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.

•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).

▪other inputs that (i) are observable for substantially the full term of the asset or liability (e.g. interest rates, yield curves, prepayment speeds, default rates, etc.) or (ii) can be corroborated by observable market data (such as interest rate and currency derivatives and certain other securities).

•Level 3 – Valuation techniques that require unobservable inputs that are supported by little or no market activity and are significant to the fair value measurement of the asset or liability (such as pricing models, discounted cash flow methodologies and similar techniques that typically reflect management’s own estimates of the assumptions a market participant would use in pricing the asset or liability).

People’s United maintains policies and procedures to value assets and liabilities using the most relevant data available. Described below are the valuation methodologies used by People’s United and the resulting fair values for those financial instruments measured at fair value on both a recurring and a non-recurring basis. 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.

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 both March 31, 2020 and 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. An active market exists for securities that are similar to the Company’s GSE mortgage-backed and CMO securities, making observable inputs readily available.

Changes in the prices obtained from the pricing service are analyzed from month to month, taking into consideration changes in market conditions including changes in mortgage spreads, changes in U.S. Treasury security yields and changes in generic pricing of securities with similar duration. As a further point of validation, the Company generates its own month-end fair value estimate for all mortgage-backed securities, 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.

As discussed in Note 9, 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.

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.


	Fair Value Measurements Using
As of March 31, 2020 (in millions)	Level 1		Level 2		Level 3		Total
Financial assets:


Debt securities available-for-sale:
U.S. Treasury and agency	$	747.2	$	—	$	—	$	747.2
GSE mortgage-backed and CMO securities	—		3,529.4		—		3,529.4
Equity securities	6.2		—		—		6.2
Other assets:
Exchange-traded funds	39.8		—		—		39.8
Mutual funds	2.9		—		—		2.9

Interest rate swaps	—		932.9		—		932.9
Interest rate caps	—		3.6		—		3.6
Foreign exchange contracts	—		8.6		—		8.6
Forward commitments to sell residential mortgage loans	—		0.6		—		0.6
Total	$	796.1	$	4,475.1	$	—	$	5,271.2
Financial liabilities:
Interest rate swaps	$	—	$	184.5	$	—	$	184.5
Interest rate caps	—		3.6		—		3.6
Risk participation agreements	—		0.5		—		0.5
Foreign exchange contracts	—		9.2		—		9.2
Interest rate-lock commitments on residential mortgage loans	—		0.7		—		0.7
Total	$	—	$	198.5	$	—	$	198.5


	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
Fixed income securities	—		—		—		—
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

Loans held-for-sale are recorded at the lower of amortized 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.

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 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 Company’s approach to determining the fair value of collateral dependent loans is described in Note 3, “Loans”. At March 31, 2020, collateral dependent loans with an amortized cost of $15.2 million had a corresponding ACL (determined using a Level 3 measurement approach) of $8.9 million. The provision for credit losses associated with collateral dependent loans totaled $3.9 million for the three months ended March 31, 2020.

Prior to the Company's adoption of the CECL standard, loan impairment was deemed to exist when full repayment of principal and interest according to the contractual terms of the loan was no longer probable. Impaired loans were 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 have been 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%.


	Fair Value Measurements Using
As of March 31, 2020 (in millions)	Level 1		Level 2		Level 3		Total
Loans held-for-sale (1)	$	—	$	19.2	$	—	$	19.2
REO and repossessed assets (2)	—		—		21.4		21.4
Mortgage servicing rights (3)	—		—		7.7		7.7
Total	$	—	$	19.2	$	29.1	$	48.3

	Fair Value Measurements Using
As of December 31, 2019 (in millions)	Level 1		Level 2		Level 3		Total
Loans held-for-sale:
Commercial	$	—	$	—	$	157.9	$	157.9
Other consumer	—		—		333.7		333.7
Residential (1)	—		19.7		—		19.7
Impaired loans (4)	—		—		61.9		61.9
REO and repossessed assets (2)	—		—		23.4		23.4
Mortgage servicing rights	—		—		10.3		10.3
Total	$	—	$	19.7	$	587.2	$	606.9

(2)Represents: (i) $9.5 million of residential REO; (ii) $7.3 million of commercial REO; and (iii) $4.6 million of repossessed assets at March 31, 2020. Charge-offs to the ACL related to loans that were transferred to REO or repossessed assets totaled $1.2 million and $0.3 million for the three months ended March 31, 2020 and 2019, respectively. Write downs and net (gains) loss on sale of foreclosed/repossessed assets charged to non-interest expense totaled $0.4 million and $0.1 million for the same periods.

(4)Represents the recorded investment in impaired loans with a related ACL measured in accordance with applicable accounting guidance. The provision for credit losses on impaired loans totaled $0.6 million for the three months ended March 31, 2019.

The following tables summarize the carrying amounts, estimated fair values and placement in the fair value hierarchy of People’s United’s financial instruments that are not measured at fair value either on a recurring or non-recurring basis:


	Carrying Amount		Estimated Fair Value Measurements Using
As of March 31, 2020 (in millions)					Level 1			Level 2			Level 3			Total
Financial assets:
Cash and due from banks	$	507.6	$	507.6		$	—		$	—		$	507.6
Short-term investments	744.3		—			744.3			—			744.3
Debt securities held-to-maturity, net	3,861.5		—			4,063.7			1.5			4,065.2
FHLB and FRB stock	407.2		—			407.2			—			407.2
Total loans, net (1)	43,927.1		—			9,999.3			34,597.9			44,597.2
Financial liabilities:
Time deposits	8,840.2		—			8,891.5			—			8,891.5
Other deposits	35,900.9		—			35,900.9			—			35,900.9
FHLB advances	4,489.7		—			4,490.7			—			4,490.7
Federal funds purchased	1,120.0		—			1,120.0			—			1,120.0
Customer repurchase agreements	301.1		—			301.1			—			301.1

Notes and debentures	1,012.6		—			995.8			—			995.8


	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
Other borrowings			—			11.0			—			11.0
Notes and debentures	993.1		—			1,021.3			—			1,021.3