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

6 Months Ended

Jun. 30, 2020

Schedule of changes in the allowance for credit losses

The following table presents a summary of changes in the ALLL and the reserve for unfunded lending commitments for the three and six months ended June 30, 2020:



	Three Months Ended June 30, 2020									Six Months Ended June 30, 2020
(in millions)	Commercial			Retail			Total			Commercial			Retail			Total
Allowance for loan and lease losses, beginning of period		$752			$1,419			$2,171			$674			$578			$1,252
Cumulative effect of change in accounting principle	—			—			—			(176		)	629			453
Allowance for loan and lease losses, beginning of period, adjusted	752			1,419			2,171			498			1,207			1,705
Charge-offs	(74		)	(106		)	(180		)	(121		)	(233		)	(354		)
Recoveries	3			30			33			6			64			70
Net charge-offs	(71		)	(76		)	(147		)	(115		)	(169		)	(284		)
Provision charged to income	554			(130		)	424			852			175			1,027
Allowance for loan and lease losses, end of period		$1,235			$1,213			$2,448			$1,235			$1,213			$2,448

Reserve for unfunded lending commitments, beginning of period		$38			$1			$39			$44			$—			$44
Cumulative effective of change in accounting principle	—			—			—			(3		)	1			(2		)
Reserve for unfunded lending commitments, beginning of period, adjusted	38			1			39			41			1			42
Provision for unfunded lending commitments	31			9			40			28			9			37
Reserve for unfunded lending commitments, end of period		$69			$10			$79			$69			$10			$79

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



	December 31, 2019						January 1, 2020							June 30, 2020
(in millions)	Amortized Cost Basis		ACL Balance		Coverage		Impact of Adoption of CECL			ACL Balance		Coverage		Amortized Cost Basis		ACL Balance		Coverage
Commercial⁽¹⁾		$41,479		$575	1.4	%		($199	)		$376	0.9	%		$48,017		$847	1.8	%
Commercial real estate	13,522		124		0.9		(57		)	67		0.5		14,485		330		2.3
Leases	2,537		19		0.7		77			96		3.8		2,428		127		5.2
Total commercial loans and leases	57,538		718		1.2		(179		)	539		0.9		64,930		1,304		2.0
Residential	19,083		35		0.2		95			130		0.7		19,245		104		0.5
Home equity	13,154		83		0.6		73			156		1.2		12,541		143		1.1
Automobile	12,120		123		1.0		83			206		1.7		12,028		277		2.3
Education	10,347		116		1.1		298			414		4.0		10,591		312		2.9
Other retail	6,846		221		3.2		81			302		4.4		6,378		387		6.1
Total retail loans	61,550		578		0.9		630			1,208		2.0		60,783		1,223		2.0
Total loans and leases		$119,088		$1,296	1.1	%		$451			$1,747	1.5	%		$125,713		$2,527	2.0	%

⁽¹⁾The commercial coverage ratio includes a 19 basis point reduction associated with PPP loans as of June 30, 2020.

In addition to the adoption of CECL, macroeconomic assumptions shifted as the COVID-19 pandemic and related economic impacts surfaced during the quarter ended March 31, 2020, resulting in a significant impact to the ACL. The significant increase in the ACL as of June 30, 2020 as compared to the January 1, 2020 ACL was driven by the COVID-19 pandemic and the resulting economic impacts, with a total reserve build of $780 million and an ending balance of $2.5 billion.

To determine the ACL as of June 30, 2020, the Company utilized the Moody’s May 13th Baseline scenario to integrate the effects of COVID-19 in the Company’s loss estimates, which reflected a second quarter 2020 decline in GDP of approximately 33%, with peak unemployment of approximately 15% followed by a gradual recovery in the second half of 2020. This scenario was more severe than first quarter 2020 which had second quarter 2020 GDP down approximately 18% and peak unemployment of approximately 9%. Estimated losses were adjusted for the expected benefit of COVID-19-related fiscal and monetary stimulus measures and the expected beneficial impacts of the Company’s own customer assistance actions. These actions include forbearance and other customer accommodation efforts encouraged by the CARES Act and regulatory interagency guidance that the Company believes will stabilize credit profiles in both its commercial and retail portfolios.

The following table presents a summary of changes in the ALLL and the reserve for unfunded lending commitments for the three and six months ended June 30, 2019:



	Three Months Ended June 30, 2019									Six Months Ended June 30, 2019
(in millions)	Commercial			Retail			Total			Commercial			Retail			Total
Allowance for loan and lease losses, beginning of period		$691			$554			$1,245			$690			$552			$1,242
Charge-offs	(45		)	(111		)	(156		)	(71		)	(223		)	(294		)
Recoveries	12			38			50			14			85			99
Net charge-offs	(33		)	(73		)	(106		)	(57		)	(138		)	(195		)
Provision charged to income	22			66			88			47			133			180
Allowance for loan and lease losses, end of period		$680			$547			$1,227			$680			$547			$1,227

Reserve for unfunded lending commitments, beginning of period		$84			$—		84				$91			$—			$91
Provision for unfunded lending commitments	9			—			9			2			—			2
Reserve for unfunded lending commitments, end of period	93			—			93				$93			$—			$93

Credit Quality Indicators

Loan and lease por

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 June 30, 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
Pass⁽¹⁾		$6,585		$7,127		$5,054		$2,897		$1,564		$2,724		$17,515		$393		$43,859
Special Mention	159		245		287		131		126		209		1,110		22		2,289
Substandard	92		89		238		120		119		119		702		19		1,498
Doubtful	8		26		9		49		5		97		173		4		371
Total commercial	6,844		7,487		5,588		3,197		1,814		3,149		19,500		438		48,017
Commercial real estate
Pass	1,227		3,375		3,674		1,792		1,037		1,152		1,192		—		13,449
Special Mention	31		70		145		132		64		82		77		—		601
Substandard	—		58		106		2		56		3		149		—		374
Doubtful	—		38		16		5		—		2		—		—		61
Total commercial real estate	1,258		3,541		3,941		1,931		1,157		1,239		1,418		—		14,485
Leases
Pass	263		351		275		184		236		1,007		—		—		2,316
Special Mention	—		2		5		6		4		1		—		—		18
Substandard	—		2		3		6		4		1		—		—		16
Doubtful	—		4		30		1		14		29		—		—		78
Total leases	263		359		313		197		258		1,038		—		—		2,428
Total commercial loans and leases
Pass	8,075		10,853		9,003		4,873		2,837		4,883		18,707		393		59,624
Special Mention	190		317		437		269		194		292		1,187		22		2,908
Substandard	92		149		347		128		179		123		851		19		1,888
Doubtful	8		68		55		55		19		128		173		4		510
Total commercial loans and leases		$8,365		$11,387		$9,842		$5,325		$3,229		$5,426		$20,918		$438		$64,930

⁽¹⁾ Includes $4.7 billion of PPP loans primarily designated as pass that are fully guaranteed by the SBA originating in 2020.

For retail loans, Citizens utilizes credit scores provided by FICO which are generally refreshed on a quarterly basis and the loan’s payment and delinquency status to monitor credit quality. 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, as of June 30, 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+		$1,067		$2,018		$876		$1,488		$1,986		$2,353		$—		$—		$9,788
740-799	1,574		1,594		520		677		858		1,059		—		—		6,282
680-739	387		459		242		226		329		556		—		—		2,199
620-679	46		105		40		58		89		240		—		—		578
<620	1		21		36		48		55		221		—		—		382
No FICO available⁽¹⁾	3		1		—		—		—		12		—		—		16
Total residential mortgages	3,078		4,198		1,714		2,497		3,317		4,441		—		—		19,245
Home equity
800+	2		10		14		9		6		269		4,331		379		5,020
740-799	1		7		7		5		5		216		3,164		345		3,750
680-739	—		3		6		12		7		213		1,730		304		2,275
620-679	—		3		10		20		11		150		480		203		877
<620	—		4		11		33		20		153		170		227		618
No FICO available⁽¹⁾	—		—		—		—		—		—		1		—		1
Total home equity	3		27		48		79		49		1,001		9,876		1,458		12,541
Automobile
800+	550		924		521		412		255		131		—		—		2,793
740-799	740		1,218		679		466		261		124		—		—		3,488
680-739	667		1,126		600		384		209		98		—		—		3,084
620-679	332		646		342		215		123		64		—		—		1,722
<620	52		268		231		186		121		69		—		—		927
No FICO available⁽¹⁾	2		—		—		—		—		12		—		—		14
Total automobile	2,343		4,182		2,373		1,663		969		498		—		—		12,028
Education
800+	651		1,165		773		751		601		811		—		—		4,752
740-799	820		1,199		627		443		314		475		—		—		3,878
680-739	267		424		231		163		117		258		—		—		1,460
620-679	20		59		46		38		34		119		—		—		316
<620	1		9		15		16		13		67		—		—		121
No FICO available⁽¹⁾	—		—		—		—		—		64		—		—		64
Total education	1,759		2,856		1,692		1,411		1,079		1,794		—		—		10,591
Other retail
800+	239		534		209		87		20		54		293		—		1,436
740-799	339		726		268		116		28		39		613		2		2,131
680-739	266		500		178		74		16		18		579		6		1,637
620-679	142		204		66		24		4		8		196		7		651
<620	13		60		34		12		2		4		95		10		230
No FICO available⁽¹⁾	39		1		—		—		—		—		251		2		293
Total other retail	1,038		2,025		755		313		70		123		2,027		27		6,378
Retail
800+	2,509		4,651		2,393		2,747		2,868		3,618		4,624		379		23,789
740-799	3,474		4,744		2,101		1,707		1,466		1,913		3,777		347		19,529
680-739	1,587		2,512		1,257		859		678		1,143		2,309		310		10,655
620-679	540		1,017		504		355		261		581		676		210		4,144
<620	67		362		327		295		211		514		265		237		2,278
No FICO available⁽¹⁾	44		2		—		—		—		88		252		2		388
Total retail		$8,221		$13,288		$6,582		$5,963		$5,484		$7,857		$11,903		$1,485		$60,783

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

Schedule of nonaccrual loans and leases and loans accruing and 90 days or more past due

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



	As of June 30, 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		$366		$33		$40		$240
Commercial real estate	61		—		6		2
Leases	79		—		—		3
Total commercial loans and leases	506		33		46		245
Residential mortgages	112		13		54		93
Home equity	254		—		86		246
Automobile	67		—		18		67
Education	18		2		4		18
Other retail	33		7		—		34
Total retail	484		22		162		458
Total loans and leases		$990		$55		$208		$703

Schedule of accruing and nonaccruing past due amounts

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



	June 30, 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		$47,768		$60		$30		$159		$48,017		$41,340		$45		$27		$67		$41,479
Commercial real estate	14,340		92		52		1		14,485		13,520		1		1		—		13,522
Leases	2,347		5		12		64		2,428		2,498		37		—		2		2,537
Total commercial loans and leases	64,455		157		94		224		64,930		57,358		83		28		69		57,538
Residential mortgages	19,044		65		33		103		19,245		18,947		35		17		84		19,083
Home equity	12,212		71		41		217		12,541		12,834		91		40		189		13,154
Automobile	11,784		162		66		16		12,028		11,788		227		81		24		12,120
Education	10,548		25		12		6		10,591		10,290		30		15		12		10,347
Other retail	6,285		31		25		37		6,378		6,729		45		31		41		6,846
Total retail loans	59,873		354		177		379		60,783		60,588		428		184		350		61,550
Total		$124,328		$511		$271		$603		$125,713		$117,946		$511		$212		$419		$119,088

Troubled debt restructurings on financing receivables

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



(in millions)	June 30, 2020		December 31, 2019
Commercial		$265		$297
Retail	700		667
Unfunded commitments related to TDRs	52		42

The following tables below summarize how loans were modified during the six months ended June 30, 2020 and 2019. The reported balances represent the post-modification outstanding amortized cost basis and can include loans that became TDRs during the period and were paid off in full, charged off, or sold prior to period end. Pre-modification balances for modified loans approximate the post-modification balances shown.



	Three Months Ended June 30, 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	—		$—	4		$3	15		$53
Commercial real estate	—	—		—	—		—	—
Total commercial loans	—	—		4	3		15	53
Residential mortgages	54	11		71	14		20	3
Home equity	27	2		49	4		190	11
Automobile	36	—		1	—		910	15
Education	—	—		—	—		142	4
Other retail	645	3		—	—		65	1
Total retail loans	762	16		121	18		1,327	34
Total	762		$16	125		$21	1,342		$87



	Three Months Ended June 30, 2019
	Primary Modification Types
	Interest Rate Reduction⁽¹⁾			Maturity Extension⁽²⁾			Other⁽³⁾
(dollars in millions)	Number of Contracts	Amortized Cost		Number of Contracts	Amortized Cost		Number of Contracts	Amortized Cost
Commercial	1		$—	7		$—	6		$47
Commercial real estate	—	—		1	—		—	—
Total commercial loans	1	—		8	—		6	47
Residential mortgages	9	2		10	1		32	5
Home equity	49	5		15	3		100	6
Automobile	40	1		7	—		335	5
Education	—	—		—	—		13	1
Other retail	941	5		—	—		143	—
Total retail loans	1,039	13		32	4		623	17
Total	1,040		$13	40		$4	629		$64



	Six Months Ended June 30, 2020
	Primary Modification Types
	Interest Rate Reduction⁽¹⁾			Maturity Extension⁽²⁾			Other⁽³⁾
(dollars in millions)	Number of Contracts	Amortized Cost		Number of Contracts	Amortized Cost		Number of Contracts	Amortized Cost
Commercial	—		$—	6		$3	32		$94
Commercial real estate	—	—		—	—		—	—
Total commercial loans	—	—		6	3		32	94
Residential mortgages	92	17		108	21		41	7
Home equity	73	6		55	4		261	15
Automobile	83	1		1	—		1,093	17
Education	—	—		—	—		233	6
Other retail	1,506	7		—	—		177	2
Total retail loans	1,754	31		164	25		1,805	47
Total	1,754		$31	170		$28	1,837		$141



	Six Months Ended June 30, 2019
	Primary Modification Types
	Interest Rate Reduction⁽¹⁾			Maturity Extension⁽²⁾			Other⁽³⁾
(dollars in millions)	Number of Contracts	Amortized Cost		Number of Contracts	Amortized Cost		Number of Contracts	Amortized Cost
Commercial	1		$—	12		$1	18		$87
Commercial real estate	—	—		1	—		—	—
Total commercial loans	1	—		13	1		18	87
Residential mortgages	13	4		21	3		62	9
Home equity	85	9		50	9		238	15
Automobile	65	1		12	—		624	9
Education	—	—		—	—		80	3
Other retail	1,557	9		—	—		144	—
Total retail loans	1,720	23		83	12		1,148	36
Total	1,721		$23	96		$13	1,166		$123

⁽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:



	June 30, 2020
(in millions)	Residential Mortgages		Home Equity		Other Retail		Total
High loan-to-value		$456		$104		$—		$560
Interest-only/negative amortization	2,324		—		—		2,324
Low introductory rate	—		—		208		208
Multiple characteristics and other	3		—		—		3
Total		$2,783		$104		$208		$3,095



	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