Balance Sheet Offsetting

3 Months Ended

Mar. 31, 2020


NOTE 14. 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 indicated below, offset asset and liabilities under such arrangements in the Consolidated Statements of Condition.

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 March 31, 2020 and December 31, 2019, 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.

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.

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 13. 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
													Financial Instruments		Net Amount
As of March 31, 2020 (in millions)														Collateral
Financial assets:
Interest rate swaps:
Counterparty A	$	—	$	—	$	—	$	—	$	—	$	—
Counterparty B	—		—		—		—		—		—
Counterparty C	—		—		—		—		—		—
Counterparty D	—		—		—		—		—		—
Counterparty E	27.5		—		27.5		—		—		27.5
Other counterparties	—		—		—		—		—		—
Foreign exchange contracts	8.6		—		8.6		—		—		8.6
Total	$	36.1	$	—	$	36.1	$	—	$	—	$	36.1
Financial liabilities:
Interest rate swaps:
Counterparty A	$	6.4	$	—	$	6.4	$	—	$	(6.4)	$	—
Counterparty B	9.9		—		9.9		—		(9.9)		—
Counterparty C	64.2		—		64.2		—		(64.2)		—
Counterparty D	24.6		—		24.6		—		(24.6)		—
Counterparty E	—		—		—		—		—		—
Other counterparties	83.0		—		83.0		—		(83.0)		—
Foreign exchange contracts	9.2		—		9.2		—		—		9.2
Total	$	197.3	$	—	$	197.3	$	—	$	(188.1)	$	9.2


	Gross Amount Recognized		Gross Amount Offset		Net Amount Presented		Gross Amounts Not Offset
													Financial Instruments		Net Amount
As of December 31, 2019 (in millions)														Collateral
Financial assets:
Interest rate swaps:
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:
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

Resale and repurchase agreements represent agreements to purchase/sell securities subject to an obligation to resell/repurchase the same or similar securities. 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.

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 March 31, 2020 and  December 31, 2019, the Company posted as collateral marketable securities with fair values of $454.2 million and $462.4 million, respectively, and, in turn, accepted as collateral marketable securities with fair values of $464.0 million and $457.5 million, respectively.


As of March 31, 2020 (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, 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)	$	—