
—
|
|
|
—
|
|
|
1.2
|
|
Net change in other assets and other liabilities
|
|
(0.7)
|
|
|
23.1
|
|
|
20.1
|
|
Net cash provided by operating activities
|
|
431.3
|
|
|
343.2
|
|
|
302.9
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
Proceeds from sales of equity securities
|
|
1.6
|
|
|
2.3
|
|
|
—
|
|
|
|
|
|
|
|
|
Proceeds from sales of debt securities available-for-sale
|
|
—
|
|
|
—
|
|
|
75.6
|
|
|
|
|
|
|
|
|
Increase in investment in bank subsidiary
|
|
—
|
|
|
(200.0)
|
|
|
—
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
1.6
|
|
|
(197.7)
|
|
|
75.6
|
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
Repayment of notes and debentures
|
|
—
|
|
|
—
|
|
|
(125.0)
|
|
|
|
|
|
|
|
|
Cash dividends paid on common stock
|
|
(274.8)
|
|
|
(243.8)
|
|
|
(227.9)
|
|
Cash dividends paid on preferred stock
|
|
(14.1)
|
|
|
(14.1)
|
|
|
(14.1)
|
|
Common stock repurchases
|
|
(4.5)
|
|
|
(2.5)
|
|
|
(3.4)
|
|
Proceeds from stock options exercised
|
|
24.1
|
|
|
27.9
|
|
|
61.8
|
|
Net cash used in financing activities
|
|
(269.3)
|
|
|
(232.5)
|
|
|
(308.6)
|
|
Net increase (decrease) in cash and cash equivalents
|
|
163.6
|
|
|
(87.0)
|
|
|
69.9
|
|
Cash and cash equivalents at beginning of year
|
|
291.6
|
|
|
378.6
|
|
|
308.7
|
|
Cash and cash equivalents at end of year
|
|
$
|
455.2
|
|
|
$
|
291.6
|
|
|
$
|
378.6
|
|
|
|
|
NOTE 26 – Subsequent Events
|
Repurchase of Common Stock
In June 2019, the Company’s Board of Directors authorized the repurchase of up to 20.0 million shares of People's United’s outstanding common stock. Such shares may be repurchased, either directly or through agents, in the open market at prices and terms satisfactory to management. In the fourth quarter of 2019, the Company repurchased 0.2 million shares of People's United common stock under this authorization at a total cost of $2.5 million. Through February 14, 2020, an additional 10.2 million shares of People's United common stock had been repurchased at a total cost of $161.9 million.
Loans Held-for-Sale
At December 31, 2019, loans held-for-sale included $333.7 million of consumer loans and $157.9 million of commercial loans previously acquired in the United Financial acquisition. All of these loans were subsequently sold, resulting in a gain, net of expenses, of approximately $15 million.
People’s United Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
|
|
|
NOTE 27 – Selected Quarterly Financial Data (Unaudited)
|
The following table presents People’s United’s quarterly financial data for 2019 and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019 (1)
|
|
|
|
|
|
|
|
2018 (1)
|
|
|
|
|
|
|
(dollars in millions, except
per common share data)
|
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
Interest and dividend income
|
|
$
|
440.5
|
|
|
$
|
472.8
|
|
|
$
|
470.9
|
|
|
$
|
496.9
|
|
|
$
|
359.1
|
|
|
$
|
375.4
|
|
|
$
|
390.0
|
|
|
$
|
431.8
|
|
Interest expense
|
|
107.7
|
|
|
124.7
|
|
|
122.2
|
|
|
114.2
|
|
|
63.3
|
|
|
74.2
|
|
|
83.6
|
|
|
99.2
|
|
Net interest income
|
|
332.8
|
|
|
348.1
|
|
|
348.7
|
|
|
382.7
|
|
|
295.8
|
|
|
301.2
|
|
|
306.4
|
|
|
332.6
|
|
Provision for loan losses
|
|
5.6
|
|
|
7.6
|
|
|
7.8
|
|
|
7.3
|
|
|
5.4
|
|
|
6.5
|
|
|
8.2
|
|
|
9.9
|
|
Net interest income
after provision for loan losses
|
|
327.2
|
|
|
340.5
|
|
|
340.9
|
|
|
375.4
|
|
|
290.4
|
|
|
294.7
|
|
|
298.2
|
|
|
322.7
|
|
Non-interest income
|
|
94.6
|
|
|
106.3
|
|
|
106.0
|
|
|
124.2
|
|
|
90.4
|
|
|
94.9
|
|
|
92.3
|
|
|
88.7
|
|
Non-interest expense
|
|
277.2
|
|
|
278.4
|
|
|
281.4
|
|
|
325.7
|
|
|
243.5
|
|
|
248.6
|
|
|
241.3
|
|
|
262.7
|
|
Income before income tax
expense
|
|
144.6
|
|
|
168.4
|
|
|
165.5
|
|
|
173.9
|
|
|
137.3
|
|
|
141.0
|
|
|
149.2
|
|
|
148.7
|
|
Income tax expense
|
|
30.0
|
|
|
35.2
|
|
|
30.4
|
|
|
36.4
|
|
|
29.4
|
|
|
30.8
|
|
|
32.2
|
|
|
15.8
|
|
Net income
|
|
114.6
|
|
|
133.2
|
|
|
135.1
|
|
|
137.5
|
|
|
107.9
|
|
|
110.2
|
|
|
117.0
|
|
|
132.9
|
|
Preferred stock dividend
|
|
3.5
|
|
|
3.5
|
|
|
3.5
|
|
|
3.5
|
|
|
3.5
|
|
|
3.5
|
|
|
3.5
|
|
|
3.5
|
|
Net income available to
common shareholders
|
|
$
|
111.1
|
|
|
$
|
129.7
|
|
|
$
|
131.6
|
|
|
$
|
134.0
|
|
|
$
|
104.4
|
|
|
$
|
106.7
|
|
|
$
|
113.5
|
|
|
$
|
129.4
|
|
Common Share Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.30
|
|
|
$
|
0.33
|
|
|
$
|
0.34
|
|
|
$
|
0.31
|
|
|
$
|
0.31
|
|
|
$
|
0.31
|
|
|
$
|
0.33
|
|
|
$
|
0.35
|
|
Diluted
|
|
0.30
|
|
|
0.33
|
|
|
0.33
|
|
|
0.31
|
|
|
0.30
|
|
|
0.31
|
|
|
0.33
|
|
|
0.35
|
|
Common dividends paid
|
|
65.2
|
|
|
69.8
|
|
|
69.9
|
|
|
69.9
|
|
|
58.8
|
|
|
59.9
|
|
|
60.0
|
|
|
65.1
|
|
Dividends paid per
common share
|
|
0.1750
|
|
|
0.1775
|
|
|
0.1775
|
|
|
0.1775
|
|
|
0.1725
|
|
|
0.1750
|
|
|
0.1750
|
|
|
0.1750
|
|
Common dividend payout ratio
|
|
58.6
|
%
|
|
53.8
|
%
|
|
53.1
|
%
|
|
52.2
|
%
|
|
56.3
|
%
|
|
56.2
|
%
|
|
52.9
|
%
|
|
50.3
|
%
|
Stock price:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
$
|
18.03
|
|
|
$
|
17.66
|
|
|
$
|
17.10
|
|
|
$
|
17.22
|
|
|
$
|
20.26
|
|
|
$
|
19.37
|
|
|
$
|
19.00
|
|
|
$
|
17.46
|
|
Low
|
|
14.25
|
|
|
15.24
|
|
|
13.81
|
|
|
14.73
|
|
|
18.18
|
|
|
18.00
|
|
|
16.95
|
|
|
13.66
|
|
Weighted average common shares
outstanding (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
370.72
|
|
|
391.27
|
|
|
391.66
|
|
|
421.85
|
|
|
339.76
|
|
|
340.64
|
|
|
341.43
|
|
|
370.22
|
|
Diluted
|
|
374.09
|
|
|
394.57
|
|
|
394.45
|
|
|
424.98
|
|
|
344.00
|
|
|
344.47
|
|
|
345.04
|
|
|
372.83
|
|
(1)The sum of the quarterly amounts for certain line items may not equal the full-year amounts due to rounding.
INDEX TO EXHIBITS
|
|
|
|
|
|
|
|
|
Designation
|
|
Description
|
|
|
|
|
|
Description of Registrant's Securities
|
|
|
|
|
|
Subsidiaries
|
|
|
|
|
|
Consent of KPMG LLP
|
|
|
|
|
|
Rule 13a-14(a)/15d-14(a) Certifications
|
|
|
|
|
|
Rule 13a-14(a)/15d-14(a) Certifications
|
|
|
|
|
|
Section 1350 Certifications
|
|
|
|
|
|
Impact of Inflation
|
|
|
|
101.1
|
|
|
The following financial information from People’s United Financial, Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 formatted in Inline XBRL: (i) Consolidated Statements of Condition as of December 31, 2019 and 2018; (ii) Consolidated Statements of Income for the years ended December 31, 2019, 2018 and 2017; (iii) Consolidated Statements of Comprehensive Income for the years ended December 31, 2019, 2018 and 2017; (iv) Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2019, 2018 and 2017; (v) Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017; and (vi) Notes to Consolidated Financial Statements.
|
|
|
|
104
|
|
|
Cover page formatted in Inline XBRL and contained within Exhibit 101.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|