Loans | 3 Months Ended |
Mar. 31, 2015 |
Receivables [Abstract] | |
Loans | NOTE 3. LOANS |
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For purposes of disclosures related to the credit quality of financing receivables and the allowance for loan losses, People’s United has identified two loan portfolio segments, Commercial and Retail, which are comprised of the following loan classes: |
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| • | | Commercial Portfolio: commercial real estate; commercial and industrial; and equipment financing. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| • | | Retail Portfolio: residential mortgage; home equity; and other consumer. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Loans acquired in connection with business combinations beginning in 2010 are referred to as ‘acquired’ loans as a result of the manner in which they are accounted for (see further discussion under ‘Acquired Loans’). All other loans are referred to as ‘originated’ loans. Accordingly, selected credit quality disclosures that follow are presented separately for the ‘originated’ loan portfolio and the ‘acquired’ loan portfolio. |
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People’s United maintains several significant accounting policies with respect to loans, including: |
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| • | | Establishment of the allowance for loan losses (including the identification of ‘impaired’ loans and related impairment measurement considerations); | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| • | | Income recognition (including the classification of a loan as ‘non-accrual’ and the treatment of loan origination costs); and | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| • | | Recognition of loan charge-offs. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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The Company did not change its policies with respect to loans or its methodology for determining the allowance for loan losses during the three months ended March 31, 2015. |
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The following table summarizes People’s United’s loans by loan portfolio segment and class: |
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| | March 31, 2015 | | | December 31, 2014 | | | | | | | | | |
(in millions) | | Originated | | | Acquired | | | Total | | | Originated | | | Acquired | | | Total | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial real estate | | $ | 9,077.80 | | | $ | 392.6 | | | $ | 9,470.40 | | | $ | 8,960.30 | | | $ | 444 | | | $ | 9,404.30 | | | | | | | | | |
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Commercial and industrial | | | 7,131.30 | | | | 274.2 | | | | 7,405.50 | | | | 6,891.10 | | | | 298.5 | | | | 7,189.60 | | | | | | | | | |
Equipment financing | | | 2,797.80 | | | | 23.5 | | | | 2,821.30 | | | | 2,839.00 | | | | 26.5 | | | | 2,865.50 | | | | | | | | | |
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Total commercial | | | 9,929.10 | | | | 297.7 | | | | 10,226.80 | | | | 9,730.10 | | | | 325 | | | | 10,055.10 | | | | | | | | | |
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Total Commercial Portfolio | | | 19,006.90 | | | | 690.3 | | | | 19,697.20 | | | | 18,690.40 | | | | 769 | | | | 19,459.40 | | | | | | | | | |
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Retail: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential mortgage: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Adjustable-rate | | | 4,366.30 | | | | 135.5 | | | | 4,501.80 | | | | 4,254.70 | | | | 139.1 | | | | 4,393.80 | | | | | | | | | |
Fixed-rate | | | 464.4 | | | | 84.4 | | | | 548.8 | | | | 446.8 | | | | 91.4 | | | | 538.2 | | | | | | | | | |
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Total residential mortgage | | | 4,830.70 | | | | 219.9 | | | | 5,050.60 | | | | 4,701.50 | | | | 230.5 | | | | 4,932.00 | | | | | | | | | |
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Consumer: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Home equity | | | 2,082.70 | | | | 46.7 | | | | 2,129.40 | | | | 2,092.90 | | | | 50.2 | | | | 2,143.10 | | | | | | | | | |
Other consumer | | | 51 | | | | 1.1 | | | | 52.1 | | | | 56.3 | | | | 1.2 | | | | 57.5 | | | | | | | | | |
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Total consumer | | | 2,133.70 | | | | 47.8 | | | | 2,181.50 | | | | 2,149.20 | | | | 51.4 | | | | 2,200.60 | | | | | | | | | |
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Total Retail Portfolio | | | 6,964.40 | | | | 267.7 | | | | 7,232.10 | | | | 6,850.70 | | | | 281.9 | | | | 7,132.60 | | | | | | | | | |
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Total loans | | $ | 25,971.30 | | | $ | 958 | | | $ | 26,929.30 | | | $ | 25,541.10 | | | $ | 1,050.90 | | | $ | 26,592.00 | | | | | | | | | |
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Net deferred loan costs, which are included in total loans and accounted for as interest yield adjustments, totaled $55.3 million at March 31, 2015 and $54.8 million at December 31, 2014. |
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The following table presents a summary, by loan portfolio segment, of activity in the allowance for loan losses. With respect to the originated portfolio, an allocation of a portion of the allowance to one segment does not preclude its availability to absorb losses in another segment. |
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| | Commercial | | | Retail | | | | | | | | |
Three Months Ended March 31, 2015 (in millions) | | Originated | | | Acquired | | | Total | | | Originated | | | Acquired | | | Total | | | Total | | | | | |
Balance at beginning of period | | $ | 169.6 | | | $ | 9.8 | | | $ | 179.4 | | | $ | 18.5 | | | $ | 0.4 | | | $ | 18.9 | | | $ | 198.3 | | | | | |
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Charge-offs | | | (6.6 | ) | | | — | | | | (6.6 | ) | | | (1.5 | ) | | | — | | | | (1.5 | ) | | | (8.1 | ) | | | | |
Recoveries | | | 0.6 | | | | — | | | | 0.6 | | | | 0.3 | | | | — | | | | 0.3 | | | | 0.9 | | | | | |
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Net loan charge-offs | | | (6.0 | ) | | | — | | | | (6.0 | ) | | | (1.2 | ) | | | — | | | | (1.2 | ) | | | (7.2 | ) | | | | |
Provision for loan losses | | | 9.5 | | | | (0.4 | ) | | | 9.1 | | | | 0.7 | | | | — | | | | 0.7 | | | | 9.8 | | | | | |
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Balance at end of period | | $ | 173.1 | | | $ | 9.4 | | | $ | 182.5 | | | $ | 18 | | | $ | 0.4 | | | $ | 18.4 | | | $ | 200.9 | | | | | |
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| | Commercial | | | Retail | | | | | | | | |
Three Months Ended March 31, 2014 (in millions) | | Originated | | | Acquired | | | Total | | | Originated | | | Acquired | | | Total | | | Total | | | | | |
Balance at beginning of period | | $ | 158.5 | | | $ | 9.8 | | | $ | 168.3 | | | $ | 19 | | | $ | 0.5 | | | $ | 19.5 | | | $ | 187.8 | | | | | |
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Charge-offs | | | (3.1 | ) | | | (1.4 | ) | | | (4.5 | ) | | | (3.3 | ) | | | (0.1 | ) | | | (3.4 | ) | | | (7.9 | ) | | | | |
Recoveries | | | 0.5 | | | | — | | | | 0.5 | | | | 0.4 | | | | — | | | | 0.4 | | | | 0.9 | | | | | |
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Net loan charge-offs | | | (2.6 | ) | | | (1.4 | ) | | | (4.0 | ) | | | (2.9 | ) | | | (0.1 | ) | | | (3.0 | ) | | | (7.0 | ) | | | | |
Provision for loan losses | | | 4.1 | | | | 1.4 | | | | 5.5 | | | | 3.9 | | | | 0.1 | | | | 4 | | | | 9.5 | | | | | |
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Balance at end of period | | $ | 160 | | | $ | 9.8 | | | $ | 169.8 | | | $ | 20 | | | $ | 0.5 | | | $ | 20.5 | | | $ | 190.3 | | | | | |
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The following is a summary, by loan portfolio segment and impairment methodology, of the allowance for loan losses and related portfolio balances: |
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| | Originated Loans | | | Originated Loans | | | Acquired Loans | | | Total | |
Individually Evaluated | Collectively Evaluated | (Discounts Related to |
for Impairment | for Impairment | Credit Quality) |
As of March 31, 2015 (in millions) | | Portfolio | | | Allowance | | | Portfolio | | | Allowance | | | Portfolio | | | Allowance | | | Portfolio | | | Allowance | |
Commercial | | $ | 169.5 | | | $ | 6.6 | | | $ | 18,837.40 | | | $ | 166.5 | | | $ | 690.3 | | | $ | 9.4 | | | $ | 19,697.20 | | | $ | 182.5 | |
Retail | | | 97.9 | | | | 3.9 | | | | 6,866.50 | | | | 14.1 | | | | 267.7 | | | | 0.4 | | | | 7,232.10 | | | | 18.4 | |
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Total | | $ | 267.4 | | | $ | 10.5 | | | $ | 25,703.90 | | | $ | 180.6 | | | $ | 958.0 | | | $ | 9.8 | | | $ | 26,929.30 | | | $ | 200.9 | |
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| | Originated Loans | | | Originated Loans | | | Acquired Loans | | | Total | |
Individually Evaluated | Collectively Evaluated | (Discounts Related to |
for Impairment | for Impairment | Credit Quality) |
As of December 31, 2014 (in millions) | | Portfolio | | | Allowance | | | Portfolio | | | Allowance | | | Portfolio | | | Allowance | | | Portfolio | | | Allowance | |
Commercial | | $ | 174.5 | | | $ | 7.6 | | | $ | 18,515.90 | | | $ | 162 | | | $ | 769 | | | $ | 9.8 | | | $ | 19,459.40 | | | $ | 179.4 | |
Retail | | | 95 | | | | 3.9 | | | | 6,755.70 | | | | 14.6 | | | | 281.9 | | | | 0.4 | | | | 7,132.60 | | | | 18.9 | |
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Total | | $ | 269.5 | | | $ | 11.5 | | | $ | 25,271.60 | | | $ | 176.6 | | | $ | 1,050.90 | | | $ | 10.2 | | | $ | 26,592.00 | | | $ | 198.3 | |
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The recorded investments, by class of loan, of originated non-performing loans are summarized as follows: |
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(in millions) | | March 31, | | | December 31, | | | | | | | | | | | | | | | | | | | | | | | | | |
2015 | 2014 | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial real estate | | $ | 43.3 | | | $ | 60.2 | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | | 42.6 | | | | 55.8 | | | | | | | | | | | | | | | | | | | | | | | | | |
Equipment financing | | | 34.9 | | | | 25.4 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Total (1) | | | 120.8 | | | | 141.4 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Retail: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential mortgage | | | 37.5 | | | | 37.6 | | | | | | | | | | | | | | | | | | | | | | | | | |
Home equity | | | 19.4 | | | | 17.9 | | | | | | | | | | | | | | | | | | | | | | | | | |
Other consumer | | | 0.1 | | | | 0.1 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Total (2) | | | 57 | | | | 55.6 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Total | | $ | 177.8 | | | $ | 197 | | | | | | | | | | | | | | | | | | | | | | | | | |
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-1 | Reported net of government guarantees totaling $17.5 million and $17.6 million at March 31, 2015 and December 31, 2014, respectively. These government guarantees relate, almost entirely, to guarantees provided by the Small Business Administration as well as selected other Federal agencies and represent the carrying value of the loans that are covered by such guarantees, the extent of which (i.e. full or partial) varies by loan. At March 31, 2015, the principal loan classes to which these government guarantees relate are commercial and industrial loans (99%) and commercial real estate loans (1%). | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
-2 | Includes $15.2 million and $18.9 million of loans in the process of foreclosure at March 31, 2015 and December 31, 2014, respectively. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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The preceding table excludes acquired loans that are (i) accounted for as purchased credit impaired loans or (ii) covered by an Federal Deposit Insurance Corporation (“FDIC”) loss-share agreement (“LSA”) totaling $72.2 million and $2.6 million, respectively, at March 31, 2015 and $100.6 million and $3.0 million, respectively, at December 31, 2014. Such loans otherwise meet People’s United’s definition of a non-performing loan but are excluded because the loans are included in loan pools that are considered performing and/or credit losses are covered by an FDIC LSA. The discounts arising from recording these loans at fair value were due, in part, to credit quality. The acquired loans are generally accounted for on a pool basis and the accretable yield on the pools is being recognized as interest income over the life of the loans based on expected cash flows at the pool level. |
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A loan is generally considered “non-performing” when it is placed on non-accrual status. A loan is generally placed on non-accrual status when it becomes 90 days past due as to interest or principal payments. Past due status is based on the contractual payment terms of the loan. A loan may be placed on non-accrual status before it reaches 90 days past due if such loan has been identified as presenting uncertainty with respect to the collectability of interest and principal. A loan past due 90 days or more may remain on accruing status if such loan is both well secured and in the process of collection. There were no loans past due 90 days or more and still accruing interest at March 31, 2015 or December 31, 2014. |
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A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreement, including scheduled principal and interest payments. Impaired loans also include certain originated loans whose terms have been modified in such a way that they are considered troubled debt restructurings (“TDRs”). Originated loans are considered TDRs if the borrower is experiencing financial difficulty and is afforded a concession by People’s United, such as, but not limited to: (i) payment deferral; (ii) a reduction of the stated interest rate for the remaining contractual life of the loan; (iii) an extension of the loan’s original contractual term at a stated interest rate lower than the current market rate for a new loan with similar risk; (iv) capitalization of interest; or (v) forgiveness of principal or interest. Generally, TDRs are placed on non-accrual status (and reported as non-performing loans) until the loan qualifies for return to accrual status. Loans qualify for return to accrual status once they have demonstrated performance with the restructured terms of the loan agreement for a minimum of six months in the case of a commercial loan or, in the case of a retail loan, when the loan is less than 90 days past due. Loans may continue to be reported as TDRs after they are returned to accrual status. In accordance with regulatory guidance, residential mortgage and home equity loans restructured in connection with the borrower’s bankruptcy and meeting certain criteria are also required to be classified as TDRs, included in non-performing loans and written down to the estimated collateral value, regardless of delinquency status. Acquired loans that are modified are not considered for TDR classification provided they are evaluated for impairment on a pool basis. |
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People’s United’s recorded investment in originated loans classified as TDRs totaled $192.5 million and $181.6 million at March 31, 2015 and December 31, 2014, respectively. The related allowance for loan losses at March 31, 2015 and December 31, 2014 was $6.7 million and $7.1 million, respectively. Interest income recognized on TDRs totaled $1.1 million and $0.9 million for the three months ended March 31, 2015 and 2014, respectively. Fundings under commitments to lend additional amounts to borrowers with loans classified as TDRs were immaterial for the three months ended March 31, 2015 and 2014. Originated loans that were modified and classified as TDRs during the three months ended March 31, 2015 and 2014 principally involve reduced payment and/or payment deferral, extension of term (generally no more than two years for commercial loans and eight years for retail loans) and/or a temporary reduction of interest rate (generally less than 200 basis points). |
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The following tables summarize, by class of loan, the recorded investments in loans modified as TDRs during the three months ended March 31, 2015 and 2014. For purposes of this disclosure, recorded investments represent amounts immediately prior to and subsequent to the restructuring. |
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| | Three Months Ended March 31, 2015 | | | | | | | | | | | | | | | | | | | | | |
(dollars in millions) | | Number | | | Pre-Modification | | | Post-Modification | | | | | | | | | | | | | | | | | | | | | |
of Contracts | Outstanding | Outstanding | | | | | | | | | | | | | | | | | | | | |
| Recorded | Recorded | | | | | | | | | | | | | | | | | | | | |
| Investment | Investment | | | | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial real estate (1) | | | 8 | | | $ | 4.9 | | | $ | 4.9 | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial (2) | | | 8 | | | | 10.1 | | | | 10.1 | | | | | | | | | | | | | | | | | | | | | |
Equipment financing (3) | | | 5 | | | | 7.6 | | | | 7.6 | | | | | | | | | | | | | | | | | | | | | |
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Total | | | 21 | | | | 22.6 | | | | 22.6 | | | | | | | | | | | | | | | | | | | | | |
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Retail: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential mortgage (4) | | | 20 | | | | 5.7 | | | | 5.7 | | | | | | | | | | | | | | | | | | | | | |
Home equity (5) | | | 33 | | | | 2 | | | | 2 | | | | | | | | | | | | | | | | | | | | | |
Other consumer | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | |
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Total | | | 53 | | | | 7.7 | | | | 7.7 | | | | | | | | | | | | | | | | | | | | | |
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Total | | | 74 | | | $ | 30.3 | | | $ | 30.3 | | | | | | | | | | | | | | | | | | | | | |
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-1 | Represents the following concessions: extension of term (8 contracts; recorded investment of $4.9 million). | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
-2 | Represents the following concessions: extension of term (4 contracts; recorded investment of $8.7 million); reduced payment and/or payment deferral (3 contracts; recorded investment of $0.6 million); or a combination of concessions (1 contract; recorded investment of $0.8 million). | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
-3 | Represents the following concessions: reduced payment and/or payment deferral (3 contracts; recorded investment of $5.7 million); or a combination of concessions (2 contracts; recorded investment of $1.9 million). | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
-4 | Represents the following concessions: loans restructured through bankruptcy (6 contracts; recorded investment of $2.4 million); reduced payment and/or payment deferral (4 contracts; recorded investment of $1.5 million); temporary rate reduction (1 contract; recorded investment of $0.2 million); or a combination of concessions (9 contracts; recorded investment of $1.6 million). | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
-5 | Represents the following concessions: loans restructured through bankruptcy (25 contracts; recorded investment of $1.0 million); reduced payment and/or payment deferral (2 contracts; recorded investment of $0.2 million); or a combination of concessions (6 contracts; recorded investment of $0.8 million). | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | Three Months Ended March 31, 2014 | | | | | | | | | | | | | | | | | | | | | |
(dollars in millions) | | Number | | | Pre-Modification | | | Post-Modification | | | | | | | | | | | | | | | | | | | | | |
of Contracts | Outstanding | Outstanding | | | | | | | | | | | | | | | | | | | | |
| Recorded | Recorded | | | | | | | | | | | | | | | | | | | | |
| Investment | Investment | | | | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial real estate (1) | | | 6 | | | $ | 5 | | | $ | 5 | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial (2) | | | 7 | | | | 3.4 | | | | 3.4 | | | | | | | | | | | | | | | | | | | | | |
Equipment financing (3) | | | 5 | | | | 2.9 | | | | 2.9 | | | | | | | | | | | | | | | | | | | | | |
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Total | | | 18 | | | | 11.3 | | | | 11.3 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Retail: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential mortgage (4) | | | 48 | | | | 16.8 | | | | 16.8 | | | | | | | | | | | | | | | | | | | | | |
Home equity (5) | | | 40 | | | | 3.8 | | | | 3.8 | | | | | | | | | | | | | | | | | | | | | |
Other consumer | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 88 | | | | 20.6 | | | | 20.6 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 106 | | | $ | 31.9 | | | $ | 31.9 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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-1 | Represents the following concessions: extension of term (4 contracts; recorded investment of $4.1 million); or a combination of concessions (2 contracts; recorded investment of $0.9 million). | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
-2 | Represents the following concessions: extension of term (3 contracts; recorded investment of $1.0 million); reduced payment and/or payment deferral (1 contract; recorded investment of $0.7 million); or a combination of concessions (3 contracts; recorded investment of $1.7 million). | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
-3 | Represents the following concessions: combination of concessions (5 contracts; recorded investment of $2.9 million). | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
-4 | Represents the following concessions: loans restructured through bankruptcy (9 contracts; recorded investment of $3.1 million); extension of term (1 contract; recorded investment of $0.5 million); reduced payment and/or payment deferral (12 contracts; recorded investment of $4.3 million); or a combination of concessions (26 contracts; recorded investment of $8.9 million). | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
-5 | Represents the following concessions: loans restructured through bankruptcy (17 contracts; recorded investment of $2.1 million); reduced payment and/or payment deferral (3 contracts; recorded investment of $0.1 million); temporary rate reduction (1 contract; recorded investment of $0.1 million); or a combination of concessions (19 contracts; recorded investment of $1.5 million). | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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The following is a summary, by class of loan, of information related to TDRs of originated loans completed within the previous 12 months that subsequently defaulted during the three months ended March 31, 2015 and 2014. For purposes of this disclosure, the previous 12 months is measured from April 1 of the respective prior year and a default represents a previously-modified loan that became past due 30 days or more during the three months ended March 31, 2015 or 2014. |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, | | | | | | | | | | | | | | | | | |
| | 2015 | | | 2014 | | | | | | | | | | | | | | | | | |
(dollars in millions) | | Number | | | Recorded | | | Number | | | Recorded | | | | | | | | | | | | | | | | | |
of Contracts | Investment as of | of Contracts | Investment as of | | | | | | | | | | | | | | | | |
| Period End | | Period End | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial real estate | | | — | | | $ | — | | | | — | | | $ | — | | | | | | | | | | | | | | | | | |
Commercial and industrial | | | 2 | | | | 0.1 | | | | 1 | | | | 1.5 | | | | | | | | | | | | | | | | | |
Equipment financing | | | 4 | | | | 1.3 | | | | 9 | | | | 1.4 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 6 | | | | 1.4 | | | | 10 | | | | 2.9 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Retail: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential mortgage | | | 17 | | | | 7.4 | | | | 24 | | | | 10.9 | | | | | | | | | | | | | | | | | |
Home equity | | | 11 | | | | 1.2 | | | | 8 | | | | 0.9 | | | | | | | | | | | | | | | | | |
Other consumer | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 28 | | | | 8.6 | | | | 32 | | | | 11.8 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 34 | | | $ | 10 | | | | 42 | | | $ | 14.7 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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People’s United’s impaired loans consist of certain originated loans, including all TDRs. The following table summarizes, by class of loan, information related to individually-evaluated impaired loans within the originated portfolio. |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of March 31, 2015 | | | As of December 31, 2014 | | | | | | | | | |
(in millions) | | Unpaid | | | Recorded | | | Related | | | Unpaid | | | Recorded | | | Related | | | | | | | | | |
Principal | Investment | Allowance | Principal | Investment | Allowance | | | | | | | | |
Balance | | for Loan | Balance | | for Loan | | | | | | | | |
| | Losses | | | Losses | | | | | | | | |
Without a related allowance for loan losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial real estate | | $ | 54.9 | | | $ | 53.7 | | | $ | — | | | $ | 57.1 | | | $ | 55.8 | | | $ | — | | | | | | | | | |
Commercial and industrial | | | 60.2 | | | | 56.9 | | | | — | | | | 51.7 | | | | 48.6 | | | | — | | | | | | | | | |
Equipment financing | | | 34.5 | | | | 24.5 | | | | — | | | | 30.2 | | | | 21.4 | | | | — | | | | | | | | | |
Retail: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential mortgage | | | 66.6 | | | | 60 | | | | — | | | | 65.4 | | | | 58.9 | | | | — | | | | | | | | | |
Home equity | | | 22.8 | | | | 19.4 | | | | — | | | | 21.3 | | | | 18.3 | | | | — | | | | | | | | | |
Other consumer | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 239 | | | $ | 214.5 | | | $ | — | | | $ | 225.7 | | | $ | 203 | | | $ | — | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
With a related allowance for loan losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial real estate | | $ | 23.1 | | | $ | 16.2 | | | $ | 1.7 | | | $ | 52.1 | | | $ | 27.8 | | | $ | 4 | | | | | | | | | |
Commercial and industrial | | | 8.3 | | | | 6.4 | | | | 2.9 | | | | 21.4 | | | | 17.4 | | | | 3.5 | | | | | | | | | |
Equipment financing | | | 11.9 | | | | 11.8 | | | | 2 | | | | 3.6 | | | | 3.5 | | | | 0.1 | | | | | | | | | |
Retail: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential mortgage | | | 16.5 | | | | 16.4 | | | | 2.7 | | | | 15.6 | | | | 15.3 | | | | 2.6 | | | | | | | | | |
Home equity | | | 2.2 | | | | 2.1 | | | | 1.2 | | | | 2.6 | | | | 2.5 | | | | 1.3 | | | | | | | | | |
Other consumer | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 62 | | | $ | 52.9 | | | $ | 10.5 | | | $ | 95.3 | | | $ | 66.5 | | | $ | 11.5 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Total impaired loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial real estate | | $ | 78 | | | $ | 69.9 | | | $ | 1.7 | | | $ | 109.2 | | | $ | 83.6 | | | $ | 4 | | | | | | | | | |
Commercial and industrial | | | 68.5 | | | | 63.3 | | | | 2.9 | | | | 73.1 | | | | 66 | | | | 3.5 | | | | | | | | | |
Equipment financing | | | 46.4 | | | | 36.3 | | | | 2 | | | | 33.8 | | | | 24.9 | | | | 0.1 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 192.9 | | | | 169.5 | | | | 6.6 | | | | 216.1 | | | | 174.5 | | | | 7.6 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Retail: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential mortgage | | | 83.1 | | | | 76.4 | | | | 2.7 | | | | 81 | | | | 74.2 | | | | 2.6 | | | | | | | | | |
Home equity | | | 25 | | | | 21.5 | | | | 1.2 | | | | 23.9 | | | | 20.8 | | | | 1.3 | | | | | | | | | |
Other consumer | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 108.1 | | | | 97.9 | | | | 3.9 | | | | 104.9 | | | | 95 | | | | 3.9 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 301 | | | $ | 267.4 | | | $ | 10.5 | | | $ | 321 | | | $ | 269.5 | | | $ | 11.5 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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The following table summarizes, by class of loan, the average recorded investment and interest income recognized on impaired loans for the periods indicated. The average recorded investment amounts are based on month-end balances. |
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| | Three Months Ended March 31, | | | | | | | | | | | | | | | | | |
| | 2015 | | | 2014 | | | | | | | | | | | | | | | | | |
(in millions) | | Average | | | Interest | | | Average | | | Interest | | | | | | | | | | | | | | | | | |
Recorded | Income | Recorded | Income | | | | | | | | | | | | | | | | |
Investment | Recognized | Investment | Recognized | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial real estate | | $ | 78 | | | $ | 0.3 | | | $ | 74.1 | | | $ | 0.2 | | | | | | | | | | | | | | | | | |
Commercial and industrial | | | 59.5 | | | | 0.4 | | | | 37 | | | | 0.2 | | | | | | | | | | | | | | | | | |
Equipment financing | | | 26.8 | | | | 0.1 | | | | 28.3 | | | | 0.3 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 164.3 | | | | 0.8 | | | | 139.4 | | | | 0.7 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Retail: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential mortgage | | | 75.6 | | | | 0.4 | | | | 69.3 | | | | 0.3 | | | | | | | | | | | | | | | | | |
Home equity | | | 21.5 | | | | 0.1 | | | | 16.4 | | | | 0.1 | | | | | | | | | | | | | | | | | |
Other consumer | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 97.1 | | | | 0.5 | | | | 85.7 | | | | 0.4 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 261.4 | | | $ | 1.3 | | | $ | 225.1 | | | $ | 1.1 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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The following tables summarize, by class of loan, aging information for originated loans: |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Past Due | | | | | | | | | | | | | | | | |
As of March 31, 2015 (in millions) | | Current | | | 30-89 | | | 90 Days | | | Total | | | Total | | | | | | | | | | | | | |
Days | or More | Originated | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial real estate | | $ | 9,044.50 | | | $ | 11.3 | | | $ | 22 | | | $ | 33.3 | | | $ | 9,077.80 | | | | | | | | | | | | | |
Commercial and industrial | | | 7,069.70 | | | | 20.9 | | | | 40.7 | | | | 61.6 | | | | 7,131.30 | | | | | | | | | | | | | |
Equipment financing | | | 2,729.70 | | | | 64.1 | | | | 4 | | | | 68.1 | | | | 2,797.80 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 18,843.90 | | | | 96.3 | | | | 66.7 | | | | 163 | | | | 19,006.90 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Retail: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential mortgage | | | 4,781.00 | | | | 24.9 | | | | 24.8 | | | | 49.7 | | | | 4,830.70 | | | | | | | | | | | | | |
Home equity | | | 2,067.50 | | | | 5.8 | | | | 9.4 | | | | 15.2 | | | | 2,082.70 | | | | | | | | | | | | | |
Other consumer | | | 50.6 | | | | 0.3 | | | | 0.1 | | | | 0.4 | | | | 51 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 6,899.10 | | | | 31 | | | | 34.3 | | | | 65.3 | | | | 6,964.40 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total originated loans | | $ | 25,743.00 | | | $ | 127.3 | | | $ | 101 | | | $ | 228.3 | | | $ | 25,971.30 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Included in the “Current” and “30-89 Days” categories above are early non-performing commercial real estate loans, commercial and industrial loans, and equipment financing loans totaling $21.4 million, $19.3 million and $30.9 million, respectively, and $22.7 million of retail loans in the process of foreclosure or bankruptcy. These loans are less than 90 days past due but have been placed on non-accrual status as a result of having been identified as presenting uncertainty with respect to the collectability of interest and principal. |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Past Due | | | | | | | | | | | | | | | | |
As of December 31, 2014 (in millions) | | Current | | | 30-89 | | | 90 Days | | | Total | | | Total | | | | | | | | | | | | | |
Days | or More | Originated | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial real estate | | $ | 8,908.00 | | | $ | 17.6 | | | $ | 34.7 | | | $ | 52.3 | | | $ | 8,960.30 | | | | | | | | | | | | | |
Commercial and industrial | | | 6,814.90 | | | | 32.4 | | | | 43.8 | | | | 76.2 | | | | 6,891.10 | | | | | | | | | | | | | |
Equipment financing | | | 2,793.30 | | | | 41 | | | | 4.7 | | | | 45.7 | | | | 2,839.00 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 18,516.20 | | | | 91 | | | | 83.2 | | | | 174.2 | | | | 18,690.40 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Retail: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential mortgage | | | 4,647.30 | | | | 29.1 | | | | 25.1 | | | | 54.2 | | | | 4,701.50 | | | | | | | | | | | | | |
Home equity | | | 2,079.30 | | | | 5 | | | | 8.6 | | | | 13.6 | | | | 2,092.90 | | | | | | | | | | | | | |
Other consumer | | | 55.8 | | | | 0.4 | | | | 0.1 | | | | 0.5 | | | | 56.3 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 6,782.40 | | | | 34.5 | | | | 33.8 | | | | 68.3 | | | | 6,850.70 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total originated loans | | $ | 25,298.60 | | | $ | 125.5 | | | $ | 117 | | | $ | 242.5 | | | $ | 25,541.10 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Included in the “Current” and “30-89 Days” categories above are early non-performing commercial real estate loans, commercial and industrial loans, and equipment financing loans totaling $25.6 million, $29.5 million and $20.7 million, respectively, and $21.8 million of retail loans in the process of foreclosure or bankruptcy. These loans are less than 90 days past due but have been placed on non-accrual status as a result of having been identified as presenting uncertainty with respect to the collectability of interest and principal. |
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Commercial Banking Credit Quality Indicators |
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The Company utilizes an internal loan risk rating system as a means of monitoring portfolio credit quality and identifying both problem and potential problem loans. Under the Company’s risk rating system, loans not meeting the criteria for problem and potential problem loans as specified below are considered to be “Pass”-rated loans. Problem and potential problem loans are classified as either “Special Mention,” “Substandard” or “Doubtful.” Loans that do not currently expose the Company to sufficient enough risk of loss to warrant classification as either Substandard or Doubtful, but possess weaknesses that deserve management’s close attention, are classified as Special Mention. Substandard loans represent those credits characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Loans classified as Doubtful possess all the weaknesses inherent in those classified Substandard with the added characteristic that collection or liquidation in full, on the basis of existing facts, conditions and values, is highly questionable and/or improbable. |
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Risk ratings on commercial loans are subject to ongoing monitoring by lending and credit personnel with such ratings updated annually or more frequently, if warranted. The Company’s internal Loan Review function is responsible for independently evaluating the appropriateness of those credit risk ratings in connection with its cyclical reviews, the approach to which is risk-based and determined by reference to underlying portfolio credit quality and the results of prior reviews. Differences in risk ratings noted in conjunction with such periodic portfolio loan reviews, if any, are reported to management each month. |
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Retail Credit Quality Indicators |
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Pools of smaller-balance, homogeneous loans with similar risk and loss characteristics are also assessed for probable losses. These loan pools include residential mortgage, home equity and other consumer loans that are not assigned individual loan risk ratings. Rather, the assessment of these portfolios is based upon a consideration of recent historical loss experience, broader portfolio indicators, including trends in delinquencies, non-performing loans and portfolio concentrations, and portfolio-specific risk characteristics, the combination of which determines whether a loan is classified as “High”, “Moderate” or “Low” risk. |
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The portfolio-specific risk characteristics considered include: (i) collateral values/ loan-to-value (“LTV”) ratios (above and below 70%); (ii) borrower credit scores under the FICO scoring system (above and below a score of 680); and (iii) other relevant portfolio risk elements such as income verification at the time of underwriting (stated income vs. non-stated income) and the property’s intended use (owner occupied, non-owner occupied, second home, etc.). In classifying a loan as either “High”, “Moderate” or “Low” risk, the combination of each of the aforementioned risk characteristics is considered for that loan, resulting, effectively, in a “matrix approach” to its risk classification. These risk classifications are reviewed periodically to ensure that they continue to be appropriate in light of changes within the portfolio and/or economic indicators as well as other industry developments. |
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For example, to the extent LTV ratios exceed 70% (reflecting a weaker collateral position for the Company) or borrower FICO scores are less than 680 (reflecting weaker financial standing and/or credit history of the customer), the loans are considered to have an increased level of inherent loss. As a result, a loan with a combination of these characteristics would generally be classified as “High” risk. Conversely, as LTV ratios decline (reflecting a stronger collateral position for the Company) or borrower FICO scores exceed 680 (reflecting stronger financial standing and/or credit history of the customer), the loans are considered to have a decreased level of inherent loss. A loan with a combination of these characteristics would generally be classified as “Low” risk. This analysis also considers (i) the extent of underwriting that occurred at the time of origination (direct income verification provides further support for credit decisions) and (ii) the property’s intended use (owner-occupied properties are less likely to default compared to ‘investment-type’ non-owner occupied properties, second homes, etc.). Loans not otherwise deemed to be “High” or “Low” risk are classified as “Moderate” risk. |
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LTV ratios and FICO scores are determined at origination and updated periodically throughout the life of the loan. LTV ratios are updated for loans 90 days past due and FICO scores are updated for the entire portfolio quarterly. The portfolio stratification (“High”, “Moderate” and “Low” risk) and identification of the corresponding credit quality indicators also occurs quarterly. |
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Commercial and Retail loans are also evaluated to determine whether they are impaired loans, which are included in the tabular disclosures of credit quality indicators that follow. |
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Acquired Loans Credit Quality Indicators |
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Upon acquiring a loan portfolio, the Company’s internal Loan Review function undertakes the process of assigning risk ratings to all commercial loans in accordance with the Company’s established policy, which may differ in certain respects from the risk rating policy of the predecessor company. The length of time necessary to complete this process varies based on the size of the acquired portfolio, the quality of the documentation maintained in the underlying loan files and the extent to which the predecessor company followed a risk rating approach comparable to People’s United’s. As a result, while acquired loans are risk rated, there are occasions when such ratings may be deemed “preliminary” until the Company’s re-rating process has been completed. |
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Acquired loans are initially recorded at fair value, determined based upon an estimate of the amount and timing of both principal and interest cash flows expected to be collected and discounted using a market interest rate. The difference between contractually required principal and interest payments at the acquisition date and the undiscounted cash flows expected to be collected at the acquisition date is referred to as the “nonaccretable difference”, which includes an estimate of future credit losses expected to be incurred over the life of the portfolio. A decrease in the expected cash flows in subsequent periods requires the establishment of an allowance for loan losses at that time. At March 31, 2015 and December 31, 2014, the allowance for loan losses on acquired loans was $9.8 million and $10.2 million, respectively. |
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The following is a summary, by class of loan, of credit quality indicators: |
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As of March 31, 2015 (in millions) | | Commercial | | | Commercial | | | Equipment | | | Total | | | | | | | | | | | | | | | | | |
Real Estate | and | Financing | | | | | | | | | | | | | | | | |
| Industrial | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Originated loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | 8,864.90 | | | $ | 6,672.70 | | | $ | 2,423.30 | | | $ | 17,960.90 | | | | | | | | | | | | | | | | | |
Special mention | | | 86 | | | | 142.1 | | | | 101.8 | | | | 329.9 | | | | | | | | | | | | | | | | | |
Substandard | | | 126.9 | | | | 314.7 | | | | 272.7 | | | | 714.3 | | | | | | | | | | | | | | | | | |
Doubtful | | | — | | | | 1.8 | | | | — | | | | 1.8 | | | | | | | | | | | | | | | | | |
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Total originated loans | | | 9,077.80 | | | | 7,131.30 | | | | 2,797.80 | | | | 19,006.90 | | | | | | | | | | | | | | | | | |
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Acquired loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | | 288.1 | | | | 178.2 | | | | 6.7 | | | | 473 | | | | | | | | | | | | | | | | | |
Special mention | | | 25.4 | | | | 20.5 | | | | 0.6 | | | | 46.5 | | | | | | | | | | | | | | | | | |
Substandard | | | 72.7 | | | | 59.9 | | | | 16.2 | | | | 148.8 | | | | | | | | | | | | | | | | | |
Doubtful | | | 6.4 | | | | 15.6 | | | | — | | | | 22 | | | | | | | | | | | | | | | | | |
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Total acquired loans | | | 392.6 | | | | 274.2 | | | | 23.5 | | | | 690.3 | | | | | | | | | | | | | | | | | |
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Total | | $ | 9,470.4 | | | $ | 7,405.5 | | | $ | 2,821.30 | | | $ | 19,697.20 | | | | | | | | | | | | | | | | | |
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As of March 31, 2015 (in millions) | | Residential | | | Home | | | Other | | | Total | | | | | | | | | | | | | | | | | |
Mortgage | Equity | Consumer | | | | | | | | | | | | | | | | |
Retail: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Originated loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Low risk | | $ | 2,379.10 | | | $ | 927.2 | | | $ | 27 | | | $ | 3,333.30 | | | | | | | | | | | | | | | | | |
Moderate risk | | | 1,943.50 | | | | 612.4 | | | | 7.1 | | | | 2,563.00 | | | | | | | | | | | | | | | | | |
High risk | | | 508.1 | | | | 543.1 | | | | 16.9 | | | | 1,068.10 | | | | | | | | | | | | | | | | | |
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Total originated loans | | | 4,830.70 | | | | 2,082.70 | | | | 51 | | | | 6,964.40 | | | | | | | | | | | | | | | | | |
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Acquired loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Low risk | | | 107.2 | | | | — | | | | — | | | | 107.2 | | | | | | | | | | | | | | | | | |
Moderate risk | | | 47.7 | | | | — | | | | — | | | | 47.7 | | | | | | | | | | | | | | | | | |
High risk | | | 65 | | | | 46.7 | | | | 1.1 | | | | 112.8 | | | | | | | | | | | | | | | | | |
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Total acquired loans | | | 219.9 | | | | 46.7 | | | | 1.1 | | | | 267.7 | | | | | | | | | | | | | | | | | |
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Total | | $ | 5,050.6 | | | $ | 2,129.4 | | | $ | 52.1 | | | $ | 7,232.1 | | | | | | | | | | | | | | | | | |
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As of December 31, 2014 (in millions) | | Commercial | | | Commercial | | | Equipment | | | Total | | | | | | | | | | | | | | | | | |
Real Estate | and | Financing | | | | | | | | | | | | | | | | |
| Industrial | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Originated loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | 8,730.90 | | | $ | 6,477.40 | | | $ | 2,481.20 | | | $ | 17,689.50 | | | | | | | | | | | | | | | | | |
Special mention | | | 82.4 | | | | 114.2 | | | | 110.6 | | | | 307.2 | | | | | | | | | | | | | | | | | |
Substandard | | | 135.3 | | | | 297.3 | | | | 247.2 | | | | 679.8 | | | | | | | | | | | | | | | | | |
Doubtful | | | 11.7 | | | | 2.2 | | | | — | | | | 13.9 | | | | | | | | | | | | | | | | | |
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Total originated loans | | | 8,960.30 | | | | 6,891.10 | | | | 2,839.00 | | | | 18,690.40 | | | | | | | | | | | | | | | | | |
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Acquired loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | | 302.5 | | | | 174.5 | | | | 7.6 | | | | 484.6 | | | | | | | | | | | | | | | | | |
Special mention | | | 20.9 | | | | 52.8 | | | | 0.7 | | | | 74.4 | | | | | | | | | | | | | | | | | |
Substandard | | | 113.5 | | | | 55 | | | | 18.2 | | | | 186.7 | | | | | | | | | | | | | | | | | |
Doubtful | | | 7.1 | | | | 16.2 | | | | — | | | | 23.3 | | | | | | | | | | | | | | | | | |
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Total acquired loans | | | 444 | | | | 298.5 | | | | 26.5 | | | | 769 | | | | | | | | | | | | | | | | | |
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Total | | $ | 9,404.3 | | | $ | 7,189.6 | | | $ | 2,865.50 | | | $ | 19,459.40 | | | | | | | | | | | | | | | | | |
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As of December 31, 2014 (in millions) | | Residential | | | Home | | | Other | | | Total | | | | | | | | | | | | | | | | | |
Mortgage | Equity | Consumer | | | | | | | | | | | | | | | | |
Retail: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Originated loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Low risk | | $ | 2,280.60 | | | $ | 931.5 | | | $ | 29.5 | | | $ | 3,241.60 | | | | | | | | | | | | | | | | | |
Moderate risk | | | 1,921.60 | | | | 597.1 | | | | 8.3 | | | | 2,527.00 | | | | | | | | | | | | | | | | | |
High risk | | | 499.3 | | | | 564.3 | | | | 18.5 | | | | 1,082.10 | | | | | | | | | | | | | | | | | |
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Total originated loans | | | 4,701.50 | | | | 2,092.90 | | | | 56.3 | | | | 6,850.70 | | | | | | | | | | | | | | | | | |
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Acquired loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Low risk | | | 107 | | | | — | | | | — | | | | 107 | | | | | | | | | | | | | | | | | |
Moderate risk | | | 50.5 | | | | — | | | | — | | | | 50.5 | | | | | | | | | | | | | | | | | |
High risk | | | 73 | | | | 50.2 | | | | 1.2 | | | | 124.4 | | | | | | | | | | | | | | | | | |
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Total acquired loans | | | 230.5 | | | | 50.2 | | | | 1.2 | | | | 281.9 | | | | | | | | | | | | | | | | | |
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Total | | $ | 4,932.0 | | | $ | 2,143.1 | | | $ | 57.5 | | | $ | 7,132.6 | | | | | | | | | | | | | | | | | |
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Acquired Loans |
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Acquired loans that have evidence of deterioration in credit quality since origination and for which it is probable, at acquisition, that all contractually required payments will not be collected are initially recorded at fair value without recording an allowance for loan losses. Fair value of the loans is determined using market participant assumptions in estimating the amount and timing of both principal and interest cash flows expected to be collected, as adjusted for an estimate of future credit losses and prepayments, and then applying a market-based discount rate to those cash flows. Acquired loans are generally accounted for on a pool basis, with pools formed based on the loans’ common risk characteristics, such as loan collateral type and accrual status. Each pool is accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows. |
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Under the accounting model for acquired loans, the excess of cash flows expected to be collected over the carrying amount of the loans, referred to as the “accretable yield”, is accreted into interest income over the life of the loans in each pool using the effective yield method. Accordingly, acquired loans are not subject to classification as non-accrual in the same manner as originated loans. Rather, acquired loans are considered to be accruing loans because their interest income relates to the accretable yield recognized at the pool level and not to contractual interest payments at the loan level. The difference between contractually required principal and interest payments and the cash flows expected to be collected, referred to as the “nonaccretable difference”, includes estimates of both the impact of prepayments and future credit losses expected to be incurred over the life of the loans in each pool. As such, charge-offs on acquired loans are first applied to the nonaccretable difference and then to any allowance for loan losses recognized subsequent to acquisition. |
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Subsequent to acquisition, actual cash collections are monitored relative to management’s expectations and revised cash flow forecasts are prepared, as warranted. These revised forecasts involve updates, as necessary, of the key assumptions and estimates used in the initial estimate of fair value. Generally speaking, expected cash flows are affected by: |
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| • | | Changes in the expected principal and interest payments over the estimated life – Updates to changes in expected cash flows are driven by the credit outlook and actions taken with borrowers. Changes in expected future cash flows resulting from loan modifications are included in the assessment of expected cash flows; | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| • | | Changes in prepayment assumptions – Prepayments affect the estimated life of the loans which may change the amount of interest income, and possibly principal, expected to be collected; and | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| • | | Changes in interest rate indices for variable rate loans – Expected future cash flows are based, as applicable, on the variable rates in effect at the time of the assessment of expected cash flows. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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A decrease in expected cash flows in subsequent periods may indicate that the loan pool is impaired, which would require the establishment of an allowance for loan losses by a charge to the provision for loan losses. An increase in expected cash flows in subsequent periods serves, first, to reduce any previously established allowance for loan losses by the increase in the present value of cash flows expected to be collected, and results in a recalculation of the amount of accretable yield for the loan pool. The adjustment of accretable yield due to an increase in expected cash flows is accounted for as a change in estimate. The additional cash flows expected to be collected are reclassified from the nonaccretable difference to the accretable yield, and the amount of periodic accretion is adjusted accordingly over the remaining life of the loans in the pool. |
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An acquired loan may be resolved either through receipt of payment (in full or in part) from the borrower, the sale of the loan to a third party or foreclosure of the collateral. In the event of a sale of the loan, a gain or loss on sale is recognized and reported within non-interest income based on the difference between the sales proceeds and the carrying amount of the loan. In other cases, individual loans are removed from the pool based on comparing the amount received from its resolution (fair value of the underlying collateral less costs to sell in the case of a foreclosure) with its outstanding balance. Any difference between these amounts is absorbed by the nonaccretable difference established for the entire pool. For loans resolved by payment in full, there is no adjustment of the nonaccretable difference since there is no difference between the amount received at resolution and the outstanding balance of the loan. In these cases, the remaining accretable yield balance is unaffected and any material change in remaining effective yield caused by the removal of the loan from the pool is addressed in connection with the subsequent cash flow re-assessment for the pool. Acquired loans subject to modification are not removed from the pool even if those loans would otherwise be deemed TDRs as the pool, and not the individual loan, represents the unit of account. |
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At the respective acquisition dates in 2011 and 2010, on an aggregate basis, the acquired loan portfolio had contractually required principal and interest payments receivable of $7.57 billion; expected cash flows of $7.02 billion; and a fair value (initial carrying amount) of $5.36 billion. The difference between the contractually required principal and interest payments receivable and the expected cash flows ($550.9 million) represented the initial nonaccretable difference. The difference between the expected cash flows and fair value ($1.66 billion) represented the initial accretable yield. Both the contractually required principal and interest payments receivable and the expected cash flows reflect anticipated prepayments, determined based on historical portfolio experience. At March 31, 2015, the outstanding principal balance and carrying amount of the acquired loan portfolio were $1.09 billion and $958.0 million, respectively ($1.18 billion and $1.05 billion, respectively, at December 31, 2014). At March 31, 2015, the aggregate remaining nonaccretable difference applicable to acquired loans totaled $89.1 million. |
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The following table summarizes activity in the accretable yield for the acquired loan portfolio: |
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| | Three Months Ended | | | | | | | | | | | | | | | | | | | | | | | | | |
March 31, | | | | | | | | | | | | | | | | | | | | | | | | |
(in millions) | | 2015 | | | 2014 | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at beginning of period | | $ | 396.3 | | | $ | 639.7 | | | | | | | | | | | | | | | | | | | | | | | | | |
Accretion | | | (15.3 | ) | | | (23.3 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
Reclassification from nonaccretable difference for loans | | | 0.3 | | | | 5.8 | | | | | | | | | | | | | | | | | | | | | | | | | |
with improved cash flows (1) | | | | | | | | | | | | | | | | | | | | | | | | |
Other changes in expected cash flows (2) | | | (19.7 | ) | | | (97.8 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
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Balance at end of period | | $ | 361.6 | | | $ | 524.4 | | | | | | | | | | | | | | | | | | | | | | | | | |
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-1 | Results in increased interest accretion as a prospective yield adjustment over the remaining life of the corresponding pool of loans. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
-2 | Represents changes in cash flows expected to be collected due to factors other than credit (e.g. changes in prepayment assumptions and/or changes in interest rates on variable rate loans), as well as loan sales, modifications and payoffs. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Other Real Estate Owned and Repossessed Assets (included in Other Assets) |
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Other real estate owned (“REO”) was comprised of residential and commercial properties totaling $16.5 million and $10.2 million, respectively, at March 31, 2015, and $13.6 million and $11.0 million, respectively, at December 31, 2014. Repossessed assets totaled $4.3 million and $2.5 million at March 31, 2015 and December 31, 2014, respectively. |