Loans held for investment are reported at the amount of their outstanding principal, net of charge-offs, unearned income, deferred loan origination fees and costs, and unamortized premiums or discounts on purchased loans. Deferred loan origination fees and costs and purchase premiums and discounts are amortized as an adjustment of yield over the life of the loan, using the effective interest method. Unamortized amounts remaining upon prepayment or sale are recorded as interest income or gain (loss) on sale, respectively. Credit card receivables include billed and uncollected interest and fees.

Interest income on loans is determined using the effective interest method. This method calculates periodic interest income at a constant effective yield on the net investment in the loan, to provide a constant rate of return over the term. Loans accounted for using the fair value option are measured at fair value with corresponding changes recognized in noninterest income.

Loan commitment fees for loans that are likely to be drawn down, and other credit related fees, are deferred (together with any incremental costs) and recognized as an adjustment to the effective interest rate over the loan term. When it is unlikely that a loan will be drawn down, the loan commitment fees are recognized over the commitment period on a straight-line basis.

Loans and leases are disclosed in portfolio segments and classes. The Company’s loan and lease portfolio segments are commercial and retail. The classes of loans and leases are: commercial and industrial, commercial real estate, leases, residential mortgages, home equity, automobile, education and other retail.


	December 31,
(in millions)	2020	2019
Commercial and industrial(1)	$44,173	$41,479
Commercial real estate	14,652	13,522
Leases	1,968	2,537
Total commercial	60,793	57,538
Residential mortgages	19,539	19,083
Home equity	12,149	13,154
Automobile	12,153	12,120
Education	12,308	10,347
Other retail	6,148	6,846
Total retail	62,297	61,550
Total loans and leases	$123,090	$119,088

(1) The December 31, 2020 commercial and industrial balance includes $4.2 billion of PPP loans fully guaranteed by the SBA.

Accrued interest receivable on loans and leases held for investment totaled $449 million and $495 million as of December 31, 2020 and 2019, respectively, and is included in other assets in the Consolidated Balance Sheets.


	December 31, 2020			December 31, 2019
(in millions)	Residential Mortgages(1)	Commercial(2)	Total	Residential Mortgages(1)	Commercial(2)	Total
Loans held for sale at fair value	$3,416	$148	$3,564	$1,778	$168	$1,946
Other loans held for sale	—	439	439	1,101	283	1,384

(2) Commercial LHFS at fair value consist of loans managed by the Company’s commercial secondary loan desk. Other commercial LHFS generally consist of loans associated with the Company’s syndication business.

Loans pledged as collateral for FHLB borrowed funds, primarily residential mortgages and home equity loans, totaled $25.5 billion and $25.3 billion at December 31, 2020 and 2019, respectively. Loans pledged as collateral to support the contingent ability to borrow at the FRB discount window, if necessary, were primarily comprised of education, auto, commercial and industrial, and commercial real estate loans, and totaled $40.0 billion and $17.4 billion at December 31, 2020 and 2019, respectively.

During the year ended December 31, 2020, the Company purchased $2.4 billion of education loans and $870 million of other retail loans. During the year ended December 31, 2019, the Company purchased $1.1 billion of education loans and $530 million of other retail loans.

During the year ended December 31, 2020, the Company sold $500 million of commercial loans, $1.0 billion of education loans and $1.5 billion of residential mortgage loans. During the year ended December 31, 2019, the Company sold $454 million of commercial loans and $628 million of retail loans, including $22 million of TDR sales.

Citizens is engaged in the leasing of equipment for commercial use, primarily focused on middle market and mid-corporate clients for large capital equipment acquisitions including corporate aircraft, railcars and trucks and trailers, among other equipment. The Company determines if an arrangement is a lease and the related lease classification at inception. Lease terms predominantly range from three years to ten years and may include options to purchase the leased property prior to the end of the lease term. The Company does not have lease agreements which contain both lease and non-lease components.

A lessee is evaluated from a credit perspective using the same underwriting standards and procedures as for a loan borrower. A lessee is expected to make rental payments based on its cash flows and the viability of its operations. Leases are usually not evaluated as collateral-based transactions, and therefore the lessee’s overall financial strength is the most important credit evaluation factor.


(in millions)	December 31, 2020	December 31, 2019
Total future minimum lease rentals	$1,381	$1,739
Estimated residual value of leased equipment (non-guaranteed)	746	1,013
Initial direct costs	7	10
Unearned income	(166)	(225)
Total leases	$1,968	$2,537

Interest income on direct financing and sales-type leases for the years ended December 31, 2020 and 2019 was $64 million and $77 million, respectively, and is reported within interest and fees on loans and leases in the Consolidated Statements of Operations.


(in millions)
2021			$334
2022			308
2023			246
2024			170
2025			112
Thereafter			211
Total undiscounted future minimum lease rentals			$1,381