Leases

12 Months Ended

Dec. 31, 2019

Leases [Abstract]

Leases

NOTE 6 – Leases

Lessor Arrangements

People's United provides equipment financing to its customers through a variety of lessor arrangements, some of which may include options to renew and/or for the lessee to purchase the leased equipment at the end of the lease term. Direct financing leases and sales-type leases (collectively, "lease financing receivables") are carried at the aggregate of lease payments receivable plus the estimated residual value of the leased assets and any IDC incurred to originate these leases, less unearned income, which is accreted to interest income over the lease term using the interest method.

The residual value component of a lease financing receivable represents the estimated fair value of the leased equipment at the end of the lease term. In establishing residual value estimates, the Company may rely on industry data, historical experience, independent appraisals and, where appropriate, information regarding product life cycle, product upgrades and competing products. Upon expiration of a lease, residual assets are remarketed, resulting in an extension of the lease by the lessee, a lease to a new customer or purchase of the residual asset by the lessee or another party. Impairment of residual values arises if the expected fair value is less than the carrying amount. The Company assesses its net investment in lease financing receivables (including residual values) for impairment on a quarterly basis with any impairment losses recognized in accordance with the impairment guidance for financial instruments. As such, net investment in lease financing receivables may be reduced by an allowance for credit losses with changes recognized as provision expense.

The composition of the Company’s total net investment in lease financing receivables included within equipment financing loans in the Consolidated Statements of Condition was as follows:

(in millions)	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.

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).

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.

Leases

NOTE 6 – Leases

Lessor Arrangements

People's United provides equipment financing to its customers through a variety of lessor arrangements, some of which may include options to renew and/or for the lessee to purchase the leased equipment at the end of the lease term. Direct financing leases and sales-type leases (collectively, "lease financing receivables") are carried at the aggregate of lease payments receivable plus the estimated residual value of the leased assets and any IDC incurred to originate these leases, less unearned income, which is accreted to interest income over the lease term using the interest method.

The residual value component of a lease financing receivable represents the estimated fair value of the leased equipment at the end of the lease term. In establishing residual value estimates, the Company may rely on industry data, historical experience, independent appraisals and, where appropriate, information regarding product life cycle, product upgrades and competing products. Upon expiration of a lease, residual assets are remarketed, resulting in an extension of the lease by the lessee, a lease to a new customer or purchase of the residual asset by the lessee or another party. Impairment of residual values arises if the expected fair value is less than the carrying amount. The Company assesses its net investment in lease financing receivables (including residual values) for impairment on a quarterly basis with any impairment losses recognized in accordance with the impairment guidance for financial instruments. As such, net investment in lease financing receivables may be reduced by an allowance for credit losses with changes recognized as provision expense.

The composition of the Company’s total net investment in lease financing receivables included within equipment financing loans in the Consolidated Statements of Condition was as follows:

(in millions)	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.

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).

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.

Leases

NOTE 6 – Leases

Lessor Arrangements

People's United provides equipment financing to its customers through a variety of lessor arrangements, some of which may include options to renew and/or for the lessee to purchase the leased equipment at the end of the lease term. Direct financing leases and sales-type leases (collectively, "lease financing receivables") are carried at the aggregate of lease payments receivable plus the estimated residual value of the leased assets and any IDC incurred to originate these leases, less unearned income, which is accreted to interest income over the lease term using the interest method.

The residual value component of a lease financing receivable represents the estimated fair value of the leased equipment at the end of the lease term. In establishing residual value estimates, the Company may rely on industry data, historical experience, independent appraisals and, where appropriate, information regarding product life cycle, product upgrades and competing products. Upon expiration of a lease, residual assets are remarketed, resulting in an extension of the lease by the lessee, a lease to a new customer or purchase of the residual asset by the lessee or another party. Impairment of residual values arises if the expected fair value is less than the carrying amount. The Company assesses its net investment in lease financing receivables (including residual values) for impairment on a quarterly basis with any impairment losses recognized in accordance with the impairment guidance for financial instruments. As such, net investment in lease financing receivables may be reduced by an allowance for credit losses with changes recognized as provision expense.

The composition of the Company’s total net investment in lease financing receivables included within equipment financing loans in the Consolidated Statements of Condition was as follows:

(in millions)	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.

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).

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.