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FAIR VALUE MEASUREMENTS
 6 Months Ended
Jun. 30, 2024
Fair Value Disclosures [Abstract]  
FAIR VALUE MEASUREMENTS
NOTE 12 - FAIR VALUE MEASUREMENTS
Citizens measures or monitors many of its assets and liabilities on a fair value basis. Fair value is used on a recurring basis for assets and liabilities for which fair value is the required or elected measurement basis of accounting. Fair value is also used on a nonrecurring basis to evaluate assets for impairment or for disclosure purposes. Nonrecurring fair value adjustments typically involve the application of lower of cost or market accounting or write-downs of individual assets. Fair value measurement guidance is also applied to determine amounts reported for certain disclosures in this Note for assets and liabilities that are not required to be reported at fair value in the financial statements.
Fair Value Option
Citizens elected to account for residential mortgage LHFS and certain commercial and industrial, and commercial real estate LHFS at fair value. The following table presents the difference between the aggregate fair value and the aggregate unpaid principal balance of LHFS measured at fair value:
June 30, 2024December 31, 2023
(dollars in millions)Aggregate Fair ValueAggregate Unpaid PrincipalAggregate Fair Value Greater (Less) Than Aggregate Unpaid PrincipalAggregate Fair ValueAggregate Unpaid PrincipalAggregate Fair Value Greater (Less) Than Aggregate Unpaid Principal
Residential mortgage loans held for sale, at fair value
$519 $507 $12 $614 $593 $21 
Commercial and industrial, and commercial real estate loans held for sale, at fair value
72 78 (6)62 69 (7)
For more information on the election of the fair value option for these assets see Note 20 in the Company’s 2023 Form 10-K.
Recurring Fair Value Measurements
Citizens utilizes a variety of valuation techniques to measure its assets and liabilities at fair value on a recurring basis. For more information on the valuation techniques utilized to measure fair value on a recurring basis, see Note 20 in the Company’s 2023 Form 10-K.
Short-term investments
Short-term investments include corporate bonds and U.S. Treasury securities managed by the Company’s trading desks. U.S. Treasury securities are classified as Level 1 in the fair value hierarchy as quoted prices in active markets are readily available. The fair value of corporate bonds is estimated using a combination of direct market quotes for a particular bond, or a comparable bond if recent market data is not available, and a discounted cash flow model that incorporates certain credit attributes of the bond issuer. External pricing services are utilized to corroborate the fair value of corporate bonds, which may result in an adjustment to the underlying bond’s valuation if price differences exceed certain thresholds. Corporate bonds are classified as Level 2 in the fair value hierarchy given the observable market inputs utilized to value these instruments. Short-term investments are included in interest-bearing deposits in banks in the Consolidated Balance Sheets.
Short-term borrowed funds
Short-term borrowed funds include short positions in corporate bonds held by the Company’s trading desks and are classified as Level 2 in the fair value hierarchy. See “Short-term investments” above for more information regarding the valuation techniques utilized to value corporate bonds.
The following table presents assets and liabilities measured at fair value, including gross derivative assets and liabilities, on a recurring basis at June 30, 2024:
(dollars in millions)TotalLevel 1Level 2Level 3
Debt securities available for sale:
Mortgage-backed securities$26,631 $— $26,631 $— 
Collateralized loan obligations294 — 294 — 
State and political subdivisions1 — 1 — 
U.S. Treasury and other5,012 5,012 — — 
Total debt securities available for sale31,938 5,012 26,926 — 
Loans held for sale, at fair value:
Residential loans held for sale
519 — 519 — 
Commercial loans held for sale
72 — 72 — 
Total loans held for sale, at fair value
591 — 591 — 
Mortgage servicing rights1,568 — — 1,568 
Derivative assets:
Interest rate contracts479 — 479 — 
Foreign exchange contracts345 — 345 — 
Commodities contracts516 — 516 — 
TBA contracts3 — 3 — 
Other contracts7 — — 7 
Total derivative assets1,350 — 1,343 7 
Equity securities, at fair value(1)
135 135 — — 
Short-term investments
61 30 31 — 
Total assets$35,643 $5,177 $28,891 $1,575 
Derivative liabilities:
Interest rate contracts$1,298 $— $1,298 $— 
Foreign exchange contracts285 — 285 — 
Commodities contracts467 — 467 — 
TBA contracts8 — 8 — 
Other contracts1 — — 1 
Total derivative liabilities2,059 — 2,058 1 
Short-term borrowed funds
2 — 2 — 
Total liabilities$2,061 $— $2,060 $1 
(1) Excludes investments of $57 million included in other assets in the Consolidated Balance Sheets that are measured at fair value using the net asset value per share (or its equivalent) practical expedient. These investments include capital contributions to private investment funds and have unfunded capital commitments of $24 million at June 30, 2024, which may be called at any time during prescribed time periods. The credit exposure is generally limited to the carrying amount of investments made and unfunded capital commitments.
The following table presents assets and liabilities measured at fair value, including gross derivative assets and liabilities, on a recurring basis at December 31, 2023:
(dollars in millions)TotalLevel 1Level 2Level 3
Debt securities available for sale:
Mortgage-backed securities$24,732 $— $24,732 $— 
Collateralized loan obligations664 — 664 — 
State and political subdivisions1 — 1 — 
U.S. Treasury and other4,380 4,380 — — 
Total debt securities available for sale29,777 4,380 25,397 — 
Loans held for sale, at fair value:
Residential loans held for sale
614 — 614 — 
Commercial loans held for sale
62 — 62 — 
Total loans held for sale, at fair value
676 — 676 — 
Mortgage servicing rights1,552 — — 1,552 
Derivative assets:
Interest rate contracts464 — 464 — 
Foreign exchange contracts434 — 434 — 
Commodities contracts685 — 685 — 
TBA contracts3 — 3 — 
Other contracts7 — — 7 
Total derivative assets1,593 — 1,586 7 
Equity securities, at fair value(1)
115 115 — — 
Total assets$33,713 $4,495 $27,659 $1,559 
Derivative liabilities:
Interest rate contracts$1,149 $— $1,149 $— 
Foreign exchange contracts378 — 378 — 
Commodities contracts640 — 640 — 
TBA contracts16 — 16 — 
Other contracts— — — — 
Total derivative liabilities2,183 — 2,183 — 
Total liabilities$2,183 $— $2,183 $— 
(1) Excludes investments of $58 million included in other assets in the Consolidated Balance Sheets that are measured at fair value using the net asset value per share (or its equivalent) practical expedient. These investments include capital contributions to private investment funds and have unfunded capital commitments of $28 million at December 31, 2023, which may be called at any time during prescribed time periods. The credit exposure is generally limited to the carrying amount of investments made and unfunded capital commitments.
The following tables present a roll forward of the balance sheet amounts for assets and liabilities measured at fair value on a recurring basis and classified as Level 3:
Three Months Ended June 30, 2024Six Months Ended June 30, 2024
(dollars in millions)Mortgage Servicing RightsOther Derivative ContractsMortgage Servicing RightsOther Derivative Contracts
Beginning balance$1,564 $8 $1,552 $7 
Issuances25 16 43 29 
Settlements(1)
(43)(13)(89)(23)
Changes in fair value during the period recognized in earnings(2)
22 (5)62 (7)
Ending balance$1,568 $6 $1,568 $6 
Three Months Ended June 30, 2023Six Months Ended June 30, 2023
(dollars in millions)Mortgage Servicing RightsOther Derivative ContractsMortgage Servicing RightsOther Derivative Contracts
Beginning balance$1,496 $13 $1,530 $1 
Issuances36 20 57 35 
Settlements(1)
(41)(7)(82)(12)
Changes in fair value during the period recognized in earnings(2)
33 (20)19 (18)
Ending balance$1,524 $6 $1,524 $6 
(1) For MSRs, represents changes in value of the MSRs due to i) passage of time including the impact from both regularly scheduled loan principal payments and partial paydowns, and ii) loans that paid off during the period. For other derivative contracts, represents the closeout of interest rate lock commitments.
(2) Represents changes in value primarily driven by market conditions. These changes are recorded in mortgage banking fees in the Consolidated Statements of Operations.
The following table presents quantitative information about significant unobservable inputs utilized to measure the fair value of Level 3 assets and liabilities.
As of June 30, 2024As of December 31, 2023
Financial Instrument
Valuation TechniqueUnobservable InputRange (Weighted Average)Range (Weighted Average)
Mortgage servicing rightsDiscounted Cash FlowConstant prepayment rate
5.53-17.24% CPR (7.05% CPR)
6.70-14.55% CPR (7.23% CPR)
Option adjusted spread
398-1,058 bps (635 bps)
398-1,058 bps (630 bps)
Other derivative contractsInternal ModelPull through rate
26.75-99.70% (80.80%)
24.90-99.70% (80.34%)
MSR value
6.61-155.54 bps (103.92 bps)
(8.90)-141.24 bps (88.04 bps)
Nonrecurring Fair Value Measurements
Fair value is also used on a nonrecurring basis to evaluate certain assets for impairment or for disclosure purposes. For more information on the valuation techniques utilized to measure fair value on a nonrecurring basis, see Note 20 in the Company’s 2023 Form 10-K.
The following table presents losses on assets measured at fair value on a nonrecurring basis and recorded in earnings:
Three Months Ended June 30,Six Months Ended June 30,
(dollars in millions)2024202320242023
Collateral-dependent loans ($64)($64)($120)($68)

The following table presents assets measured at fair value on a nonrecurring basis:
June 30, 2024December 31, 2023
(dollars in millions)TotalLevel 1Level 2Level 3TotalLevel 1Level 2Level 3
Collateral-dependent loans $934 $— $934 $— $789 $— $789 $— 
Fair Value of Financial Instruments
The following tables present the estimated fair value for financial instruments not recorded at fair value in the Consolidated Financial Statements. The carrying amounts are recorded in the Consolidated Balance Sheets under the indicated captions:
June 30, 2024
TotalLevel 1Level 2Level 3
(dollars in millions)Carrying ValueEstimated Fair ValueCarrying ValueEstimated Fair ValueCarrying ValueEstimated Fair ValueCarrying ValueEstimated Fair Value
Financial assets:
Debt securities held to maturity$8,895 $7,924 $— $— $8,447 $7,490 $448 $434 
Other loans held for sale
92 92 — — — — 92 92 
Net loans and leases139,717 137,363 — — 934 934 138,783 136,429 
Other assets731 731 — — 709 709 22 22 
Financial liabilities:
Deposits176,352 176,102 — — 176,352 176,102 — — 
Short-term borrowed funds2 2 — — 2 2 — — 
Long-term borrowed funds13,082 12,719 — — 13,082 12,719 — — 
December 31, 2023
TotalLevel 1Level 2Level 3
(dollars in millions)Carrying ValueEstimated Fair ValueCarrying ValueEstimated Fair ValueCarrying ValueEstimated Fair ValueCarrying ValueEstimated Fair Value
Financial assets:
Debt securities held to maturity $9,184 $8,350 $— $— $8,696 $7,887 $488 $463 
Other loans held for sale
103 103 — — — — 103 103 
Net loans and leases143,861 140,504 — — 789 789 143,072 139,715 
Other assets869 869 — — 851 851 18 18 
Financial liabilities:
Deposits177,342 177,096 — — 177,342 177,096 — — 
Short-term borrowed funds505 505 — — 505 505 — — 
Long-term borrowed funds13,467 13,012 — — 13,467 13,012 — —