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Loans

3 Months Ended

Mar. 31, 2020

NOTE 3 — LOANS

The following tables and data as of March 31, 2020 include the loan balances acquired in the MOB Transaction, which were recorded at fair value on the acquisition date. See Note 2 — Acquisition and Discontinued Operations for further information.

Unless otherwise noted, loans held for sale are not included.

Loans by Product (dollars in millions)

	March 31, 2020		December 31, 2019
Commercial loans	$	28,445.3	$	22,765.1
Financing Leases and Leverage Leases		2,251.5		2,254.4
Total commercial		30,696.8		25,019.5
Consumer loans		7,833.6		5,979.4
Total loans	$	38,530.4	$	30,998.9

The following table presents loans by segment, based on obligor location:

Loans (dollars in millions)

	March 31, 2020						December 31, 2019
	Domestic		Foreign		Total		Domestic		Foreign		Total
Commercial Banking	$	28,414.2	$	1,608.5	$	30,022.7	$	22,866.0	$	1,527.4	$	24,393.4
Consumer Banking⁽¹⁾		8,507.7		—		8,507.7		6,605.5		—		6,605.5
Total	$	36,921.9	$	1,608.5	$	38,530.4	$	29,471.5	$	1,527.4	$	30,998.9

⁽¹⁾	^{The Consumer Banking segment includes certain commercial loans, primarily consisting of a portfolio of Small Business Administration ("SBA") loans. These loans are excluded from the Consumer loan balances and included in the Commercial loan balances in product related tables in this note.}

The following table presents selected components of the net investment in loans:

Components of Net Investment (dollars in millions)

	March 31,			December 31,
	2020			2019
Unearned income	$	(440.2	)	$	(430.0	)
Unamortized premiums / (discounts)		(550.4	)		30.0
Accretable yield on PCI loans		—			(745.4	)
Net unamortized deferred costs and (fees)⁽¹⁾		49.7			50.9

⁽¹⁾Due to CECL,accretable yield is eliminated. At December 31, 2019, accretable yield on PCI loans were shown as a separate component of net investment.

Certain of the following tables present credit-related information at the “class” level. A class is generally a disaggregation of a portfolio segment. In determining the classes, CIT considered the loan characteristics and methods it applies in monitoring and assessing credit risk and performance.

Credit Quality Information

Management monitors credit quality of commercial loans based upon risk rating consistent with bank regulatory guidance and consumer loans based upon LTV and FICO score. The following table summarizes commercial loans disaggregated by year of origination and by risk rating. The consumer loan LTV ratios and FICO scores by year of origination are also presented below. In accordance with CIT’s policy election not to measure an ACL for accrued interest, accrued interest receivable (within other assets) is separately reported from the loan’s amortized cost basis. Following the Company’s adoption of CECL, prior period risk rating disclosures were not conformed to current disclosure requirements and will continue to be reported under previously applicable accounting guidance.

Commercial Loans — Risk Rating by Class (dollars in millions)

															Revolving
															Loans
															Converted
													Revolving		to Term
													Loans		Loans
March 31, 2020	Term Loans Amortized Cost Basis by Origination Year												Amortized		Amortized
											2015 &		Cost		Cost
Grade	2020		2019		2018		2017		2016		Prior		Basis		Basis		Total⁽¹⁾
Commercial Finance
Pass	$	2,714.0	$	3,256.1	$	2,903.2	$	1,080.7	$	518.6	$	1,350.1	$	3,572.5	$	98.2	$	15,493.4
Special Mention		54.2		68.1		86.7		54.0		27.7		139.6		257.2		5.8		693.3
Classified-accrual		27.8		18.9		27.2		152.3		69.0		238.3		241.7		1.6		776.8
Classified-non-accrual		—		—		58.5		15.6		30.8		82.3		42.6		—		229.8
Total Commercial Finance		2,796.0		3,343.1		3,075.6		1,302.6		646.1		1,810.3		4,114.0		105.6		17,193.3
Real Estate Finance
Pass		574.1		2,300.8		1,712.7		907.6		789.7		909.7		56.6		—		7,251.2
Special Mention		—		109.0		59.0		167.6		26.4		49.0		—		—		411.0
Classified-accrual		—		3.2		9.0		28.6		3.6		8.8		—		—		53.2
Classified-non-accrual		—		—		0.3		—		—		1.2		—		—		1.5
Total Real Estate Finance		574.1		2,413.0		1,781.0		1,103.8		819.7		968.7		56.6		-		7,716.9
Business Capital
Pass		564.4		1,845.7		1,192.0		546.3		230.1		70.4		18.0		0.6		4,467.5
Special Mention		16.9		98.8		83.3		38.7		23.9		4.0		—		—		265.6
Classified-accrual		8.9		87.2		83.4		46.6		20.5		6.4		—		—		253.0
Classified-non-accrual		0.1		13.9		17.4		23.3		7.7		3.3		—		—		65.7
Total Business Capital		590.3		2,045.6		1,376.1		654.9		282.2		84.1		18.0		0.6		5,051.8
Rail
Pass		—		0.9		—		—		3.2		56.6		—		—		60.7
Total Rail		—		0.9		—		—		3.2		56.6		—		—		60.7
Commercial Banking
Pass	$	3,852.5	$	7,403.5	$	5,807.9	$	2,534.6	$	1,541.6	$	2,386.8	$	3,647.1	$	98.8	$	27,272.8
Special Mention		71.1		275.9		229.0		260.3		78.0		192.6		257.2		5.8		1,369.9
Classified-accrual		36.7		109.3		119.6		227.5		93.1		253.5		241.7		1.6		1,083.0
Classified-non-accrual		0.1		13.9		76.2		38.9		38.5		86.8		42.6		—		297.0
Total Commercial Banking		3,960.4		7,802.6		6,232.7		3,061.3		1,751.2		2,919.7		4,188.6		106.2		30,022.7
Consumer Banking - Consumer and Community Banking (Primarily SBA Loans)
Pass		50.4		202.3		118.5		90.7		62.9		90.8		10.0		—		625.6
Special Mention		—		1.0		2.0		0.5		—		3.0		—		—		6.5
Classified-accrual		—		1.4		7.6		8.8		6.0		17.2		0.3		—		41.3
Classified-non-accrual		—		—		—		0.2		—		0.5		—		—		0.7
Total Consumer Banking		50.4		204.7		128.1		100.2		68.9		111.5		10.3		-		674.1
Total	$	4,010.8	$	8,007.3	$	6,360.8	$	3,161.5	$	1,820.1	$	3,031.2	$	4,198.9	$	106.2	$	30,696.8

⁽¹⁾	^{Amortized cost excludes accrued interest receivable of $59.3 million that is included in other assets.}

Commercial Loans — Risk Rating by Class (dollars in millions)

Grade:	Pass		Special Mention		Classified- accrual		Classified- non-accrual		PCI Loans⁽¹⁾		Total
December 31, 2019
Commercial Banking
Commercial Finance	$	12,601.1	$	450.7	$	614.3	$	246.7	$	—	$	13,912.8
Real Estate Finance		5,007.0		341.0		6.3		0.4		27.8		5,382.5
Business Capital		4,527.5		233.1		217.0		60.9		—		5,038.5
Rail		59.6		—		—		—		—		59.6
Total Commercial Banking		22,195.2		1,024.8		837.6		308.0		27.8		24,393.4
Consumer Banking
Consumer and Community Banking - Primarily SBA Loans		589.6		2.4		33.9		0.2		—		626.1
Total Consumer Banking		589.6		2.4		33.9		0.2		—		626.1
Total	$	22,784.8	$	1,027.2	$	871.5	$	308.2	$	27.8	$	25,019.5

⁽¹⁾	^{PCI Loans had $20.7 million of non-criticized loans and $7.1 million of criticized loans (special mention or classified).}

The following table provides a summary of the consumer loan LTV distribution and the covered loans held for investment

balances for primarily single-family residential (“SFR”) mortgage loans. The average LTV was 61% and 63% for the total consumer loans included below at March 31, 2020 and December 31, 2019, respectively.

Following the Company’s adoption of CECL, the comparative prior period financial information was not adjusted for the Consumer Loan LTV Distribution and will continue to be reported under previously applicable accounting guidance.

Consumer Loan LTV Distribution (dollars in millions)







	Term Loans Amortized Cost Basis by Origination Year																	Revolving Loans Amortized Cost			Revolving Loans Converted to Term Loans Amortized Cost
LTV Range	2020		2019			2018			2017			2016			2015 & Prior			Basis			Basis			Total ⁽⁴⁾
As of March 31, 2020
Legacy Consumer Mortgages
Greater than 125%	$	—		$	—		$	—		$	—		$	—		$	57.4		$	—		$	0.4		$	57.8
101% – 125%		—			—			—			—			—			94.3			—			1.1			95.4
80% – 100%		—			—			—			—			—			303.4			—			4.7			308.1
Less than 80%		—			—			—			—			—			1,553.4			—			26.9			1,580.3
Government-guaranteed ⁽¹⁾		—			—			—			—			—			23.8			—			—			23.8
No LTV available ⁽²⁾		—			—			—			—			—			3.8			—			23.2			27.0
Total Legacy Consumer Mortgages		—			—			—			—			—			2,036.1			—			56.3			2,092.4
Consumer and Community Banking
Greater than 125%		—			—			—			—			—			—			0.4			—			0.4
80% – 100%		15.2			68.5			26.5			3.3			0.3			1.7			3.0			—			118.5
Less than 80%		338.2			1,636.0			880.7			807.9			507.8			1,156.9			15.3			9.2			5,352.0
Government-guaranteed ⁽¹⁾		0.8			50.1			23.0			92.8			11.1			8.4			—			—			186.2
No LTV available ⁽²⁾		0.1			0.1			0.1			0.4			0.2			5.8			44.3			9.8			60.8
No LTV required ⁽³⁾		—			1.3			1.1			0.5			0.9			15.4			4.1			—			23.3
Total Consumer and Community Banking		354.3			1,756.0			931.4			904.9			520.3			1,188.2			67.1			19.0			5,741.2
Total Consumer Loans ⁽⁴⁾	$	354.3		$	1,756.0		$	931.4		$	904.9		$	520.3		$	3,224.3		$	67.1		$	75.3		$	7,833.6

⁽¹⁾ Represents loans with principal repayments insured by the FHA and U.S. Department of Veterans Affairs (“VA”).

⁽²⁾ Represents primarily junior lien loans for which LTV is not available.

⁽³⁾ Represents overdrafts, personal line of credit and third-party guaranteed loans with servicer recourse option for which LTV is not required.

⁽⁴⁾ Amortized cost excluded accrued interest receivable of $24.5 million that was included in other assets.

Consumer Loan LTV Distribution (dollars in millions)

	Covered Loans ⁽²⁾				Non-covered Loans				Total Consumer
LTV Range	Non-PCI		PCI		Non-PCI		PCI		Loans
December 31, 2019
Greater than 125%	$	—	$	2.8	$	5.2	$	53.2	$	61.2
101% – 125%		—		8.5		6.6		93.0		108.1
80% – 100%		0.3		48.1		183.4		239.3		471.1
Less than 80%		307.5		234.3		4,225.5		570.6		5,337.9
Not Applicable⁽¹⁾		—		—		1.1		—		1.1
Total	$	307.8	$	293.7	$	4,421.8	$	956.1	$	5,979.4

⁽¹⁾	^{Certain Consumer Loans do not have LTV's.}

⁽²⁾	^{Covered loans at December 31, 2019 are limited to loans with indemnifications provided by the FDIC under loss share agreements (“LSA”) related to the First Federal and La Jolla transactions described below.}

The SFR amounts represent the carrying value, which differ from unpaid principal balances, and include the unamortized premiums or discounts. Prior to March 31, 2020, certain consumer SFR loans are “covered loans” for which the Company can be reimbursed for a portion of certain future losses with indemnifications provided by the FDIC under LSAs. At December 31, 2019, the covered loans relate to the FDIC-assisted transactions of First Federal Bank of California in December 2009 (“First Federal Transaction”) and La Jolla Bank, FSB in February 2010 (“La Jolla Transaction”) with the indemnification period ending in December 2019 and February 2020, respectively. As of March 31, 2020, all of the LSAs have expired and there are no covered loans.

The following table provides a summary of the FICO score distribution for consumer loans by origination year and revolving loans. The average FICO score was 752 and 751 for the total consumer loans included below at March 31, 2020 and December 31, 2019, respectively.

Current FICO Score Distribution (dollars in millions)







		Term Loans Amortized Cost Basis by Origination Year																												Revolving Loans Amortized Cost							Revolving Loans Converted to Term Loans Amortized Cost
Current FICO Score		2020				2019						2018						2017						2016							2015 & Prior						Basis						Basis						Total ⁽⁴⁾
As of March 31, 2020
Legacy Consumer Mortgages
Greater than or equal to 730		$			—			$		—				$		—				$		—			$			—				$			784.6			$			—			$			24.3			$			808.9
Greater than or equal to 660 and less than 730					—					—						—						—						—							639.5						—						18.4						657.9
Less than 660					—					—						—						—						—							538.3						—						13.0						551.3
Government-guaranteed ⁽¹⁾					—					—						—						—						—							23.8						—						-						23.8
No FICO score available ⁽²⁾					—					—						—						—						—							49.9						—						0.6						50.5
Total Legacy Consumer Mortgages					—					—						—						—						—							2,036.1						—						56.3						2,092.4
Consumer and Community Banking
Greater than or equal to 730			306.7				1,460.3						786.7						741.9							452.9								931.4						46.8						12.9						4,739.6
Greater than or equal to 660 and less than 730				45.7							229.5						105.7						59.3						45.9							151.1						12.6						3.7						653.5
Less than 660				1.0							13.7						13.6						8.4						8.0							60.7						4.4						2.3						112.1
Government-guaranteed ⁽¹⁾				0.8							50.1						23.0						92.8						11.1							8.4						—						—						186.2
No FICO score available ⁽²⁾				—							1.5						1.4						2.0						1.5							21.4						2.2						0.1						30.1
FICO score not required ⁽³⁾				0.1							0.9						1.0						0.5						0.9							15.2						1.1						—						19.7
Total Consumer and Community Banking				354.3							1,756.0						931.4						904.9						520.3							1,188.2						67.1						19.0						5,741.2
Total Consumer Loans ⁽⁴⁾	$			354.3					$		1,756.0				$		931.4				$		904.9				$		520.3				$			3,224.3			$			67.1			$			75.3			$			7,833.6

⁽¹⁾ Represents loans with principal repayments insured by the FHA and VA.

⁽²⁾ Represents loans with no FICO score available due to borrower bankruptcy or limited credit history.

⁽³⁾ Represents overdrafts, personal lines of credit and third-party guaranteed loans with servicer recourse option for which FICO score is not required.

⁽⁴⁾ Amortized cost excluded accrued interest receivable of $24.5 million that was included in other assets.

Current FICO Score Distribution (dollars in millions)

	Covered Loans⁽³⁾				Non-covered Loans				Total Consumer
FICO Range	Non-PCI		PCI		Non-PCI		PCI		Loans
December 31, 2019
Legacy Consumer Mortgages
Greater than or equal to 730	$	202.2	$	98.6	$	320.0	$	252.5	$	873.3
Greater than or equal to 660 and less than 730		71.3		98.8		123.2		324.7		618.0
Less than 660		16.8		89.8		51.0		370.5		528.1
Government-guaranteed ⁽¹⁾		—		—		24.5		—		24.5
No FICO score available ⁽²⁾		17.5		6.5		5.2		8.4		37.6
Total Legacy Consumer Mortgages		307.8		293.7		523.9		956.1		2,081.5
Consumer and Community Banking
Greater than or equal to 730		—		—		3,319.0		—		3,319.0
Greater than or equal to 660 and less than 730		—		—		332.6		—		332.6
Less than 660		—		—		29.6		—		29.6
Government-guaranteed ⁽¹⁾		—		—		193.8		—		193.8
No FICO score available		—		—		21.8		—		21.8
FICO score not required⁽²⁾		—		—		1.1		—		1.1
Total Consumer and Community Banking		—		—		3,897.9		—		3,897.9
Total Consumer Banking	$	307.8	$	293.7	$	4,421.8	$	956.1	$	5,979.4

⁽¹⁾ Represents loans with principal repayments insured by the FHA.

⁽²⁾Represents overdrafts for which FICO score is not required.

⁽³⁾Covered loans at December 31, 2019 are limited to loans with indemnifications provided by the FDIC under the LSA related to the First Federal and La Jolla transactions.

As of March 31, 2020 and December 31, 2019, there was no remaining amount of negative amortization contractually permitted on consumer loans with terms that permitted negative amortization.

Past Due and Non-accrual Loans—

For additional information on reporting of past due and non-accrual loans, see discussion of the CARES Act and Interagency Statement in Note 1 – Business and Summary of Significant Accounting Policies.

The table that follows presents portfolio delinquency status, regardless of accrual/non-accrual classification:

Loans - Delinquency Status (dollars in millions)

	Past Due						Total
	30-59		60-89		90 or more		Past Due		Current		PCI Loans ⁽¹⁾		Total ⁽²⁾
March 31, 2020
Commercial Banking
Commercial Finance	$	70.7	$	1.8	$	60.9	$	133.4	$	17,059.9	$	—	$	17,193.3
Real Estate Finance		21.0		1.5		0.9		23.4		7,693.5		—		7,716.9
Business Capital		129.3		34.1		25.2		188.6		4,863.2		—		5,051.8
Rail		—		—		—		—		60.7		—		60.7
Total Commercial Banking		221.0		37.4		87.0		345.4		29,677.3		—		30,022.7
Consumer Banking
Legacy Consumer Mortgages		120.1		25.2		59.7		205.0		1,887.4		—		2,092.4
Consumer and Community Banking		42.3		5.6		10.3		58.2		6,357.1		—		6,415.3
Total Consumer Banking		162.4		30.8		70.0		263.2		8,244.5		—		8,507.7
Total	$	383.4	$	68.2	$	157.0	$	608.6	$	37,921.8	$	—	$	38,530.4
December 31, 2019
Commercial Banking
Commercial Finance	$	58.7	$	27.8	$	49.0	$	135.5	$	13,777.3	$	—	$	13,912.8
Real Estate Finance		0.6		46.6		—		47.2		5,307.5		27.8		5,382.5
Business Capital		113.8		35.0		22.0		170.8		4,867.7		—		5,038.5
Rail		—		—		—		—		59.6		—		59.6
Total Commercial Banking		173.1		109.4		71.0		353.5		24,012.1		27.8		24,393.4
Consumer Banking
Legacy Consumer Mortgages		15.5		3.3		17.7		36.5		795.2		1,249.8		2,081.5
Consumer and Community Banking		16.4		3.3		7.6		27.3		4,496.7		—		4,524.0
Total Consumer Banking		31.9		6.6		25.3		63.8		5,291.9		1,249.8		6,605.5
Total	$	205.0	$	116.0	$	96.3	$	417.3	$	29,304.0	$	1,277.6	$	30,998.9

⁽¹⁾

^{Before the adoption of CECL,PCI loans were categorized separately, as the balances represent an estimate of cash flows deemed to be collectible and therefore were not subject to past due or non-accrual status classification. Although these former PCI (now PCD) loans may have been contractually past due, we expected to fully collect the carrying values. As of March 31, 2020, total past due included $172.6 million of PCD loans previously excluded as PCI loans (within LCM), of which $44.0 million are 90 days or more past due.}

⁽²⁾	^{The $1.6 billion of PCD loans were included in the total balance as of March 31, 2020.}

The following table sets forth non-accrual loans, assets received in satisfaction of loans (OREO and repossessed assets) and loans 90 days or more past due and still accruing.

Loans on Non-Accrual Status (dollars in millions)⁽²⁾⁽³⁾


	December 31, 2019		Legacy CIT⁽⁶⁾ CECL Adoption		MOB Acquisition		January 1, 2020		March 31, 2020		With No Allowance Recorded⁽⁴⁾
Commercial Banking
Commercial Finance⁽¹⁾	$	246.7	$	—	$	61.1	$	307.8	$	229.8	$	35.1
Business Capital		60.9		—		—		60.9	65.7		4.4
Real Estate Finance		0.4		0.6		—		1.0	1.5			—
Total Commercial Banking		308.0	0.6		61.1		369.7			297.0		39.5
Consumer Banking
Consumer and Community Banking		4.0		—		7.2		11.2		7.0		2.1
Legacy Consumer Mortgages⁽⁵⁾		14.3		81.6		—		95.9		77.8		10.4
Total Consumer Banking		18.3		81.6		7.2		107.1		84.8		12.5
Total	$	326.3	$	82.2	$	68.3	$	476.8	$	381.8	$	52.0
Repossessed assets and OREO	20.1									20.6
Total non-performing assets	$	346.4							$	402.4
Commercial loans past due 90 days or more accruing	25.6								7.4
Consumer loans past due 90 days or more accruing	11.3								11.5
Total accruing loans past due 90 days or more	$	36.9							$	18.9

⁽¹⁾

^{Factored receivables within our Commercial Finance division do not accrue interest and therefore are not considered within non-accrual loan balances; however factored receivables are considered for credit provisioning purposes. Loans that are 90 or more days past due guaranteed by government agencies are not placed on non-accrual status.}

⁽²⁾	^{Interest recorded on non-accrual loans was $0.4 million for the quarter ended March 31, 2020.}

⁽³⁾	^{Accrued interest that was reversed when the loan went to non-accrual status was $0.9 million for the quarter ended March 31, 2020.}

⁽⁴⁾	^{Includes loans that have been charged off to their net realizable value and loans where the collateral or enterprise value exceeds the expected pay off value.}

⁽⁵⁾	^{March 31, 2020 balance includes $67 million of PCD loans that were previously classified as PCI loans not subject to non-accrual classification.}

⁽⁶⁾	^{Legacy CIT is before the MOB Acquisition, detail of which is separately disclosed.}

Payments received on non-accrual loans are generally applied first against outstanding principal, though in certain instances where the remaining recorded investment is deemed fully collectible, interest income is recognized on a cash basis.

Loans are in the process of foreclosure when repayment is expected to be provided substantially through the sale of the underlying real estate and the borrower is experiencing financial difficulty. The table below summarizes the residential mortgage loans in the process of foreclosure. In March 2020, CIT has suspended residential property foreclosures and evictions for at least 60 days to single family homeowners due to the coronavirus national emergency to align with government agency guidance.

Loans in Process of Foreclosure (dollars in millions)

	March 31,		December 31,
	2020		2019
Loans in process of foreclosure⁽¹⁾	$	27.3	$	38.9

⁽¹⁾ At December 31, 2019, the reported balance includes $25.4 million of PCI loans in process of foreclosure.

Impaired Loans

The following table contains prior period information about impaired loans and the related allowance for loan losses by class, pre-adoption of CECL. CECL did not carry forward the concept of impaired loans, therefore only the prior period is presented. PCI loans, which were excluded from impaired loan balances, included loans that were identified as impaired at the date of the OneWest Transaction (the “Acquisition Date”) for which the Company is applying the income recognition and disclosure guidance in ASC 310-30 (Loans and Debt Securities Acquired with Deteriorated Credit Quality), are disclosed further below in Loans Acquired with Deteriorated Credit Quality.

Impaired Loans (dollars in millions)

							Average Recorded Investment
December 31, 2019	Recorded Investment		Unpaid Principal Balance		Related Allowance		Year Ended December 31, 2019⁽²⁾
With no related allowance recorded:
Commercial Banking
Commercial Finance	$	46.5	$	69.0	$	—	$	68.0
Business Capital		4.8		5.5		—		6.0
Real Estate Finance		—		—		—		1.6
Consumer Banking
Consumer and Community Banking		4.0		4.0		—		4.9
Legacy Consumer Mortgages		20.6		22.4		—		24.7
With an allowance recorded:
Commercial Banking
Commercial Finance		223.9		267.3		86.0		166.6
Business Capital		19.4		19.4		10.0		11.6
Real Estate Finance		—		—		—		0.8
Consumer Banking
Consumer and Community Banking		0.1		0.2		—		—
Legacy Consumer Mortgages		1.4		1.4		0.2		0.4
Total Impaired Loans⁽¹⁾		320.7		389.2		96.2		284.6
Total Loans Impaired at Acquisition Date		1,277.6		1,936.1		17.4		1,504.4
Total	$	1,598.3	$	2,325.3	$	113.6	$	1,789.0

⁽¹⁾	^{Interest income recorded for the year ended December 31, 2019 while the loans were impaired was approximately $2.1 million, of which none was recognized using the cash-basis method of accounting.}

⁽²⁾	^{Average recorded investment for the year ended December 31, 2019.}

Loans Acquired with Deteriorated Credit Quality

Effective with the adoption of CECL, PCD loans are recorded at an initial amortized cost comprised of the sum of 1) the purchase price and 2) the estimate of credit losses which is recorded in the ACL. Subsequent to the initial recognition, PCD loans are accounted for under the same methodology as non-PCD loans. The following table provides a reconciliation of the purchase price and the unpaid principal balance / contractual cash flows owed to CIT as of the acquisition date for loans acquired during the respective period. For the quarter ended March 31, 2020, the PCD loans acquired related to the MOB Transaction.

PCD Loans during the quarter ended March 31, 2020 (dollars in millions)

	Commercial Banking			Consumer Banking			Total
Par Value (UPB)	$	347.8		$	58.4		$	406.2
Allowance for Credit Losses ⁽¹⁾		(56.1	)		(2.7	)		(58.8	)
(Discount) Premium		(9.0	)		2.4			(6.6	)
Purchase Price	$	282.7		$	58.1		$	340.8

⁽¹⁾

^{Under the new CECL standard, the initial ACL recognized on PCD assets was $58.8 million, of which $38.6 million was charged-off for loans that had been written-off prior to acquisition (whether full or partial) or which met CIT’s charge-off policy at the time of acquisition. After considering loans that were immediately charged-off upon acquisition, the net impact was $20.2 million of additional PCD reserves on January 1.}

Pre-adoption of CECL, the Company applied the income recognition and disclosure guidance in ASC 310-30 to loans that were identified as PCI as of the Acquisition Date. PCI loans were initially recorded at estimated fair value with no allowance for loan losses carried over, since the initial fair values reflected credit losses expected to be incurred over the remaining lives of the loans. The acquired loans are subject to the Company’s internal credit review. See Note 4 — Allowance for Credit Losses.

PCI Loans (dollars in millions)

December 31, 2019	Carrying Value		Unpaid Principal Balance		Allowance for Loan Losses
Commercial Banking
Real Estate Finance	$	27.8	$	30.4	$	9.8
Consumer Banking
Legacy Consumer Mortgages		1,249.8		1,905.7		7.6
	$	1,277.6	$	1,936.1	$	17.4

Accretable Yield

See the Company’s 2019 Form 10-K, Note 1 — Business and Summary of Significant Accounting Policies for further details. Changes in the accretable yield for PCI loans are summarized below. Prior to 2020, the changes in the accretable yield was

presented for PCI loans. Due to CECL, PCI accounting was eliminated and superseded by PCD guidance.

Change in Accretable Yield (dollars in millions)

	Quarter Ended March 31,
	2019
Balance, beginning of period	$	903.8
Accretion into interest income		(40.7	)
Reclassification from non-accretable difference		2.4
Disposals and Other		(1.9	)
Balance, end of period	$	863.6

Troubled Debt Restructuring

The Company periodically modifies the terms of loans in response to borrowers’ difficulties. Modifications that include a financial concession to the borrower are accounted for as TDRs. A restructuring of a debt constitutes a TDR for purposes of ASC 310-40 when CIT, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider. A concession may be either by agreement between CIT and the debtor or imposed by law or a court of law. See the Company's 2019 Form 10-K for discussion of policies on TDRs.

The Interagency Statement offers some practical expedients for evaluating whether loan modifications that occur in response to the COVID-19 pandemic are TDRs. It indicates that a lender can conclude that a borrower is not experiencing financial difficulty if either (1) short-term (e.g., six months or less) modifications are made in response to the COVID-19 pandemic, such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant related to loans in which the borrower is less than 30 days past due on its contractual payments at the time a modification program is implemented, or (2) the modification or deferral program is mandated by the federal government or a state government (e.g., a state program that requires all institutions within that state to suspend mortgage payments for a specified period). Accordingly, any loan modification made in response to the COVID-19 pandemic that meets either of these practical expedients would not be considered a TDR because the borrower is not experiencing financial difficulty.

Modified loans that meet the definition of a TDR are subject to the Company's individually reviewed loans policy.

The following table presents recorded investment of TDRs, excluding those within a trial modification period of $1.5 million at March 31, 2020 and $5.5 million at December 31, 2019, and those previously classified as PCI at December 31, 2019:

TDRs (dollars in millions)

	March 31, 2020						December 31, 2019
	Recorded Investment			% Total TDR			Recorded Investment			% Total TDR
Commercial Banking	$	123.1			86	%	$	129.5			87	%
Consumer Banking		19.6			14	%		19.3			13	%
Total	$	142.7			100	%	$	148.8			100	%
Percent non-accrual		72	%					71	%

Modifications (dollars in millions)

	Quarters Ended March 31,
	2020		2019
Recorded investment related to modifications qualifying as TDRs that occurred during the quarters	$	51.4	$	10.0
Recorded investment at the time of default of TDRs that experienced a payment default (payment default is one missed payment) during the quarters and for which the payment default occurred within one year of the modification	$	0.7	$	0.8

There were $18.2 million and $23.6 million as of March 31, 2020 and December 31, 2019, respectively, of commitments to lend additional funds to borrowers whose loan terms have been modified in TDRs.

The financial impact of the various modification strategies that the Company employs in response to borrower difficulties is presented below. Although the focus is on the March 31, 2020 amounts, the overall nature and impact of modification programs were comparable in the prior year period.

Modifications qualifying as TDRs based upon recorded investment at March 31, 2020 were comprised of payment deferrals (49%) and covenant relief and/or other (51%). At December 31, 2019, TDR recorded investment was comprised of payment deferrals (52%) and covenant relief and/or other (48%).

▪	Payment deferrals result in lower net present value of cash flows, if not accompanied by additional interest or fees, and increased provision for credit losses to the extent applicable. The financial impact of these modifications is not significant given the moderate length of deferral periods.

▪

Interest rate reductions result in lower amounts of interest being charged to the customer, but are a relatively small part of the Company’s restructuring programs. The weighted average change in interest rates for all TDRs occurring during the quarters ended March 31, 2020 and 2019 was not significant.

▪

Debt forgiveness, or the reduction in amount owed by borrower, results in incremental provision for credit losses, in the form of higher charge-offs. While these types of modifications have the greatest individual impact on the allowance, the amounts of principal forgiveness for TDRs occurring during quarters ended March 31, 2020 and 2019 was not significant, as debt forgiveness is a relatively small component of the Company’s modification programs.

▪	The other elements of the Company’s modification programs that are not TDRs do not have a significant impact on financial results given their relative size, or do not have a direct financial impact, as in the case of covenant changes.