CREDIT QUALITY AND THE ALLOWANCE FOR CREDIT LOSSES

9 Months Ended

Sep. 30, 2023

Receivables [Abstract]

CREDIT QUALITY AND THE ALLOWANCE FOR CREDIT LOSSES

NOTE 4 - CREDIT QUALITY AND THE ALLOWANCE FOR CREDIT LOSSES

Allowance for Credit Losses    

Management’s estimate of expected credit losses in the Company’s loan and lease portfolios is recorded in the ALLL and the allowance for unfunded lending commitments (collectively the ACL). The Company’s estimate of expected credit losses considers extensive historical loss experience, including the impact of loss mitigation and restructuring programs that the Company offers to borrowers experiencing financial difficulty, as well as projected loss severity as a result of loan default.

Effective January 1, 2023, the Company adopted new accounting guidance that eliminates the separate recognition and measurement of TDRs. Upon adoption of this guidance, the ACL for loans previously identified as TDRs is measured at the product level based on post-modification credit attributes and use of an econometric model.

For a detailed discussion of the ACL reserve methodology and estimation techniques as of December 31, 2022, see Note 6 in the Company’s 2022 Form 10-K. There were no significant changes to the ACL reserve methodology during the nine months ended September 30, 2023.

The following table presents a summary of changes in the ACL for the three and nine months ended September 30, 2023:

	Three Months Ended September 30, 2023			Nine Months Ended September 30, 2023
(dollars in millions)	Commercial	Retail	Total	Commercial	Retail	Total
Allowance for loan and lease losses, beginning of period	$1,157	$887	$2,044	$1,060	$923	$1,983
Charge-offs	(74)	(117)	(191)	(212)	(339)	(551)
Recoveries	4	34	38	14	99	113
Net charge-offs	(70)	(83)	(153)	(198)	(240)	(438)
Provision expense (benefit) for loans and leases	146	43	189	371	164	535
Allowance for loan and lease losses, end of period	1,233	847	2,080	1,233	847	2,080
Allowance for unfunded lending commitments, beginning of period	213	42	255	207	50	257
Provision expense (benefit) for unfunded lending commitments	(21)	4	(17)	(15)	(4)	(19)
Allowance for unfunded lending commitments, end of period	192	46	238	192	46	238
Total allowance for credit losses, end of period	$1,425	$893	$2,318	$1,425	$893	$2,318

During the nine months ended September 30, 2023, net charge-offs of $438 million and a provision for expected credit losses of $516 million resulted in an increase of $78 million to the ACL.

Our ACL as of September 30, 2023 accounts for an economic forecast over our two-year reasonable and supportable period with implied peak unemployment of approximately 6% and peak-to-trough GDP decline of approximately 1.0%. This forecast reflects a mild recession over the two-year reasonable and supportable period.

The following table presents a summary of changes in the ACL for the three and nine months ended September 30, 2022:

	Three Months Ended September 30, 2022			Nine Months Ended September 30, 2022
(dollars in millions)	Commercial	Retail	Total	Commercial	Retail	Total
Allowance for loan and lease losses, beginning of period	$987	$977	$1,964	$821	$937	$1,758
Allowance on PCD loans and leases at acquisition	—	—	—	99	2	101
Charge-offs(1)	(22)	(94)	(116)	(49)	(259)	(308)
Recoveries	7	35	42	13	113	126
Net charge-offs	(15)	(59)	(74)	(36)	(146)	(182)
Provision expense (benefit) for loans and leases(2)	58	32	90	146	157	303
Allowance for loan and lease losses, end of period	1,030	950	1,980	1,030	950	1,980
Allowance for unfunded lending commitments, beginning of period	166	17	183	153	23	176
Provision expense (benefit) for unfunded lending commitments	6	27	33	18	21	39
Allowance on PCD unfunded lending commitments at acquisition	—	—	—	1	—	1
Allowance for unfunded lending commitments, end of period	172	44	216	172	44	216
Total allowance for credit losses, end of period	$1,202	$994	$2,196	$1,202	$994	$2,196

(1) Excludes $33 million of charge-offs previously taken by Investors or recognized upon completion of the Investors acquisition under purchase accounting for the nine months ended September 30, 2022. The initial allowance for loan and lease losses on PCD assets included these amounts and, after charging these amounts off upon acquisition, the net impact for PCD assets was $101 million of additional allowance for loan and lease losses.

(2) Includes $169 million of initial provision expense related to non-PCD loans and leases acquired from Investors and HSBC for the nine months ended September 30, 2022.

Credit Quality Indicators

The Company presents loan and lease portfolio segments and classes by credit quality indicator and vintage year. Citizens defines the vintage date for the purpose of this disclosure as the date of the most recent credit decision. Renewals are categorized as new credit decisions and reflect the renewal date as the vintage date, except for renewals of loans modified for borrowers experiencing financial difficulty, or FDMs, which are presented in the original vintage.

Citizens utilizes regulatory classification ratings to monitor credit quality for commercial loans and leases. For more information on regulatory classification ratings see Note 6 in the Company’s 2022 Form 10-K.

The following table presents the amortized cost basis of commercial loans and leases by vintage date and regulatory classification rating as of September 30, 2023, and gross charge-offs by vintage date for the nine months ended September 30, 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	$2,539	$6,979	$5,557	$1,459	$1,244	$2,217	$22,929	$52	$42,976
Special Mention	6	172	448	81	72	214	552	—	1,545
Substandard	—	285	320	207	112	314	742	10	1,990
Doubtful	—	26	41	9	4	102	56	4	242
Total commercial and industrial	2,545	7,462	6,366	1,756	1,432	2,847	24,279	66	46,753
Gross charge-offs	—	1	32	4	1	24	35	—	97
Commercial real estate
Pass	1,366	5,516	6,193	2,823	2,300	4,334	1,833	9	24,374
Special Mention	—	640	528	158	500	235	84	—	2,145
Substandard	—	244	157	540	468	947	141	—	2,497
Doubtful	—	92	2	9	147	217	3	—	470
Total commercial real estate	1,366	6,492	6,880	3,530	3,415	5,733	2,061	9	29,486
Gross charge-offs	—	—	—	51	11	53	—	—	115
Leases
Pass	67	182	295	202	69	323	—	—	1,138
Special Mention	—	28	1	1	2	—	—	—	32
Substandard	3	15	13	6	5	3	—	—	45
Doubtful	—	—	3	—	—	—	—	—	3
Total leases	70	225	312	209	76	326	—	—	1,218
Gross charge-offs	—	—	—	—	—	—	—	—	—
Total commercial
Pass	3,972	12,677	12,045	4,484	3,613	6,874	24,762	61	68,488
Special Mention	6	840	977	240	574	449	636	—	3,722
Substandard	3	544	490	753	585	1,264	883	10	4,532
Doubtful	—	118	46	18	151	319	59	4	715
Total commercial	$3,981	$14,179	$13,558	$5,495	$4,923	$8,906	$26,340	$75	$77,457
Gross charge-offs	$—	$1	$32	$55	$12	$77	$35	$—	$212

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 September 30, 2023, and gross charge-offs by vintage date for the nine months ended September 30, 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+	$620	$2,988	$5,167	$3,115	$1,141	$3,233	$—	$—	$16,264
740-799	987	1,990	2,645	1,487	618	1,699	—	—	9,426
680-739	272	652	771	458	277	855	—	—	3,285
620-679	44	133	164	96	108	459	—	—	1,004
<620	4	38	103	94	166	578	—	—	983
No FICO available(1)	—	—	2	1	3	15	—	—	21
Total residential mortgages	1,927	5,801	8,852	5,251	2,313	6,839	—	—	30,983
Gross charge-offs	—	—	—	—	1	2	—	—	3
Home equity
800+	—	4	4	2	5	95	5,084	236	5,430
740-799	—	2	2	1	4	89	4,539	249	4,886
680-739	—	—	1	2	4	98	2,569	207	2,881
620-679	—	1	1	2	9	83	688	134	918
<620	—	1	1	2	10	85	303	212	614
Total home equity	—	8	9	9	32	450	13,183	1,038	14,729
Gross charge-offs	—	—	—	—	—	2	6	—	8
Automobile
800+	85	573	1,165	421	198	68	—	—	2,510
740-799	146	740	1,164	433	203	74	—	—	2,760
680-739	163	647	808	295	145	57	—	—	2,115
620-679	107	362	389	130	78	37	—	—	1,103
<620	40	232	302	110	76	42	—	—	802
Total automobile	541	2,554	3,828	1,389	700	278	—	—	9,290
Gross charge-offs	—	24	31	11	9	7	—	—	82
Education
800+	254	674	1,670	1,460	625	1,247	—	—	5,930
740-799	304	717	1,108	908	389	717	—	—	4,143
680-739	123	308	350	282	137	314	—	—	1,514
620-679	21	64	68	57	34	111	—	—	355
<620	3	16	24	24	15	55	—	—	137
No FICO available(1)	18	—	—	—	—	37	—	—	55
Total education	723	1,779	3,220	2,731	1,200	2,481	—	—	12,134
Gross charge-offs	—	3	12	16	10	35	—	—	76
Other retail
800+	125	116	49	45	22	24	500	—	881
740-799	169	131	59	60	29	25	998	1	1,472
680-739	146	101	50	50	25	15	1,020	2	1,409
620-679	82	61	29	25	8	5	441	2	653
<620	15	38	20	16	5	3	246	3	346
No FICO available(1)	20	3	—	2	—	—	367	—	392
Total other retail	557	450	207	198	89	72	3,572	8	5,153
Gross charge-offs	36	22	7	6	8	7	84	—	170
Total retail
800+	1,084	4,355	8,055	5,043	1,991	4,667	5,584	236	31,015
740-799	1,606	3,580	4,978	2,889	1,243	2,604	5,537	250	22,687
680-739	704	1,708	1,980	1,087	588	1,339	3,589	209	11,204
620-679	254	621	651	310	237	695	1,129	136	4,033
<620	62	325	450	246	272	763	549	215	2,882
No FICO available(1)	38	3	2	3	3	52	367	—	468
Total retail	$3,748	$10,592	$16,116	$9,578	$4,334	$10,120	$16,755	$1,046	$72,289
Gross charge-offs	$36	$49	$50	$33	$28	$53	$90	$—	$339

(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).

Nonaccrual and Past Due Assets

The following tables present an aging analysis of accruing loans and leases, and nonaccrual loans and leases as of September 30, 2023 and December 31, 2022:

	September 30, 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	$46,475	$23	$9	$4	$242	$46,753	$43
Commercial real estate	28,896	75	42	3	470	29,486	48
Leases	1,215	—	—	—	3	1,218	—
Total commercial	76,586	98	51	7	715	77,457	91
Residential mortgages(1)	30,416	110	50	217	190	30,983	149
Home equity	14,351	82	28	—	268	14,729	179
Automobile	9,031	147	50	—	62	9,290	7
Education	12,035	47	26	3	23	12,134	2
Other retail	5,014	49	31	21	38	5,153	—
Total retail	70,847	435	185	241	581	72,289	337
Total	$147,433	$533	$236	$248	$1,296	$149,746	$428

	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 $216 million and $316 million of loans fully or partially guaranteed by the FHA, VA, and USDA at September 30, 2023 and December 31, 2022, respectively.

Interest income is generally not recognized for loans and leases that are on nonaccrual status. The Company reverses accrued interest receivable with a charge to interest income upon classifying a loan or lease as nonaccrual.

At September 30, 2023 and December 31, 2022, the Company had collateral-dependent residential mortgage and home equity loans totaling $542 million and $561 million, respectively. At September 30, 2023 and December 31, 2022, the Company had collateral-dependent commercial loans totaling $293 million and $21 million, respectively.

The amortized cost basis of mortgage loans collateralized by residential real estate for which formal foreclosure proceedings were in-process was $321 million and $250 million as of September 30, 2023 and December 31, 2022, respectively.

Loan Modifications to Borrowers Experiencing Financial Difficulty

Effective January 1, 2023, the Company adopted accounting guidance that eliminates the recognition and measurement of TDRs. Upon adoption of this guidance, all loan modifications to borrowers experiencing financial difficulty, or FDMs, are evaluated to determine whether the modification should be accounted for as a new loan or a continuation of the existing loan. The existing loan is derecognized and the restructured loan is accounted for as a new loan if the effective yield on the restructured loan is at least equal to the effective yield for comparable loans with similar collection risk and the modification to the original loan is more than minor. Any unamortized fees and costs from the original loan are recognized in interest income when the new loan is granted. If a loan restructuring does not meet these conditions, the existing loan’s amortized cost basis is carried forward and the modified loan is accounted for as a continuation of the existing loan. FDMs are generally accounted for as a continuation of the existing loan given the terms are typically not at market rates.

The Company offers loan modifications to retail and commercial borrowers as a result of its loss mitigation activities that may result in a payment delay, interest rate reduction, term extension, principal forgiveness, or combination thereof. Payment delays consist of modifications that result in a delay of contractual amounts due greater than three months over a rolling 12-month period.

Commercial loan modifications are offered on a case-by-case basis and generally include a payment delay, term extension and/or interest rate reduction. The Company does not typically offer principal forgiveness for commercial loans. Retail loan modifications are offered through structured loan modification programs, which are summarized below.

•Forbearance programs provide borrowers experiencing some form of hardship a period of time during which their contractual payment obligations are suspended, resulting in a payment delay and/or term extension.

•Other repayment plans are offered due to hardship and include an interest rate reduction and/or term extension designed to enable the borrower to return the loan to current status in an expeditious manner.

•Settlement agreements may be executed with borrowers experiencing a long-term hardship or who are delinquent, resulting in principal forgiveness. Upon fulfillment of the terms of the settlement agreement, the unpaid principal amount is forgiven resulting in a charge-off of the outstanding principal balance.

•Certain reorganization bankruptcy judgments may result in any one of the four modification types or some combination thereof.

The following tables present the period-end amortized cost of loans to borrowers experiencing financial difficulty that were modified during the three and nine months ended September 30, 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 September 30, 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	$—	$148	$47	$—	$—	$1	$196	0.42	%
Commercial real estate	—	131	—	—	37	1	169	0.57
Total commercial	—	279	47	—	37	2	365	0.47
Residential mortgages	2	25	—	—	6	—	33	0.11
Home equity	1	1	—	—	1	—	3	0.02
Automobile	—	—	—	—	—	—	—	—
Education	3	—	1	—	—	—	4	0.03
Other retail	3	—	—	—	—	—	3	0.06
Total retail	9	26	1	—	7	—	43	0.06
Total(2)	$9	$305	$48	$—	$44	$2	$408	0.27	%

	Nine Months Ended September 30, 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	$—	$263	$78	$—	$1	$2	$344	0.74	%
Commercial real estate	—	454	—	—	37	1	492	1.67
Total commercial	—	717	78	—	38	3	836	1.08
Residential mortgages	6	59	—	—	16	—	81	0.26
Home equity	1	4	—	—	5	—	10	0.07
Automobile	—	—	—	—	—	—	—	—
Education	7	—	2	—	—	—	9	0.07
Other retail	8	—	—	—	—	—	8	0.16
Total retail	22	63	2	—	21	—	108	0.15
Total(2)	$22	$780	$80	$—	$59	$3	$944	0.63	%

(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 borrowers that had their debt discharged by means of a Chapter 7 bankruptcy filing.

The following tables present the financial effect of loans to borrowers experiencing financial difficulty that were modified during the three and nine months ended September 30, 2023, disaggregated by class of financing receivable.

	Three Months Ended September 30, 2023
	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	2.32	%	17	$427,833	$—
Commercial real estate	1.25		7	77,482	—
Residential mortgages	0.98		47	—	—
Home equity	2.51		133	—	—
Automobile	—		—	—	—
Education	4.95		—	4,972	—
Other retail	18.86		—	—	1

	Nine Months Ended September 30, 2023
	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	2.95	%	14	$562,909	$—
Commercial real estate	1.25		8	47,172	—
Residential mortgages	1.55		48	—	—
Home equity	2.24		127	2,343	—
Automobile	3.47		20	1,253	—
Education	4.97		—	4,171	—
Other retail	18.45		—	—	4

(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. Amounts are reported in whole dollars.

(4) Amounts are recorded as charge-offs and are reported in millions.

(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 nine months ended September 30, 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.

	September 30, 2023
		Days Past Due and Accruing
(dollars in millions)	Current	30-59	60-89	90+	Nonaccrual	Total
Commercial and industrial	$262	$—	$—	$—	$82	$344
Commercial real estate	262	55	—	—	175	492
Total commercial	524	55	—	—	257	836
Residential mortgages	52	—	5	13	11	81
Home equity	3	—	—	—	7	10
Automobile	—	—	—	—	—	—
Education	8	—	—	—	1	9
Other retail	6	1	—	—	1	8
Total retail	69	1	5	13	20	108
Total	$593	$56	$5	$13	$277	$944

The following tables present the period-end amortized cost of loans to borrowers experiencing financial difficulty that were modified on or after January 1, 2023 that subsequently defaulted during the three and nine months ended September 30, 2023, disaggregated by class of financing receivable and modification type. The modification type reflects the cumulative effect of all FDMs at the time of default. A loan is considered to be in default if, subsequent to modification, it becomes 90 or more days past due or is placed on nonaccrual status.

	Three Months Ended September 30, 2023
(dollars in millions)	Interest Rate Reduction	Term Extension	Payment Delay	Interest Rate Reduction and Term Extension	Total
Commercial and industrial	$—	$—	$—	$—	$—
Commercial real estate	—	41	—	—	41
Total commercial	—	41	—	—	41
Residential mortgages	1	6	—	5	12
Home equity	—	1	—	2	3
Automobile	—	—	—	—	—
Education	—	—	1	—	1
Other retail	—	—	—	—	—
Total retail	1	7	1	7	16
Total	$1	$48	$1	$7	$57

	Nine Months Ended September 30, 2023
(dollars in millions)	Interest Rate Reduction	Term Extension	Payment Delay	Interest Rate Reduction and Term Extension	Total
Commercial and industrial	$—	$3	$—	$—	$3
Commercial real estate	—	67	—	—	67
Total commercial	—	70	—	—	70
Residential mortgages	1	6	—	5	12
Home equity	—	1	—	2	3
Automobile	—	—	—	—	—
Education	—	—	1	—	1
Other retail	—	—	—	—	—
Total retail	1	7	1	7	16
Total	$1	$77	$1	$7	$86

Unfunded commitments related to loans modified during the nine months ended September 30, 2023 were $146 million at September 30, 2023.

Troubled Debt Restructuring Disclosures Prior to the Adoption of ASU 2022-02

The following tables summarize loans modified during the three and nine months ended September 30, 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 September 30, 2022
		Amortized Cost Basis
(dollars in millions)	Number of Contracts	Interest Rate Reduction(1)	Maturity Extension(2)	Other(3)	Total
Commercial and industrial	6	$—	$2	$46	$48
Total commercial	6	—	2	46	48
Residential mortgages	185	6	21	13	40
Home equity	68	2	—	2	4
Automobile	135	—	—	1	1
Education	245	—	—	8	8
Other retail	590	2	—	—	2
Total retail	1,223	10	21	24	55
Total	1,229	$10	$23	$70	$103

		Nine Months Ended September 30, 2022
		Amortized Cost Basis
(dollars in millions)	Number of Contracts	Interest Rate Reduction(1)	Maturity Extension(2)	Other(3)	Total
Commercial and industrial	25	$—	$26	$80	$106
Total commercial	25	—	26	80	106
Residential mortgages	1,656	44	74	248	366
Home equity	318	4	1	16	21
Automobile	447	1	—	3	4
Education	481	—	—	19	19
Other retail	1,678	7	—	1	8
Total retail	4,580	56	75	287	418
Total	4,605	$56	$101	$367	$524

(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.

Modified TDRs resulted in charge-offs of $2 million for the nine months ended September 30, 2022. Unfunded commitments related to TDRs were $81 million at December 31, 2022.

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	Nine Months Ended
(dollars in millions)	September 30, 2022
Commercial TDRs	$—	$—
Retail TDRs(1)	28	224
Total	$28	$224

(1) Includes $18 million and $174 million of loans fully or partially government guaranteed by the FHA, VA, and USDA for the three and nine months ended September 30, 2022, respectively.

Concentrations of Credit Risk

The Company’s lending activity is geographically well diversified with an emphasis in our core markets located in the New England, Mid-Atlantic and Midwest regions. Generally, loans are collateralized by assets including real estate, inventory, accounts receivable, other personal property and investment securities. As of September 30, 2023 and December 31, 2022, there were no material concentration risks within the commercial or retail loan portfolios. Exposure to credit losses arising from lending transactions may fluctuate with fair values of collateral supporting loans, which may not perform according to contractual agreements. The Company’s policy is to collateralize loans to the extent necessary; however, unsecured loans are also granted on the basis of the financial strength of the applicant and the facts surrounding the transaction.