Leases

3 Months Ended

Mar. 31, 2020

Leases [Abstract]

Leases

NOTE 5. LEASES

Effective January 1, 2019, People's United adopted new accounting guidance relating to real estate (primarily branch locations) and office equipment subject to non-cancelable operating lease agreements entered into by the Company as lessee. The amount of the right-of-use ("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.

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 initial direct costs ("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.

Upon adoption, the Company recognized (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.

Lessor Arrangements

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

The residual value component of a lease financing receivable represents the estimated fair value of the leased equipment at the end of the lease term. In establishing residual value estimates, the Company may rely on industry data, historical experience, independent appraisals and, where appropriate, information regarding product life cycle, product upgrades and competing products. Upon expiration of a lease, residual assets are remarketed, resulting in an extension of the lease by the lessee, a lease to a new customer or purchase of the residual asset by the lessee or another party. Impairment of residual values arises if the expected fair value is less than the carrying amount. The Company assesses its net investment in lease financing receivables (including residual values) for impairment on a quarterly basis with any impairment losses recognized in accordance with the impairment guidance for financial instruments. As such, net investment in lease financing receivables may be reduced by an ACL 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)	March 31, 2020		December 31, 2019
Lease payments receivable	$	1,451.7	$	1,417.1
Estimated residual value of leased assets	128.7		128.0
Gross investment in lease financing receivables	1,580.4		1,545.1
Plus: Deferred origination costs	13.0		13.4
Less: Unearned income	(158.5)		(156.9)
Total net investment in lease financing receivables	$	1,434.9	$	1,401.6

The contractual maturities of the Company's lease financing receivables were as follows:

(in millions)	March 31, 2020
2020 (1)	$	408.6
2021	448.4
2022	340.8
2023	208.7
2024	117.7
Later years	56.2
Total	$	1,580.4

(1)Contractual maturities for the nine months remaining in 2020.

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.

The following table summarizes People's United's total lease income:

	Three Months Ended March 31,
(in millions)	2020		2019
Lease financing receivables	$	17.6	$	15.5
Operating leases	12.6		12.7
Total lease income	$	30.2	$	28.2

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 2028.

At lease commencement, the Company considers renewal or termination options in the determination of the term of the lease. If it is reasonably certain that a renewal or termination option will be exercised, the effects of such options are included in the determination of the expected lease term. All leases are recorded with the exception of leases with an initial term of twelve months or less for which the Company made the short-term lease election. Within the Consolidated Statements of Condition, ROU assets are reported in other assets and the related lease liabilities are reported in other liabilities.

In recognizing ROU assets and related lease liabilities, lease and non-lease components (such as taxes, insurance and common area maintenance costs) are accounted for separately as such amounts are generally readily determinable under the Company's lease contracts. Lease expense is recognized on a straight-line basis over the lease term and is recorded within occupancy and equipment expense in the Consolidated Statements of Income. Variable lease payments, which generally relate to the non-lease components noted above, are expensed as incurred.

The following tables provide the components of lease cost and supplemental information:

	Three Months Ended March 31,
(in millions)	2020		2019
Operating lease cost	$	16.7	$	15.3
Variable lease cost	3.1		2.3
Finance lease cost	0.1		—
Sublease income	(0.5)		(0.4)
Net lease cost	$	19.4	$	17.2

(dollars in millions)	March 31, 2020			December 31, 2019
Lease ROU assets:
Operating leases	$	275.9		$	276.6
Finance leases	2.5			2.6
Lease liabilities:
Operating leases	307.5			307.9
Finance leases	5.2			5.3
Weighted-average discount rate:
Operating leases	3.12		%	3.13		%
Finance leases	2.58			2.58
Weighted-average remaining lease term (in years):
Operating leases	7.8			7.7
Finance leases	11.9			12.2

	Three Months Ended March 31,
(in millions)	2020		2019
Cash payments included in the measurement of lease liabilities:
Reported in operating cash from operating leases	$	17.1	$	15.4
Reported in financing cash from finance leases	0.1		—
ROU assets obtained in exchange for lessee:
Operating lease liabilities (1)	14.3		10.3
Finance lease liabilities (1)	—		—

(1)Excludes related transition adjustment recorded during three months ended March 31, 2019 (see above).

The contractual maturities of the Company's lease liabilities as of March 31, 2020 were as follows:

(in millions)	Operating Leases		Finance Leases
2020 (1)	$	50.4	$	0.4
2021	65.3		0.5
2022	47.7		0.5
2023	36.0		0.5
2024	30.0		0.5
Later years	121.0		3.7
Total lease payments	350.4		6.1
Less: Interest	(42.9)		(0.9)
Total lease liabilities	$	307.5	$	5.2

(1)Contractual maturities for the nine months remaining in 2020.

Leases

NOTE 5. LEASES

Effective January 1, 2019, People's United adopted new accounting guidance relating to real estate (primarily branch locations) and office equipment subject to non-cancelable operating lease agreements entered into by the Company as lessee. The amount of the right-of-use ("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.

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 initial direct costs ("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.

Upon adoption, the Company recognized (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.

Lessor Arrangements

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

The residual value component of a lease financing receivable represents the estimated fair value of the leased equipment at the end of the lease term. In establishing residual value estimates, the Company may rely on industry data, historical experience, independent appraisals and, where appropriate, information regarding product life cycle, product upgrades and competing products. Upon expiration of a lease, residual assets are remarketed, resulting in an extension of the lease by the lessee, a lease to a new customer or purchase of the residual asset by the lessee or another party. Impairment of residual values arises if the expected fair value is less than the carrying amount. The Company assesses its net investment in lease financing receivables (including residual values) for impairment on a quarterly basis with any impairment losses recognized in accordance with the impairment guidance for financial instruments. As such, net investment in lease financing receivables may be reduced by an ACL 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)	March 31, 2020		December 31, 2019
Lease payments receivable	$	1,451.7	$	1,417.1
Estimated residual value of leased assets	128.7		128.0
Gross investment in lease financing receivables	1,580.4		1,545.1
Plus: Deferred origination costs	13.0		13.4
Less: Unearned income	(158.5)		(156.9)
Total net investment in lease financing receivables	$	1,434.9	$	1,401.6

The contractual maturities of the Company's lease financing receivables were as follows:

(in millions)	March 31, 2020
2020 (1)	$	408.6
2021	448.4
2022	340.8
2023	208.7
2024	117.7
Later years	56.2
Total	$	1,580.4

(1)Contractual maturities for the nine months remaining in 2020.

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.

The following table summarizes People's United's total lease income:

	Three Months Ended March 31,
(in millions)	2020		2019
Lease financing receivables	$	17.6	$	15.5
Operating leases	12.6		12.7
Total lease income	$	30.2	$	28.2

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 2028.

At lease commencement, the Company considers renewal or termination options in the determination of the term of the lease. If it is reasonably certain that a renewal or termination option will be exercised, the effects of such options are included in the determination of the expected lease term. All leases are recorded with the exception of leases with an initial term of twelve months or less for which the Company made the short-term lease election. Within the Consolidated Statements of Condition, ROU assets are reported in other assets and the related lease liabilities are reported in other liabilities.

In recognizing ROU assets and related lease liabilities, lease and non-lease components (such as taxes, insurance and common area maintenance costs) are accounted for separately as such amounts are generally readily determinable under the Company's lease contracts. Lease expense is recognized on a straight-line basis over the lease term and is recorded within occupancy and equipment expense in the Consolidated Statements of Income. Variable lease payments, which generally relate to the non-lease components noted above, are expensed as incurred.

The following tables provide the components of lease cost and supplemental information:

	Three Months Ended March 31,
(in millions)	2020		2019
Operating lease cost	$	16.7	$	15.3
Variable lease cost	3.1		2.3
Finance lease cost	0.1		—
Sublease income	(0.5)		(0.4)
Net lease cost	$	19.4	$	17.2

(dollars in millions)	March 31, 2020			December 31, 2019
Lease ROU assets:
Operating leases	$	275.9		$	276.6
Finance leases	2.5			2.6
Lease liabilities:
Operating leases	307.5			307.9
Finance leases	5.2			5.3
Weighted-average discount rate:
Operating leases	3.12		%	3.13		%
Finance leases	2.58			2.58
Weighted-average remaining lease term (in years):
Operating leases	7.8			7.7
Finance leases	11.9			12.2

	Three Months Ended March 31,
(in millions)	2020		2019
Cash payments included in the measurement of lease liabilities:
Reported in operating cash from operating leases	$	17.1	$	15.4
Reported in financing cash from finance leases	0.1		—
ROU assets obtained in exchange for lessee:
Operating lease liabilities (1)	14.3		10.3
Finance lease liabilities (1)	—		—

(1)Excludes related transition adjustment recorded during three months ended March 31, 2019 (see above).

The contractual maturities of the Company's lease liabilities as of March 31, 2020 were as follows:

(in millions)	Operating Leases		Finance Leases
2020 (1)	$	50.4	$	0.4
2021	65.3		0.5
2022	47.7		0.5
2023	36.0		0.5
2024	30.0		0.5
Later years	121.0		3.7
Total lease payments	350.4		6.1
Less: Interest	(42.9)		(0.9)
Total lease liabilities	$	307.5	$	5.2

(1)Contractual maturities for the nine months remaining in 2020.

Leases

NOTE 5. LEASES

Effective January 1, 2019, People's United adopted new accounting guidance relating to real estate (primarily branch locations) and office equipment subject to non-cancelable operating lease agreements entered into by the Company as lessee. The amount of the right-of-use ("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.

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 initial direct costs ("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.

Upon adoption, the Company recognized (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.

Lessor Arrangements

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

The residual value component of a lease financing receivable represents the estimated fair value of the leased equipment at the end of the lease term. In establishing residual value estimates, the Company may rely on industry data, historical experience, independent appraisals and, where appropriate, information regarding product life cycle, product upgrades and competing products. Upon expiration of a lease, residual assets are remarketed, resulting in an extension of the lease by the lessee, a lease to a new customer or purchase of the residual asset by the lessee or another party. Impairment of residual values arises if the expected fair value is less than the carrying amount. The Company assesses its net investment in lease financing receivables (including residual values) for impairment on a quarterly basis with any impairment losses recognized in accordance with the impairment guidance for financial instruments. As such, net investment in lease financing receivables may be reduced by an ACL 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)	March 31, 2020		December 31, 2019
Lease payments receivable	$	1,451.7	$	1,417.1
Estimated residual value of leased assets	128.7		128.0
Gross investment in lease financing receivables	1,580.4		1,545.1
Plus: Deferred origination costs	13.0		13.4
Less: Unearned income	(158.5)		(156.9)
Total net investment in lease financing receivables	$	1,434.9	$	1,401.6

The contractual maturities of the Company's lease financing receivables were as follows:

(in millions)	March 31, 2020
2020 (1)	$	408.6
2021	448.4
2022	340.8
2023	208.7
2024	117.7
Later years	56.2
Total	$	1,580.4

(1)Contractual maturities for the nine months remaining in 2020.

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.

The following table summarizes People's United's total lease income:

	Three Months Ended March 31,
(in millions)	2020		2019
Lease financing receivables	$	17.6	$	15.5
Operating leases	12.6		12.7
Total lease income	$	30.2	$	28.2

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 2028.

At lease commencement, the Company considers renewal or termination options in the determination of the term of the lease. If it is reasonably certain that a renewal or termination option will be exercised, the effects of such options are included in the determination of the expected lease term. All leases are recorded with the exception of leases with an initial term of twelve months or less for which the Company made the short-term lease election. Within the Consolidated Statements of Condition, ROU assets are reported in other assets and the related lease liabilities are reported in other liabilities.

In recognizing ROU assets and related lease liabilities, lease and non-lease components (such as taxes, insurance and common area maintenance costs) are accounted for separately as such amounts are generally readily determinable under the Company's lease contracts. Lease expense is recognized on a straight-line basis over the lease term and is recorded within occupancy and equipment expense in the Consolidated Statements of Income. Variable lease payments, which generally relate to the non-lease components noted above, are expensed as incurred.

The following tables provide the components of lease cost and supplemental information:

	Three Months Ended March 31,
(in millions)	2020		2019
Operating lease cost	$	16.7	$	15.3
Variable lease cost	3.1		2.3
Finance lease cost	0.1		—
Sublease income	(0.5)		(0.4)
Net lease cost	$	19.4	$	17.2

(dollars in millions)	March 31, 2020			December 31, 2019
Lease ROU assets:
Operating leases	$	275.9		$	276.6
Finance leases	2.5			2.6
Lease liabilities:
Operating leases	307.5			307.9
Finance leases	5.2			5.3
Weighted-average discount rate:
Operating leases	3.12		%	3.13		%
Finance leases	2.58			2.58
Weighted-average remaining lease term (in years):
Operating leases	7.8			7.7
Finance leases	11.9			12.2

	Three Months Ended March 31,
(in millions)	2020		2019
Cash payments included in the measurement of lease liabilities:
Reported in operating cash from operating leases	$	17.1	$	15.4
Reported in financing cash from finance leases	0.1		—
ROU assets obtained in exchange for lessee:
Operating lease liabilities (1)	14.3		10.3
Finance lease liabilities (1)	—		—

(1)Excludes related transition adjustment recorded during three months ended March 31, 2019 (see above).

The contractual maturities of the Company's lease liabilities as of March 31, 2020 were as follows:

(in millions)	Operating Leases		Finance Leases
2020 (1)	$	50.4	$	0.4
2021	65.3		0.5
2022	47.7		0.5
2023	36.0		0.5
2024	30.0		0.5
Later years	121.0		3.7
Total lease payments	350.4		6.1
Less: Interest	(42.9)		(0.9)
Total lease liabilities	$	307.5	$	5.2

(1)Contractual maturities for the nine months remaining in 2020.