ALLOWANCE FOR CREDIT LOSSES, NONPERFORMING ASSETS, AND CONCENTRATIONS OF CREDIT RISK (Tables)

12 Months Ended

Dec. 31, 2020

Schedule of changes in the allowance for credit losses

The following table present a summary of changes in the ACL for the year ended December 31, 2020:


	Year Ended December 31, 2020
(in millions)	Commercial	Retail	Total
Allowance for loan and lease losses, beginning of period	$674	$578	$1,252
Cumulative effect of change in accounting principle	(176)	629	453
Allowance for loan and lease losses, beginning of period, adjusted	498	1,207	1,705
Charge-offs	(437)	(406)	(843)
Recoveries	12	138	150
Net charge-offs	(425)	(268)	(693)

Provision charged to income	1,160	271	1,431
Allowance for loan and lease losses, end of period	1,233	1,210	2,443
Reserve for unfunded lending commitments, beginning of period	44	—	44
Cumulative effect of change in accounting principle	(3)	1	(2)
Reserve for unfunded lending commitments, beginning of period, adjusted	41	1	42
Provision for unfunded lending commitments	145	40	185
Reserve for unfunded lending commitments, end of period	186	41	227
Total allowance for credit losses, end of period	$1,419	$1,251	$2,670

The following table provides additional detail on the cumulative effect of change in accounting principle on the ACL and related coverage ratios:


	December 31, 2019				January 1, 2020				December 31, 2020
(in millions)	Amortized Cost Basis	ACL Balance	Coverage		Impact of Adoption of CECL	ACL Balance	Coverage		Amortized Cost Basis	ACL Balance	Coverage
Commercial and industrial(1)	$41,479	$575	1.4	%	($199)	$376	0.9	%	$44,173	$895	2.0	%
Commercial real estate	13,522	124	0.9		(57)	67	0.5		14,652	472	3.2
Leases	2,537	19	0.7		77	96	3.8		1,968	52	2.6
Total commercial	57,538	718	1.2		(179)	539	0.9		60,793	1,419	2.3
Residential	19,083	35	0.2		95	130	0.7		19,539	141	0.7




Home equity	13,154	83	0.6		73	156	1.2		12,149	150	1.2
Automobile	12,120	123	1.0		83	206	1.7		12,153	200	1.6
Education	10,347	116	1.1		298	414	4.0		12,308	386	3.1


Other retail	6,846	221	3.2		81	302	4.4		6,148	374	6.1
Total retail	61,550	578	0.9		630	1,208	2.0		62,297	1,251	2.0
Total loans and leases	$119,088	$1,296	1.1	%	$451	$1,747	1.5	%	$123,090	$2,670	2.2	%

(1) The commercial coverage ratio includes a 21 basis point reduction associated with PPP loans as of December 31, 2020.

The difference in ACL as of December 31, 2020 as compared to December 31, 2019 continues to be driven by the COVID-19 pandemic, associated lockdowns and the resulting economic impacts from March to December 31, 2020, as well as the Company’s adoption of CECL on January 1, 2020. Citizens added $451 million in ACL upon adoption of CECL, and has since added an additional $923 million in the year ended December 31, 2020, resulting in an ending ACL balance of $2.7 billion.

The increase in commercial net charge-offs in the year ended December 31, 2020 compared to the year ended December 31, 2019 was driven by charge-offs in the retail real estate, metals and mining, energy and related, and casual dining industry sectors. Retail net charge-offs in the year ended December 31, 2020 reflected the benefit of forbearance and stimulus activity stemming from the COVID-19 pandemic and associated lockdowns.

To determine the ACL as of December 31, 2020, we utilized an economic scenario that generally reflects real GDP growth of approximately 4% over 2021, returning to fourth quarter 2019 real GDP levels by the last quarter of 2021. The scenario also projects the unemployment rate to be in the range of approximately 7% to 7.5% throughout 2021. While the macroeconomic forecast was slightly improved relative to the third quarter 2020 forecast, we continued to apply management judgment to adjust the modeled reserves in the commercial industry sectors most impacted by the COVID-19 pandemic and associated lockdowns, including retail and hospitality, casual dining, retail trade, price-sensitive energy and related, and educational services, as well as in certain retail products.

The following tables present a summary of changes in the ACL for the year ended December 31, 2019 and 2018:


	Year Ended December 31, 2019
(in millions)	Commercial	Retail	Total
Allowance for loan and lease losses, beginning of period	$690	$552	$1,242
Charge-offs	(140)	(475)	(615)
Recoveries	24	161	185
Net charge-offs	(116)	(314)	(430)

Provision charged to income	100	340	440
Allowance for loan and lease losses, end of period	674	578	1,252
Reserve for unfunded lending commitments, beginning of period	91	—	91
Provision for unfunded lending commitments	(47)	—	(47)
Reserve for unfunded lending commitments, end of period	44	—	44
Total allowance for credit losses, end of period	$718	$578	$1,296


	Year Ended December 31, 2018
(in millions)	Commercial	Retail	Total
Allowance for loan and lease losses, beginning of period	$685	$551	$1,236
Charge-offs	(52)	(442)	(494)
Recoveries	19	158	177
Net charge-offs	(33)	(284)	(317)
Provision charged to income(1)	38	285	323
Allowance for loan and lease losses, end of period	690	552	1,242
Reserve for unfunded lending commitments, beginning of period	88	—	88
Provision for unfunded lending commitments	3	—	3
Reserve for unfunded lending commitments, end of period	91	—	91
Total allowance for credit losses, end of period	$781	$552	$1,333

Schedule of classes of loans and leases, amortized cost basis by credit quality indicator

The following table presents the amortized cost basis of commercial loans and leases, by vintage date and regulatory classification rating, as of December 31, 2020:


	Term Loans by Origination Year						Revolving Loans
(in millions)	2020	2019	2018	2017	2016	Prior to 2016	Within the Revolving Period	Converted to Term	Total
Commercial and industrial
Pass(1)	$8,036	$5,730	$4,180	$2,174	$1,157	$1,980	$17,281	$340	$40,878
Special Mention	34	264	163	84	60	173	771	34	1,583
Substandard	91	195	248	100	81	127	600	22	1,464
Doubtful	65	10	34	38	3	31	63	4	248
Total commercial and industrial	8,226	6,199	4,625	2,396	1,301	2,311	18,715	400	44,173
Commercial real estate
Pass	1,848	2,836	2,810	1,106	566	919	3,271	—	13,356
Special Mention	19	130	121	92	94	48	300	—	804
Substandard	116	2	65	5	53	26	149	—	416
Doubtful	16	26	8	—	—	2	24	—	76
Total commercial real estate	1,999	2,994	3,004	1,203	713	995	3,744	—	14,652
Leases
Pass	455	246	229	139	180	673	—	—	1,922
Special Mention	3	4	2	4	2	18	—	—	33
Substandard	—	2	2	4	4	—	—	—	12
Doubtful	—	—	—	—	—	1	—	—	1
Total leases	458	252	233	147	186	692	—	—	1,968
Total commercial
Pass(1)	10,339	8,812	7,219	3,419	1,903	3,572	20,552	340	56,156
Special Mention	56	398	286	180	156	239	1,071	34	2,420
Substandard	207	199	315	109	138	153	749	22	1,892
Doubtful	81	36	42	38	3	34	87	4	325
Total commercial	$10,683	$9,445	$7,862	$3,746	$2,200	$3,998	$22,459	$400	$60,793

(1) Includes PPP loans designated as pass that are fully guaranteed by the SBA originating in 2020.

For retail loans, Citizens utilizes credit scores provided by FICO and the loan’s payment and delinquency status to monitor credit quality. Management believes FICO credit scores are considered the strongest indicator of credit losses over the contractual life of the loan as the scores are based on current and historical national industry-wide consumer level credit performance data, and assist management in predicting the borrower’s future payment performance.

The following table presents the amortized cost basis of retail loans, by vintage date and FICO scores that are generally refreshed quarterly, as of December 31, 2020:


	Term Loans by Origination Year						Revolving Loans
(in millions)	2020	2019	2018	2017	2016	Prior to 2016	Within the Revolving Period	Converted to Term	Total
Residential mortgages
800+	$2,687	$1,885	$638	$1,129	$1,615	$1,755	$—	$—	$9,709
740-799	2,931	1,133	398	527	743	904	—	—	6,636
680-739	784	351	162	172	295	458	—	—	2,222
620-679	97	94	44	56	66	223	—	—	580
<620	12	28	35	58	50	185	—	—	368
No FICO available(1)	1	2	1	5	1	14	—	—	24
Total residential mortgages	6,512	3,493	1,278	1,947	2,770	3,539	—	—	19,539
Home equity
800+	2	8	10	7	5	216	4,319	344	4,911
740-799	2	6	7	6	5	180	3,234	331	3,771
680-739	1	6	10	15	8	179	1,632	284	2,135
620-679	—	10	18	21	14	136	402	195	796
<620	1	17	30	29	18	122	105	214	536

Total home equity	6	47	75	78	50	833	9,692	1,368	12,149
Automobile
800+	1,056	812	424	312	169	62	—	—	2,835
740-799	1,514	1,022	531	344	172	59	—	—	3,642
680-739	1,347	889	461	282	138	47	—	—	3,164
620-679	669	484	259	157	84	32	—	—	1,685
<620	140	242	189	137	79	34	—	—	821
No FICO available(1)	2	—	—	—	—	4	—	—	6
Total automobile	4,728	3,449	1,864	1,232	642	238	—	—	12,153
Education
800+	1,817	1,363	849	781	578	777	—	—	6,165
740-799	1,797	1,009	541	387	251	423	—	—	4,408
680-739	450	294	173	127	90	221	—	—	1,355
620-679	26	35	33	28	25	95	—	—	242
<620	2	5	10	10	8	41	—	—	76
No FICO available(1)	2	—	—	—	—	60	—	—	62
Total education	4,094	2,706	1,606	1,333	952	1,617	—	—	12,308
Other retail
800+	461	380	163	77	15	44	341	—	1,481
740-799	620	460	184	81	19	31	638	2	2,035
680-739	495	302	111	48	10	13	561	5	1,545
620-679	248	104	37	14	3	5	174	7	592
<620	24	30	17	6	1	3	77	8	166
No FICO available(1)	54	1	—	—	—	—	272	2	329
Total other retail	1,902	1,277	512	226	48	96	2,063	24	6,148
Retail
800+	6,023	4,448	2,084	2,306	2,382	2,854	4,660	344	25,101
740-799	6,864	3,630	1,661	1,345	1,190	1,597	3,872	333	20,492
680-739	3,077	1,842	917	644	541	918	2,193	289	10,421
620-679	1,040	727	391	276	192	491	576	202	3,895
<620	179	322	281	240	156	385	182	222	1,967
No FICO available(1)	59	3	1	5	1	78	272	2	421
Total retail	$17,242	$10,972	$5,335	$4,816	$4,462	$6,323	$11,755	$1,392	$62,297

(1) Represents loans for which an updated FICO score was unavailable (e.g., due to recent profile changes).

Schedule of nonperforming loans and leases by class

The following table presents nonaccrual loans and leases and loans accruing and 90 days or more past due:


	As of December 31, 2020			As of December 31, 2019
(in millions)	Nonaccrual loans and leases	90+ days past due and accruing	Nonaccrual with no related ACL	Nonaccrual loans and leases
Commercial and industrial	$280	$20	$56	$240
Commercial real estate	176	—	2	2
Leases	2	1	—	3
Total commercial	458	21	58	245
Residential mortgages	167	30	96	93
Home equity	276	—	207	246
Automobile	72	—	17	67
Education	18	2	2	18
Other retail	28	9	—	34
Total retail	561	41	322	458
Total loans and leases	$1,019	$62	$380	$703

Analysis of age of past due amounts

The following table presents an analysis of the age of both accruing and nonaccruing loan and lease past due amounts:


	December 31, 2020					December 31, 2019
	Days Past Due					Days Past Due
(in millions)	Current-29	30-59	60-89	90 or More	Total	Current-29	30-59	60-89	90 or More	Total
Commercial and industrial	$43,817	$223	$16	$117	$44,173	$41,340	$45	$27	$67	$41,479
Commercial real estate	14,531	1	85	35	14,652	13,520	1	1	—	13,522
Leases	1,956	9	—	3	1,968	2,498	37	—	2	2,537
Total commercial	60,304	233	101	155	60,793	57,358	83	28	69	57,538
Residential mortgages	19,291	59	21	168	19,539	18,947	35	17	84	19,083
Home equity	11,848	61	28	212	12,149	12,834	91	40	189	13,154
Automobile	11,901	170	65	17	12,153	11,788	227	81	24	12,120
Education	12,255	33	13	7	12,308	10,290	30	15	12	10,347
Other retail	6,047	38	29	34	6,148	6,729	45	31	41	6,846
Total retail	61,342	361	156	438	62,297	60,588	428	184	350	61,550
Total	$121,646	$594	$257	$593	$123,090	$117,946	$511	$212	$419	$119,088

Troubled debt restructurings on financing receivables

The following table summarizes TDRs by class and total unfunded commitments:


	December 31,
(in millions)	2020	2019
Commercial	$257	$297
Retail	718	667
Unfunded commitments related to TDRs	49	42

The following tables summarize how loans were modified during the years ended December 31, 2020, 2019 and 2018. The reported balances represent the post-modification outstanding recorded investment and can include loans that became TDRs during the period and were paid off in full, charged off, or sold prior to period end.


	December 31, 2020
	Primary Modification Types
	Interest Rate Reduction(1)		Maturity Extension(2)		Other(3)
(dollars in millions)	Number of Contracts	Recorded Investment	Number of Contracts	Recorded Investment	Number of Contracts	Recorded Investment
Commercial and industrial	1	$—	25	$107	44	$325
Commercial real estate	—	—	1	7	—	—
Total commercial	1	—	26	114	44	325
Residential mortgages	210	39	190	34	73	13
Home equity	143	12	151	12	429	23
Automobile	129	2	104	1	3,003	47
Education	—	—	—	—	465	10
Other retail	2,311	10	—	—	280	2
Total retail	2,793	63	445	47	4,250	95
Total	2,794	$63	471	$161	4,294	$420


	December 31, 2019
	Primary Modification Types
	Interest Rate Reduction(1)		Maturity Extension(2)		Other(3)
(dollars in millions)	Number of Contracts	Recorded Investment	Number of Contracts	Recorded Investment	Number of Contracts	Recorded Investment
Commercial and industrial	3	$—	26	$5	56	$210
Commercial real estate	—	—	1	—	—	—
Total commercial	3	—	27	5	56	210
Residential mortgages	60	12	62	10	120	17




Home equity	196	20	72	11	454	26
Automobile	160	3	21	—	1,250	17
Education	—	—	—	—	272	7


Other retail	3,259	18	—	—	480	2
Total retail	3,675	53	155	21	2,576	69
Total	3,678	$53	182	$26	2,632	$279


	December 31, 2018
	Primary Modification Types
	Interest Rate Reduction(1)		Maturity Extension(2)		Other(3)
(dollars in millions)	Number of Contracts	Recorded Investment	Number of Contracts	Recorded Investment	Number of Contracts	Recorded Investment
Commercial and industrial	7	$1	49	$22	53	$200
Commercial real estate	—	—	3	31	2	31
Total commercial	7	1	52	53	55	231
Residential mortgages	35	4	61	8	142	17




Home equity	128	11	180	26	584	36
Automobile	158	3	46	1	1,189	17
Education	—	—	—	—	355	7


Other retail	2,313	13	—	—	9	—
Total retail	2,634	31	287	35	2,279	77
Total	2,641	$32	339	$88	2,334	$308

(1) Includes modifications that consist of multiple concessions, one of which is an interest rate reduction.

(2) Includes modifications that consist of multiple concessions, one of which is a maturity extension (unless one of the other concessions was an interest rate reduction).

(3) Includes modifications other than interest rate reductions or maturity extensions, such as lowering scheduled payments for a specified period of time, principal forgiveness, and capitalizing arrearages. Also included are the following: deferrals, trial modifications, certain bankruptcies, loans in forbearance and prepayment plans. Modifications can include the deferral of accrued interest resulting in post modification balances being higher than pre-modification.

Schedule of loans that may increase credit exposure

The following tables present balances of loans with these characteristics:


	December 31, 2020
(in millions)	Residential Mortgages	Home Equity	Other Retail	Total
High loan-to-value	$289	$64	$—	$353
Interest only/negative amortization	2,801	—	—	2,801
Low introductory rate	—	—	170	170

Total	$3,090	$64	$170	$3,324


	December 31, 2019
(in millions)	Residential Mortgages	Home Equity	Other Retail	Total
High loan-to-value	$402	$151	$—	$553
Interest only/negative amortization	2,043	—	—	2,043
Low introductory rate	—	—	235	235

Total	$2,445	$151	$235	$2,831