Allowance for Credit Losses

12 Months Ended

Dec. 31, 2022

ALLOWANCE FOR CREDIT LOSSES

The ACL for loans and leases is reported in the allowance for credit losses on the Consolidated Balance Sheets, while the ACL for unfunded commitments is reported in other liabilities. The provision or benefit for credit losses related to both (i) loans and leases and (ii) unfunded commitments is reported in the Consolidated Statements of Income as provision or benefit for credit losses. The ACL methodology is discussed in Note 1 — Significant Accounting Policies and Basis of Presentation.

The initial ACL for PCD loans and leases acquired in the CIT Merger (the “Initial PCD ACL”) of $272 million was established through the PCD Gross-Up and there was no corresponding increase to the provision for credit losses. The PCD Gross-Up is discussed further in Note 1 — Significant Accounting Policies and Basis of Presentation. The initial ACL for Non-PCD loans and leases acquired in the CIT Merger was established through a corresponding increase of $454 million to the provision for credit losses (the “Day 2 provision for loans and leases”). The ACL activity for loans and leases and the ACL for unfunded commitments is summarized in the following tables. The increase in the ACL is primarily related to the CIT Merger, loan growth, and deterioration in the economic outlook.

ACL for Loans and Leases


dollars in millions	Year Ended December 31, 2022
	Commercial		Consumer		Total
Balance at December 31, 2021	$	80	$	98	$	178
Initial PCD ACL(1)	258		14		272
Day 2 provision for loans and leases	432		22		454
Provision (benefit) for credit losses - loans and leases	101		(4)		97
Total provision for credit losses- loans and leases	533		18		551
Charge-offs(1)	(126)		(20)		(146)
Recoveries	44		23		67

Balance at December 31, 2022	$	789	$	133	$	922

	Year Ended December 31, 2021
	Commercial		Consumer		Total
Balance at December 31, 2020	$	92	$	133	$	225
(Benefit) for credit losses - loans and leases	(7)		(30)		(37)
Charge-offs	(18)		(18)		(36)
Recoveries	13		13		26

Balance at December 31, 2021	$	80	$	98	$	178

	Year Ended December 31, 2020
	Commercial		Consumer		Total
Balance at December 31, 2019	$	150	$	75	$	225
Adoption of ASC 326	(84)		46		(38)
Balance after adoption of ASC 326	66		121		187
Provision for credit losses - loans and leases	34		24		58
Initial balance on PCD loans	1		1		2
Charge-offs	(20)		(25)		(45)
Recoveries	11		12		23

Balance at December 31, 2020	$	92	$	133	$	225

(1) The Initial PCD ACL related to the CIT Merger was $272 million, net of an additional $243 million for loans that CIT charged-off prior to the Merger Date (whether full or partial) which met BancShares’ charge-off policy at the Merger Date.

ACL for Unfunded Commitments


dollars in millions	Year Ended December 31,
	2022		2021		2020
Beginning balance	$	12	$	13	$	1
Adoption of ASC 326	—		—		9
Balance after adoption of ASC 326	12		13		10
Provision (benefit) for credit losses - unfunded commitments (1)	94		(1)		3
Ending balance	$	106	$	12	$	13

(1) Includes the Day 2 provision for unfunded commitments of $59 million related to the CIT Merger.