ALLOWANCE FOR CREDIT LOSSES, NONACCRUAL LOANS AND LEASES, AND CONCENTRATIONS OF CREDIT RISK (Tables)

3 Months Ended

Mar. 31, 2023

Receivables [Abstract]

Schedule of changes in the allowance for credit losses

The following table presents a summary of changes in the ACL for the three months ended March 31, 2023:

	Three Months Ended March 31, 2023
(dollars in millions)	Commercial	Retail	Total
Allowance for loan and lease losses, beginning of period	$1,060	$923	$1,983
Charge-offs	(59)	(112)	(171)
Recoveries	7	31	38
Net charge-offs	(52)	(81)	(133)
Provision expense (benefit) for loans and leases	103	64	167
Allowance for loan and lease losses, end of period	1,111	906	2,017
Allowance for unfunded lending commitments, beginning of period	207	50	257
Provision expense (benefit) for unfunded lending commitments	8	(7)	1
Allowance for unfunded lending commitments, end of period	215	43	258
Total allowance for credit losses, end of period	$1,326	$949	$2,275

The following table presents a summary of changes in the ACL for the three months ended March 31, 2022:

	Three Months Ended March 31, 2022
(dollars in millions)	Commercial	Retail	Total
Allowance for loan and lease losses, beginning of period	$821	$937	$1,758
Charge-offs	(14)	(87)	(101)
Recoveries	3	39	42
Net charge-offs	(11)	(48)	(59)
Provision expense (benefit) for loans and leases(1)	(32)	53	21
Allowance for loan and lease losses, end of period	778	942	1,720
Allowance for unfunded lending commitments, beginning of period	153	23	176
Provision expense (benefit) for unfunded lending commitments	(6)	(12)	(18)
Allowance for unfunded lending commitments, end of period	147	11	158
Total allowance for credit losses, end of period	$925	$953	$1,878

(1) Includes $24 million of initial provision expense related to non-PCD loans and leases acquired from HSBC for the three months ended March 31, 2022.

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 March 31, 2023, and gross charge-offs by vintage date for the three months ended March 31, 2023:

	Term Loans by Origination Year						Revolving Loans
(dollars in millions)	2023	2022	2021	2020	2019	Prior to 2019	Within the Revolving Period	Converted to Term	Total
Commercial and industrial
Pass	$1,357	$7,665	$7,610	$1,832	$1,766	$2,791	$23,680	$129	$46,830
Special Mention	—	192	242	127	15	196	382	—	1,154
Substandard	36	286	279	216	178	397	811	12	2,215
Doubtful	18	34	23	3	7	88	74	4	251
Total commercial and industrial	1,411	8,177	8,154	2,178	1,966	3,472	24,947	145	50,450
Gross charge-offs	—	—	27	4	—	—	24	—	55
Commercial real estate
Pass	603	5,375	6,486	3,284	2,827	5,124	1,585	4	25,288
Special Mention	—	489	95	309	274	279	11	—	1,457
Substandard	—	154	82	160	574	1,119	25	—	2,114
Doubtful	—	8	1	6	88	37	—	—	140
Total commercial real estate	603	6,026	6,664	3,759	3,763	6,559	1,621	4	28,999
Gross charge-offs	—	—	—	—	1	3	—	—	4
Leases
Pass	59	240	331	230	85	421	—	—	1,366
Special Mention	3	2	6	4	2	—	—	—	17
Substandard	—	9	11	3	8	3	—	—	34
Doubtful	—	—	—	—	—	—	—	—	—
Total leases	62	251	348	237	95	424	—	—	1,417
Gross charge-offs	—	—	—	—	—	—	—	—	—
Total commercial
Pass	2,019	13,280	14,427	5,346	4,678	8,336	25,265	133	73,484
Special Mention	3	683	343	440	291	475	393	—	2,628
Substandard	36	449	372	379	760	1,519	836	12	4,363
Doubtful	18	42	24	9	95	125	74	4	391
Total commercial	$2,076	$14,454	$15,166	$6,174	$5,824	$10,455	$26,568	$149	$80,866
Gross charge-offs	$—	$—	$27	$4	$1	$3	$24	$—	$59

The following table presents the amortized cost basis of commercial loans and leases by vintage date and regulatory classification rating as of December 31, 2022:

	Term Loans by Origination Year						Revolving Loans
(dollars in millions)	2022	2021	2020	2019	2018	Prior to 2018	Within the Revolving Period	Converted to Term	Total
Commercial and industrial
Pass	$8,304	$8,469	$2,224	$2,074	$1,334	$1,952	$24,211	$148	$48,716
Special Mention	124	189	120	74	48	153	364	—	1,072
Substandard	150	218	203	255	99	349	597	14	1,885
Doubtful	10	14	1	5	41	14	76	2	163
Total commercial and industrial	8,588	8,890	2,548	2,408	1,522	2,468	25,248	164	51,836
Commercial real estate
Pass	5,767	6,442	3,639	3,066	2,145	3,536	1,888	3	26,486
Special Mention	1	119	103	390	99	113	62	—	887
Substandard	92	18	79	253	350	610	23	—	1,425
Doubtful	—	2	9	55	—	1	—	—	67
Total commercial real estate	5,860	6,581	3,830	3,764	2,594	4,260	1,973	3	28,865
Leases
Pass	263	363	250	99	128	345	—	—	1,448
Special Mention	4	5	2	6	1	3	—	—	21
Substandard	—	4	3	3	—	—	—	—	10
Doubtful	—	—	—	—	—	—	—	—	—
Total leases	267	372	255	108	129	348	—	—	1,479
Total commercial
Pass	14,334	15,274	6,113	5,239	3,607	5,833	26,099	151	76,650
Special Mention	129	313	225	470	148	269	426	—	1,980
Substandard	242	240	285	511	449	959	620	14	3,320
Doubtful	10	16	10	60	41	15	76	2	230
Total commercial	$14,715	$15,843	$6,633	$6,280	$4,245	$7,076	$27,221	$167	$82,180

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

The following table presents the amortized cost basis of retail loans by vintage date and current FICO score as of March 31, 2023, and gross charge-offs by vintage date for the three months ended March 31, 2023:

	Term Loans by Origination Year						Revolving Loans
(dollars in millions)	2023	2022	2021	2020	2019	Prior to 2019	Within the Revolving Period	Converted to Term	Total
Residential mortgages
800+	$133	$2,528	$5,105	$3,202	$1,167	$3,289	$—	$—	$15,424
740-799	344	2,225	2,850	1,566	628	1,747	—	—	9,360
680-739	87	671	863	493	293	955	—	—	3,362
620-679	18	139	158	99	139	492	—	—	1,045
<620	—	25	81	92	167	588	—	—	953
No FICO available(1)	1	—	2	2	3	210	—	—	218
Total residential mortgages	583	5,588	9,059	5,454	2,397	7,281	—	—	30,362
Gross charge-offs	—	—	—	—	—	1	—	—	1
Home equity
800+	—	4	5	2	5	108	4,957	257	5,338
740-799	—	1	2	1	4	98	4,306	263	4,675
680-739	—	1	1	1	6	115	2,386	229	2,739
620-679	—	—	1	2	10	98	628	144	883
<620	—	—	—	2	10	100	219	169	500
Total home equity	—	6	9	8	35	519	12,496	1,062	14,135
Gross charge-offs	—	—	—	—	—	1	1	—	2
Automobile
800+	95	625	1,362	524	276	130	—	—	3,012
740-799	141	877	1,434	567	290	141	—	—	3,450
680-739	154	820	1,054	400	214	110	—	—	2,752
620-679	94	502	519	183	114	69	—	—	1,481
<620	14	217	316	125	97	69	—	—	838
No FICO available(1)	2	—	—	—	—	—	—	—	2
Total automobile	500	3,041	4,685	1,799	991	519	—	—	11,535
Gross charge-offs	—	7	11	4	4	4	—	—	30
Education
800+	74	652	1,710	1,522	668	1,391	—	—	6,017
740-799	106	771	1,248	1,042	442	808	—	—	4,417
680-739	53	361	396	331	159	362	—	—	1,662
620-679	7	69	74	61	38	125	—	—	374
<620	—	12	18	21	12	57	—	—	120
No FICO available(1)	3	1	—	—	—	40	—	—	44
Total education	243	1,866	3,446	2,977	1,319	2,783	—	—	12,634
Gross charge-offs	—	2	3	4	3	11	—	—	23
Other retail
800+	16	163	82	74	37	40	475	—	887
740-799	22	195	101	94	51	44	966	1	1,474
680-739	18	149	85	82	40	27	1,000	3	1,404
620-679	13	92	50	42	14	9	435	4	659
<620	2	42	27	22	7	4	210	5	319
No FICO available(1)	2	5	1	2	—	—	402	1	413
Total other retail	73	646	346	316	149	124	3,488	14	5,156
Gross charge-offs	5	15	4	3	3	3	23	—	56
Total retail
800+	318	3,972	8,264	5,324	2,153	4,958	5,432	257	30,678
740-799	613	4,069	5,635	3,270	1,415	2,838	5,272	264	23,376
680-739	312	2,002	2,399	1,307	712	1,569	3,386	232	11,919
620-679	132	802	802	387	315	793	1,063	148	4,442
<620	16	296	442	262	293	818	429	174	2,730
No FICO available(1)	8	6	3	4	3	250	402	1	677
Total retail	$1,399	$11,147	$17,545	$10,554	$4,891	$11,226	$15,984	$1,076	$73,822
Gross charge-offs	$5	$24	$18	$11	$10	$20	$24	$—	$112

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

The following table presents the amortized cost basis of retail loans by vintage date and current FICO score as of December 31, 2022:

	Term Loans by Origination Year						Revolving Loans
(dollars in millions)	2022	2021	2020	2019	2018	Prior to 2018	Within the Revolving Period	Converted to Term	Total
Residential mortgages
800+	$2,132	$4,943	$3,143	$1,180	$363	$3,081	$—	$—	$14,842
740-799	2,376	2,991	1,660	638	257	1,635	—	—	9,557
680-739	769	899	502	308	149	851	—	—	3,478
620-679	125	168	135	138	99	422	—	—	1,087
<620	17	68	77	165	147	455	—	—	929
No FICO available(1)	2	2	2	3	2	17	—	—	28
Total residential mortgages	5,421	9,071	5,519	2,432	1,017	6,461	—	—	29,921
Home equity
800+	4	5	2	5	6	110	4,958	267	5,357
740-799	2	2	1	4	6	97	4,350	274	4,736
680-739	1	1	1	6	11	114	2,296	234	2,664
620-679	—	1	2	9	16	93	558	143	822
<620	—	—	2	12	18	82	178	172	464
Total home equity	7	9	8	36	57	496	12,340	1,090	14,043
Automobile
800+	650	1,453	584	324	120	54	—	—	3,185
740-799	962	1,606	649	343	134	56	—	—	3,750
680-739	920	1,187	460	254	102	44	—	—	2,967
620-679	554	586	205	133	62	28	—	—	1,568
<620	188	309	130	106	56	31	—	—	820
No FICO available(1)	2	—	—	—	—	—	—	—	2
Total automobile	3,276	5,141	2,028	1,160	474	213	—	—	12,292
Education
800+	548	1,720	1,567	694	410	1,068	—	—	6,007
740-799	735	1,351	1,126	486	267	609	—	—	4,574
680-739	363	423	356	170	103	288	—	—	1,703
620-679	54	76	62	38	29	102	—	—	361
<620	6	16	20	12	11	50	—	—	115
No FICO available(1)	6	—	—	—	—	42	—	—	48
Total education	1,712	3,586	3,131	1,400	820	2,159	—	—	12,808
Other retail
800+	182	105	93	48	25	27	491	—	971
740-799	230	134	121	68	31	25	974	1	1,584
680-739	175	109	103	52	21	14	993	4	1,471
620-679	108	65	52	18	8	4	435	4	694
<620	35	30	25	9	4	2	190	6	301
No FICO available(1)	12	1	3	—	—	—	380	1	397
Total other retail	742	444	397	195	89	72	3,463	16	5,418
Total retail
800+	3,516	8,226	5,389	2,251	924	4,340	5,449	267	30,362
740-799	4,305	6,084	3,557	1,539	695	2,422	5,324	275	24,201
680-739	2,228	2,619	1,422	790	386	1,311	3,289	238	12,283
620-679	841	896	456	336	214	649	993	147	4,532
<620	246	423	254	304	236	620	368	178	2,629
No FICO available(1)	22	3	5	3	2	59	380	1	475
Total retail	$11,158	$18,251	$11,083	$5,223	$2,457	$9,401	$15,803	$1,106	$74,482

(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 tables present an aging analysis of accruing loans and leases, and nonaccrual loans and leases as of March 31, 2023 and December 31, 2022:

	March 31, 2023
		Days Past Due and Accruing
(dollars in millions)	Current	30-59	60-89	90+	Nonaccrual	Total	Nonaccrual with no related ACL
Commercial and industrial	$50,007	$119	$6	$21	$297	$50,450	$63
Commercial real estate	28,558	231	7	63	140	28,999	1
Leases	1,416	1	—	—	—	1,417	—
Total commercial	79,981	351	13	84	437	80,866	64
Residential mortgages(1)	29,556	202	74	314	216	30,362	162
Home equity	13,804	68	23	—	240	14,135	180
Automobile	11,323	128	34	—	50	11,535	8
Education	12,561	33	14	3	23	12,634	3
Other retail	5,034	42	27	23	30	5,156	1
Total retail	72,278	473	172	340	559	73,822	354
Total	$152,259	$824	$185	$424	$996	$154,688	$418

	December 31, 2022
		Days Past Due and Accruing
(dollars in millions)	Current	30-59	60-89	90+	Nonaccrual	Total	Nonaccrual with no related ACL
Commercial and industrial	$51,389	$152	$25	$21	$249	$51,836	$64
Commercial real estate	28,665	51	45	1	103	28,865	7
Leases	1,475	4	—	—	—	1,479	—
Total commercial	81,529	207	70	22	352	82,180	71
Residential mortgages(1)	29,228	95	45	319	234	29,921	187
Home equity	13,719	64	19	—	241	14,043	185
Automobile	12,039	152	45	—	56	12,292	9
Education	12,718	36	17	4	33	12,808	3
Other retail	5,294	44	30	22	28	5,418	1
Total retail	72,998	391	156	345	592	74,482	385
Total	$154,527	$598	$226	$367	$944	$156,662	$456

(1) 90+ days past due and accruing includes $309 million and $316 million of loans fully or partially guaranteed by the FHA, VA, and USDA at March 31, 2023 and December 31, 2022, respectively.

Troubled debt restructurings on financing receivables

The following table presents the period-end amortized cost of loans to borrowers experiencing financial difficulty that were modified during the three months ended March 31, 2023, disaggregated by class of financing receivable and modification type. The modification type reflects the cumulative effect of all FDMs received during the indicated period.

	Three Months Ended March 31, 2023
(dollars in millions)	Interest Rate Reduction	Term Extension	Payment Delay	Principal Forgiveness	Interest Rate Reduction and Term Extension	Term Extension and Payment Delay	Total	Total as a % of Loan Class(1)
Commercial and industrial	$—	$44	$32	$—	$—	$21	$97	0.19	%
Commercial real estate	—	55	—	—	—	—	55	0.19
Leases	—	—	—	—	—	—	—	—
Total commercial	—	99	32	—	—	21	152	0.19
Residential mortgages	2	19	—	—	3	—	24	0.08
Home equity	—	1	—	—	2	—	3	0.02
Automobile	—	—	—	—	—	—	—	—
Education	1	—	1	—	—	—	2	0.02
Other retail	3	—	—	—	—	—	3	0.06
Total retail	6	20	1	—	5	—	32	0.04
Total(2)	$6	$119	$33	$—	$5	$21	$184	0.12	%

(1) Represents the total amortized cost as of period-end divided by the period-end amortized cost of the corresponding loan class. Accrued interest receivable is excluded from amortized cost and is immaterial.

(2) Excludes the period-end amortized cost of $7 million relative to borrowers that had their debt discharged by means of a Chapter 7 bankruptcy filing during the three months ended March 31, 2023.

The following table presents the financial effect of loans to borrowers experiencing financial difficulty that were modified during the three months ended March 31, 2023, disaggregated by class of financing receivable.

	Three Months Ended March 31, 2023
(amounts in whole dollars)	Weighted-Average Interest Rate Reduction(1)(5)		Weighted-Average Term Extension (in Months)(2)(5)	Weighted-Average Payment Deferral(3)(5)	Amount of Principal Forgiven(4)
Commercial and industrial	4.05	%	9	$658,467	$—
Commercial real estate	—		14	—	—
Leases	—		—	—	—
Residential mortgages	1.47		44	—	—
Home equity	2.02		139	3,863	—
Automobile	2.76		23	1,005	2,702
Education	5.77		—	3,037	—
Other retail	17.79		22	—	1,156,256

(1) Represents the weighted-average reduction of the loan’s interest rate.

(2) Represents the weighted-average extension of a loan’s maturity date.

(3) Represents the weighted-average amount of payments delayed as a result of the loan modification.

(4) Amounts are recorded as charge-offs.

(5) Weighted based on period-end amortized cost.

The following table presents an aging analysis of the period-end amortized cost of loans to borrowers experiencing financial difficulty that were modified during the three months ended March 31, 2023, disaggregated by class of financing receivable. A loan in a forbearance or repayment plan is reported as past due according to its contractual terms until contractually modified. Subsequent to modification, it is reported as past due based on its restructured terms.

	March 31, 2023
		Days Past Due and Accruing
(dollars in millions)	Current	30-59	60-89	90+	Nonaccrual	Total
Commercial and industrial	$76	$—	$—	$—	$21	$97
Commercial real estate	55	—	—	—	—	55
Leases	—	—	—	—	—	—
Total commercial	131	—	—	—	21	152
Residential mortgages	16	4	—	2	2	24
Home equity	1	—	—	—	2	3
Automobile	—	—	—	—	—	—
Education	2	—	—	—	—	2
Other retail	3	—	—	—	—	3
Total retail	22	4	—	2	4	32
Total	$153	$4	$—	$2	$25	$184

The following tables summarize loans modified during the three months ended March 31, 2022. The balances represent the post-modification outstanding amortized cost basis and may include loans that became TDRs during the period and were subsequently 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 March 31, 2022
		Amortized Cost Basis
(dollars in millions)	Number of Contracts	Interest Rate Reduction(1)	Maturity Extension(2)	Other(3)	Total
Commercial and industrial	10	$—	$24	$7	$31
Total commercial	10	—	24	7	31
Residential mortgages	1,181	22	14	214	250
Home equity	178	2	—	9	11
Automobile	165	1	—	1	2
Education	143	—	—	6	6
Other retail	521	2	—	—	2
Total retail	2,188	27	14	230	271
Total	2,198	$27	$38	$237	$302

(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.

Financing receivable, troubled debt restructuring, default

The following table provides a summary of TDRs that defaulted (became 90 days or more past due) within 12 months of their modification date:

	Three Months Ended March 31,
(dollars in millions)	2022
Commercial TDRs	$—
Retail TDRs(1)	15
Total	$15

(1) Includes $10 million of loans fully or partially government guaranteed by the FHA, VA, and USDA for the three months ended March 31, 2022.