Regulatory Capital Requirements

12 Months Ended

Dec. 31, 2019

Banking and Thrift [Abstract]

Regulatory Capital Requirements

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.

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.