Total undiscounted future minimum lease rentals

  
Interest income on direct financing and sales-type leases for the years ended December 31, 2021, 2020 and 2019 was $49 million, $64 million and $77 million, respectively, and is reported within interest and fees on loans and leases in the Consolidated Statements of Operations. A maturity analysis of direct financing and sales-type lease receivables at December 31, 2021 is presented below:

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| --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |
| (in millions) |  |
| 2022 | $315  |  |
| 2023 | 267  |  |
| 2024 | 203  |  |
| 2025 | 151  |  |
| 2026 | 105  |  |
| Thereafter | 154  |  |
| Total undiscounted future minimum lease rentals | $1,195  |  |

NOTE 6 - ALLOWANCE FOR CREDIT LOSSES, NONACCRUAL LOANS AND LEASES, AND CONCENTRATIONS OF CREDIT RISK 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). Through December 31, 2019 the ACL reserve was management’s best estimate of incurred probable losses in the Company’s loan and lease portfolios based on reviews of certain individual loans and leases, analyzing changes in the composition, size and delinquency of the portfolio, reviewing previous loss experience and considering current and anticipated economic factors. The Company’s methodology for determining the qualitative component through December 31, 2019 included a statistical analysis of prior charge-off rates and an assessment of factors affecting the determination of incurred losses in the loan and lease portfolio. Such factors included trends in economic conditions, loan growth, back testing results, credit underwriting policy exceptions, regulatory and audit findings, and peer comparisons. Upon adoption of CECL effective January 1, 2020, the Company’s ACL reserve methodology changed to estimate expected credit losses over the contractual life of loans and leases. Adoption resulted in a cumulative-effect reduction of $337 million, net of taxes of $114 million, to retained earnings and a corresponding increase to the ACL of $451 million.The ACL is maintained at a level the Company believes to be appropriate to absorb expected lifetime credit losses over the contractual life of the loan and lease portfolios and on the unfunded lending commitments. The determination of the ACL is based on periodic evaluation of the loan and lease portfolios and unfunded lending commitments that are not unconditionally cancellable considering a number of relevant underlying factors, including key assumptions and evaluation of quantitative and qualitative information. Key assumptions used in the ACL measurement process include the use of a two-year reasonable and supportable economic forecast period followed by a one-year reversion period to historical credit loss information. The evaluation of quantitative and qualitative information is performed through assessments of groups of assets that share similar risk characteristics and certain individual loans and leases that do not share similar risk characteristics with the collective group. Loans are grouped generally by product type (e.g., commercial and industrial, commercial real estate, residential mortgage), and significant loan portfolios are assessed for credit losses using econometric models.The quantitative evaluation of the adequacy of the ACL utilizes a single economic forecast as its foundation, and is primarily based on econometric models that use known or estimated data as of the balance sheet date and forecasted data over the reasonable and supportable period. Known and estimated data include current PD, LGD and EAD (for commercial), timing and amount of expected draws (for unfunded lending commitments), FICO, LTV, term and time on books (for retail loans), mix and level of loan balances, delinquency levels, assigned risk ratings, previous loss experience, current business conditions, amounts and timing of expected future cash flows, and factors particular to a specific commercial credit such as competition, business and management performance. Forward-looking economic assumptions include real gross domestic product, unemployment rate, interest rate curve, and changes in collateral values. This data is aggregated to estimate expected credit losses over the contractual life of the loans and leases, adjusted for expected prepayments. In 

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|  |  | Citizens Financial Group, Inc. | 98 |


