CITIZENS FINANCIAL GROUP INC/RI [CFG] Filings

10-Q 1 cfg-20220331.htm 10-Q cfg-20220331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended

March 31, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From

(Not Applicable)

Commission File Number 001-36636

(Exact name of the registrant as specified in its charter)


Delaware						05-0412693
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification Number)

One Citizens Plaza, Providence, RI 02903

(Address of principal executive offices, including zip code)

(203) 900-6715

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common stock, $0.01 par value per share	CFG	New York Stock Exchange
Depositary Shares, each representing a 1/40th interest in a share of 6.350% Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series D	CFG PrD	New York Stock Exchange
Depositary Shares, each representing a 1/40th interest in a share of 5.000% Fixed-Rate Non-Cumulative Perpetual Preferred Stock, Series E	CFG PrE	New York Stock Exchange

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days.

☑ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

☑ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:


Large accelerated filer	☑	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☑ No

There were 495,446,033 shares of Registrant’s common stock ($0.01 par value) outstanding on April 25, 2022.




	Table of Contents


Glossary of Acronyms and Terms		3

Part I. Financial Information		5

Item 1. Financial Statements		35

Consolidated Balance Sheets (unaudited)		36
Consolidated Statements of Operations (unaudited)		37
Consolidated Statements of Comprehensive Income (unaudited)		38
Consolidated Statements of Changes in Stockholders’ Equity (unaudited)		39
Consolidated Statements of Cash Flows (unaudited)		40
Notes to the Consolidated Financial Statements (unaudited)		41

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		5

Item 3. Quantitative and Qualitative Disclosures about Market Risk		68

Item 4. Controls and Procedures		68


Part II. Other Information		68

Item 1. Legal Proceedings		68
Item 1A. Risk Factors		68
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		69
Item 3. Defaults Upon Senior Securities		69
Item 4. Mine Safety Disclosures		69
Item 5. Other Information		69
Item 6. Exhibits		69


Signature		70

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GLOSSARY OF ACRONYMS AND TERMS

The following is a list of common acronyms and terms we regularly use in our financial reporting:


2021 Form 10-K						Annual Report on Form 10-K for the year ended December 31, 2021
AACL						Adjusted Allowance for Credit Losses
ACL						Allowance for Credit Losses: Allowance for Loan and Lease Losses plus Allowance for Unfunded Lending Commitments
AFS						Available for Sale
ALM						Asset and Liability Management
AOCI						Accumulated Other Comprehensive Income (Loss)
ASU						Accounting Standards Update
ATM						Automated Teller Machine
Board or Board of Directors						The Board of Directors of Citizens Financial Group, Inc.
bps						Basis Points
CARES Act						Coronavirus Aid, Relief, and Economic Security Act
CBNA						Citizens Bank, National Association
CCB						Capital Conservation Buffer
CCMI						Citizens Capital Markets, Inc.
CECL						Current Expected Credit Losses (ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments)
CET1						Common Equity Tier 1
CET1 capital ratio						Common Equity Tier 1 capital divided by total risk-weighted assets as defined under the U.S. Basel III Standardized approach
Citizens, CFG, the Company, we, us, or our						Citizens Financial Group, Inc. and its Subsidiaries
CLO						Collateralized Loan Obligation
CLTV						Combined Loan-to-Value
COVID-19 pandemic						Coronavirus Disease 2019 Pandemic
CRE						Commercial Real Estate
Dodd-Frank Act						The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
EPS						Earnings Per Share
EVE						Economic Value of Equity
Exchange Act						The Securities Exchange Act of 1934
Fannie Mae (FNMA)						Federal National Mortgage Association
FDIC						Federal Deposit Insurance Corporation
FHA						Federal Housing Administration
FHLB						Federal Home Loan Bank
FICO						Fair Isaac Corporation (credit rating)
FRB or Federal Reserve						Board of Governors of the Federal Reserve System and, as applicable, Federal Reserve Bank(s)
Freddie Mac (FHLMC)						Federal Home Loan Mortgage Corporation
FTE						Fully Taxable Equivalent
FTP						Funds Transfer Pricing
GAAP						Accounting Principles Generally Accepted in the United States of America
GDP						Gross Domestic Product
Ginnie Mae (GNMA)						Government National Mortgage Association
GSE						Government Sponsored Entity
HSBC						HSBC Bank U.S.A., N.A.
HSBC transaction						Acquisition of HSBC East Coast branches and national online deposit business
HTM						Held To Maturity
Investors						Investors Bancorp, Inc.

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JMP						JMP Group LLC
Last-of-Layer						Last-of-layer is a fair value hedge of the interest rate risk of a portfolio of similar prepayable assets whereby the last dollar amount within the portfolio of assets is identified as the hedged item
LHFS						Loans Held for Sale
LIBOR						London Interbank Offered Rate
LIHTC						Low Income Housing Tax Credit
MBS						Mortgage-Backed Securities
MD&A						Management’s Discussion and Analysis of Financial Condition and Results of Operations
Mid-Atlantic						District of Columbia, Delaware, Maryland, New Jersey, New York, Pennsylvania, Virginia, and West Virginia
Midwest						Illinois, Indiana, Michigan, and Ohio
Modified CECL Transition						The Day-1 CECL adoption entry booked to retained earnings plus 25% of subsequent CECL ACL reserve build
Modified AACL Transition						The Day-1 CECL adoption entry booked to ACL plus 25% of subsequent CECL ACL reserve build
MSRs						Mortgage Servicing Rights
NCOs						Net charge-offs
New England						Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont
OCC						Office of the Comptroller of the Currency
OCI						Other Comprehensive Income (Loss)
Operating Leverage						Period-over-period percent change in total revenue, less the period-over-period percent change in noninterest expense
Parent Company						Citizens Financial Group, Inc. (the Parent Company of Citizens Bank, National Association and other subsidiaries)
PPP						Paycheck Protection Program
ROTCE						Return on Average Tangible Common Equity
RPA						Risk Participation Agreement
RWA						Risk-Weighted Assets
SBA						United States Small Business Administration
SCB						Stress Capital Buffer
SEC						United States Securities and Exchange Commission
SVaR						Stressed Value at Risk
Tailoring Rules						Rules establishing risk-based categories for determining prudential standards for large U.S. and foreign banking organizations, consistent with the Dodd-Frank Act, as amended by the Economic Growth, Regulatory Relief and Consumer Protection Act
TBAs						To-Be-Announced Mortgage Securities
TDR						Troubled Debt Restructuring
Tier 1 capital ratio						Tier 1 capital, which includes Common Equity Tier 1 capital plus non-cumulative perpetual preferred equity that qualifies as additional tier 1 capital, divided by total risk-weighted assets as defined under the U.S. Basel III Standardized approach
Tier 1 leverage ratio						Tier 1 capital, which includes Common Equity Tier 1 capital plus non-cumulative perpetual preferred equity that qualifies as additional tier 1 capital, divided by quarterly adjusted average assets as defined under the U.S. Basel III Standardized approach
TOP						Tapping Our Potential
Total capital ratio						Total capital, which includes Common Equity Tier 1 capital, tier 1 capital and allowance for credit losses and qualifying subordinated debt that qualifies as tier 2 capital, divided by total risk-weighted assets as defined under the U.S. Basel III Standardized approach
USDA						United States Department of Agriculture
VA						United States Department of Veterans Affairs
VaR						Value at Risk
VIE						Variable Interest Entities

Citizens Financial Group, Inc. | 4

PART I. FINANCIAL INFORMATION

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


						Page
Forward-Looking Statements						6
Introduction						7
Financial Performance						8
Results of Operations						10
Net Interest Income						10
Noninterest Income						11
Noninterest Expense						12
Provision for Credit Losses						12
Income Tax Expense						12
Business Operating Segments						12
Analysis of Financial Condition						14
Securities						14
Loans and Leases						15
Allowance for Credit Losses and Nonaccrual Loans and Leases						15
Deposits						20
Borrowed Funds						20
Capital and Regulatory Matters						20
Liquidity						23
Critical Accounting Estimates						26
A cco unting and Reporting Developments						28
Risk Governance						28
Market Risk						29
Non-GAAP Financial Measures and Reconciliations						33

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FORWARD-LOOKING STATEMENTS

This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements regarding potential future share repurchases and future dividends as well as the potential effects of the COVID-19 disruption and Russia’s invasion of Ukraine on our business, operations, financial performance and prospects, are forward-looking statements. Also, any statement that does not describe historical or current facts is a forward-looking statement. These statements often include the words “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “goals,” “targets,” “initiatives,” “potentially,” “probably,” “projects,” “outlook,” “guidance” or similar expressions or future conditional verbs such as “may,” “will,” “should,” “would,” and “could.”

Forward-looking statements are based upon the current beliefs and expectations of management, and on information currently available to management. Our statements speak as of the date hereof, and we do not assume any obligation to update these statements or to update the reasons why actual results could differ from those contained in such statements in light of new information or future events. We caution you, therefore, against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. While there is no assurance that any list of risks and uncertainties or risk factors is complete, important factors that could cause actual results to differ materially from those in the forward-looking statements include the following, without limitation:

•Negative economic and political conditions that adversely affect the general economy, housing prices, the job market, consumer confidence and spending habits which may affect, among other things, the level of nonaccrual assets, charge-offs and provision expense;

•The rate of growth in the economy and employment levels, as well as general business and economic conditions, and changes in the competitive environment;

•Our ability to implement our business strategy, including the cost savings and efficiency components, and achieve our financial performance goals, including through the integration of Investors and the HSBC branches;

•The COVID-19 disruption and its effects on the economic and business environments in which we operate;

•The impact of Russia’s invasion of Ukraine and the imposition of sanctions on Russia and other actions in response, including on economic and market conditions, inflationary pressures and the interest rate environment, commodity price and foreign exchange rate volatility, and heightened cybersecurity risks;

•Our ability to meet heightened supervisory requirements and expectations;

•Liabilities and business restrictions resulting from litigation and regulatory investigations;

•Our capital and liquidity requirements under regulatory capital standards and our ability to generate capital internally or raise capital on favorable terms;

•The effect of changes in interest rates on our net interest income, net interest margin and our mortgage originations, mortgage servicing rights and mortgages held for sale;

•Changes in interest rates and market liquidity, as well as the magnitude of such changes, which may reduce interest margins, impact funding sources and affect the ability to originate and distribute financial products in the primary and secondary markets;

•The effect of changes in the level of checking or savings account deposits on our funding costs and net interest margin;

•Financial services reform and other current, pending or future legislation or regulation that could have a negative effect on our revenue and businesses;

•A failure in or breach of our operational or security systems or infrastructure, or those of our third party vendors or other service providers, including as a result of cyber-attacks;

•Greater than expected costs or other difficulties related to the integration of our business and that of Investors and the relevant HSBC branches;

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•The inability to retain existing Investors or HSBC clients and employees following the closing of the Investors acquisition and HSBC transaction; and

•Management’s ability to identify and manage these and other risks.

In addition to the above factors, we also caution that the actual amounts and timing of any future common stock dividends or share repurchases will be subject to various factors, including our capital position, financial performance, risk-weighted assets, capital impacts of strategic initiatives, market conditions and regulatory and accounting considerations, as well as any other factors that our Board of Directors deems relevant in making such a determination. Therefore, there can be no assurance that we will repurchase shares from or pay any dividends to holders of our common stock, or as to the amount of any such repurchases or dividends. Further, statements about the effects of the COVID-19 disruption and Russia’s invasion of Ukraine on our business, operations, financial performance and prospects may constitute forward-looking statements and are subject to the risk that the actual impacts may differ, possibly materially, from what is reflected in those forward-looking statements due to factors and future developments that are uncertain, unpredictable and in many cases beyond our control, including the scope and duration of the pandemic and Russia’s invasion of Ukraine, actions taken by governmental authorities in response to the pandemic and Russia’s invasion of Ukraine, and the direct and indirect impact of the pandemic and Russia’s invasion of Ukraine on our customers, third parties and us.

More information about factors that could cause actual results to differ materially from those described in the forward-looking statements can be found in the “Risk Factors” section in Part II, Item 1A of this report and Part I, Item 1A of our 2021 Form 10-K.

INTRODUCTION

Citizens Financial Group, Inc. is one of the nation’s oldest and largest financial institutions with $192.1 billion in assets as of March 31, 2022. Headquartered in Providence, Rhode Island, we offer a broad range of retail and commercial banking products and services to individuals, small businesses, middle-market companies, large corporations and institutions. We help our customers reach their potential by listening to them and by understanding their needs in order to offer tailored advice, ideas and solutions. In Consumer Banking, we provide an integrated experience that includes mobile and online banking, a full-service customer contact center and, including the acquisition of Investors, the convenience of approximately 3,300 ATMs and more than 1,200 branches in 14 states and the District of Columbia. Consumer Banking products and services include a full range of banking, lending, savings, wealth management and small business offerings. In Commercial Banking, we offer a broad complement of financial products and solutions, including lending and leasing, deposit and treasury management services, foreign exchange, interest rate and commodity risk management solutions, as well as loan syndication, corporate finance, merger and acquisition, and debt and equity capital markets capabilities. More information is available at www.citizensbank.com.

On February 18, 2022, CBNA completed the acquisition of HSBC East Coast branches and national online deposit business. The transaction extends our physical presence and adds customers in several attractive markets, accelerating our national expansion strategy. The transaction includes 66 locations in the New York City metropolitan area, 9 locations in the Mid-Atlantic/Washington D.C. area, and 5 locations in Southeast Florida.

On April 6, 2022, Citizens completed the acquisition of all outstanding shares of Investors for a combination of stock and cash. The acquisition enhances Citizens’ banking franchise, adding an attractive middle market, small business and consumer customer base while building our physical presence in the Mid-Atlantic region with the addition of 154 branches located in the greater New York City and Philadelphia metropolitan areas and across New Jersey.

For additional information regarding these acquisitions see Note 2.

The following MD&A is intended to assist readers in their analysis of the accompanying unaudited interim Consolidated Financial Statements and supplemental financial information. It should be read in conjunction with the unaudited interim Consolidated Financial Statements and Notes to the unaudited interim Consolidated Financial Statements in Part I, Item 1, as well as other information contained in this document and our 2021 Form 10-K.

Non-GAAP Financial Measures

This document contains non-GAAP financial measures denoted as “Underlying” results. Underlying results for any given reporting period exclude certain items that may occur in that period which management does not consider indicative of our on-going financial performance. We believe these non-GAAP financial measures provide

Citizens Financial Group, Inc. | 7

useful information to investors because they are used by management to evaluate our operating performance and make day-to-day operating decisions. In addition, we believe our Underlying results in any given reporting period reflect our on-going financial performance, increase comparability of period-to-period results, and are useful to consider in addition to our GAAP financial results.

Other companies may use similarly titled non-GAAP financial measures that are calculated differently from the way we calculate such measures. Accordingly, our non-GAAP financial measures may not be comparable to similar measures used by such companies. We caution investors not to place undue reliance on such non-GAAP financial measures, but to consider them with the most directly comparable GAAP measures. Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for our results reported under GAAP.

Non-GAAP measures are denoted throughout our MD&A by the use of the term Underlying. Where there is a reference to these metrics in that paragraph, all measures that follow are on the same basis when applicable. For more information on the computation of non-GAAP financial measures, see “—Non-GAAP Financial Measures and Reconciliations.”

FINANCIAL PERFORMANCE

Quarter to Date and Period End - Key Highlights

Net income of $420 million decreased $191 million from the first quarter of 2021, with earnings per diluted common share of $0.93, down $0.44 from $1.37 per diluted common share in the first quarter of 2021. ROTCE of 11.4% decreased from 17.2% in the first quarter of 2021.

In the first quarter of 2022, results reflect $56 million of expenses, net of tax benefit, or $0.14 per diluted common share, from notable items compared to $15 million of expenses, net of tax benefit, or $0.04 per diluted common share, from notable items in the first quarter of 2021.


Table 1: Notable Items
	Three Months Ended March 31, 2022
		Less: notable items
(in millions)	Reported results (GAAP)	Integration costs(1)	TOP and other(2)	Provision(3)	Underlying results (non-GAAP)
Provision (benefit) for credit losses	$3	$—	$—	$24	($21)
Noninterest expense	1,106	37	11	—	1,058
Income tax expense	116	(10)	—	(6)	132


	Three Months Ended March 31, 2021
		Less: notable items
(in millions)	Reported results (GAAP)	Integration costs	TOP and other(2)	Provision	Underlying results (non-GAAP)
Provision (benefit) for credit losses	($140)	$—	$—	$—	($140)
Noninterest expense	1,018	—	20	—	998
Income tax expense	170	—	(5)	—	175

(1) Includes integration costs associated with acquisitions.

(2) Includes our TOP transformational and revenue and efficiency initiatives for the three months ended March 31, 2022 and 2021, and income tax impacts related to legacy tax matters for the three months ended March 31, 2022.

(3) Includes the initial provision for credit losses of $24 million tied to the HSBC transaction. As required by purchase accounting, a fair value mark for performing loans including both credit and interest rate components is recorded in addition to the provision for credit losses expense, thus the credit exposure has been “double counted”.

•Net income available to common stockholders of $396 million decreased $192 million, compared to $588 million in the first quarter of 2021.

◦On an Underlying basis, which excludes notable items, net income available to common stockholders of $452 million compared with $603 million in the first quarter of 2021.

◦On an Underlying basis, earnings per diluted common share of $1.07 compared to $1.41 in the first quarter of 2021.

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•Total revenue of $1.6 billion decreased $14 million, or 1%, from the first quarter of 2021, driven by a decline of 8% in noninterest income, partially offset by a 3% increase in net interest income.

◦Net interest income of $1.1 billion increased 3%, reflecting 3% growth in interest-earning assets and broadly stable net interest margin.

◦Net interest margin of 2.75% was stable compared to the first quarter of 2021.

–Net interest margin on a FTE basis of 2.75% decreased 1 basis point, compared to 2.76% in the first quarter of 2021, as the impact of lower earning-asset yields was largely offset by the deployment of cash into loan growth.

–Average loans and leases of $129.2 billion increased $6.3 billion, or 5%, from $122.8 billion in the first quarter of 2021, driven by a $6.6 billion increase in retail loans given growth in mortgage, auto and education, and the impact of the HSBC transaction, partially offset by planned run-off of personal unsecured installment loans and a $304 million decrease in commercial as growth was more than offset by a reduction in PPP loans.

–Average deposits of $155.1 billion increased $8.4 billion, or 6%, from $146.6 billion in the first quarter of 2021, driven by the impact of the HSBC transaction and growth in demand, checking with interest and savings, partially offset by a decrease in money market and term.

◦Noninterest income of $498 million decreased $44 million, or 8%, from the first quarter of 2021, primarily reflecting lower mortgage banking fees partially offset by improved capital markets fees, foreign exchange and derivative products revenue, and other income.

•Noninterest expense of $1.1 billion increased by 9% from the first quarter of 2021.

◦On an Underlying basis, noninterest expense increased 6% from the first quarter of 2021, reflecting higher salaries and employee benefits given merit increases, and other operating expense associated with increased travel and advertising costs, partially offset by the benefit of efficiency initiatives.

•The efficiency ratio of 67.2% compared to 61.4% for the first quarter of 2021, and ROTCE of 11.4% compared to 17.2%.

◦On an Underlying basis, the efficiency ratio of 64.3% compared to 60.2% for the first quarter of 2021, and ROTCE of 13.0% compared to 17.6%.

•Credit provision expense of $3 million compares with a $140 million credit provision benefit for the first quarter of 2021, reflecting strong credit performance across the retail and commercial loan portfolios. The first quarter 2022 Underlying credit provision benefit excludes the “double count” of the $24 million day-one CECL provision expense tied to the HSBC transaction.

•Tangible book value per common share of $30.97 decreased 6% from the first quarter of 2021.

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RESULTS OF OPERATIONS

Net Interest Income

Net interest income is our largest source of revenue and is the difference between the interest earned on interest-earning assets (generally loans, leases and investment securities) and the interest expense incurred in connection with interest-bearing liabilities (generally deposits and borrowed funds). The level of net interest income is primarily a function of the difference between the effective yield on our average interest-earning assets and the effective cost of our interest-bearing liabilities. These factors are influenced by the pricing and mix of interest-earning assets and interest-bearing liabilities which, in turn, are impacted by external factors such as local economic conditions, competition for loans and deposits, the monetary policy of the FRB and market interest rates. For further discussion, refer to “—Market Risk — Non-Trading Risk,” and “—Risk Governance” as described in our 2021 Form 10-K.


Table 2: Major Components of Net Interest Income
	Three Months Ended March 31,
	2022				2021				Change
(dollars in millions)	Average Balances	Income/ Expense	Yields/ Rates		Average Balances	Income/ Expense	Yields/ Rates		Average Balances	Yields/ Rates (bps)
Assets:
Interest-bearing cash and due from banks and deposits in banks	$8,055	$4	0.21	%	$10,861	$3	0.11	%	($2,806)	10 bps
Taxable investment securities	29,245	138	1.88		27,031	128	1.89		2,214	(1)
Non-taxable investment securities	2	—	2.60		3	—	2.60		(1)	—
Total investment securities	29,247	138	1.88		27,034	128	1.89		2,213	(1)
Commercial and industrial	44,947	328	2.91		44,287	347	3.12		660	(21)
Commercial real estate	14,066	90	2.57		14,675	94	2.57		(609)	—
Leases	1,560	11	2.81		1,915	13	2.69		(355)	12
Total commercial loans and leases	60,573	429	2.83		60,877	454	2.98		(304)	(15)
Residential mortgages	23,461	169	2.88		19,388	148	3.05		4,073	(17)
Home equity	12,124	90	3.02		12,001	95	3.20		123	(18)
Automobile	14,534	127	3.55		12,229	125	4.14		2,305	(59)
Education	13,034	131	4.07		12,436	134	4.38		598	(31)
Other retail	5,428	102	7.63		5,916	105	7.25		(488)	38
Total retail loans	68,581	619	3.65		61,970	607	3.96		6,611	(31)
Total loans and leases	129,154	1,048	3.26		122,847	1,061	3.47		6,307	(21)
Loans held for sale, at fair value	2,366	16	2.70		3,254	18	2.27		(888)	43
Other loans held for sale	454	7	5.89		385	6	6.30		69	(41)
Interest-earning assets	169,276	1,213	2.88		164,381	1,216	2.97		4,895	(9)
Noninterest-earning assets	19,041				18,188				853
Total assets	$188,317				$182,569				$5,748
Liabilities and Stockholders’ Equity:
Checking with interest	$30,417	$5	0.07	%	$26,116	$6	0.09	%	$4,301	(2)
Money market	47,220	12	0.10		49,536	22	0.18		(2,316)	(8)
Savings	23,835	5	0.08		18,611	5	0.11		5,224	(3)
Term	4,970	3	0.29		8,572	17	0.83		(3,602)	(54)
Total interest-bearing deposits	106,442	25	0.10		102,835	50	0.20		3,607	(10)
Short-term borrowed funds	29	—	3.50		150	—	0.46		(121)	304
Long-term borrowed funds	6,066	41	2.66		8,336	49	2.35		(2,270)	31
Total borrowed funds	6,095	41	2.66		8,486	49	2.32		(2,391)	34
Total interest-bearing liabilities	112,537	66	0.23		111,321	99	0.36		1,216	(13)
Demand deposits	48,641				43,814				4,827
Other liabilities	4,144				4,858				(714)
Total liabilities	165,322				159,993				5,329
Stockholders’ equity	22,995				22,576				419
Total liabilities and stockholders’ equity	$188,317				$182,569				$5,748
Interest rate spread			2.65	%			2.62	%		3
Net interest income and net interest margin		$1,147	2.75	%		$1,117	2.75	%		—
Net interest income and net interest margin, FTE(1)		$1,149	2.75	%		$1,120	2.76	%		(1)
Memo: Total deposits (interest-bearing and demand)	$155,083	$25	0.07	%	$146,649	$50	0.14	%	$8,434	(7) bps

(1) Net interest income and net interest margin is presented on a FTE basis using the federal statutory tax rate of 21%. The FTE impact is predominantly attributable to commercial and industrial loans for the periods presented.

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Net interest income of $1.1 billion increased 3% from the first quarter of 2021, reflecting 3% growth in interest-earning assets and broadly stable net interest margin.

Net interest margin on a FTE basis of 2.75% decreased 1 basis point compared to 2.76% in the first quarter of 2021, as the impact of lower earning asset yields was largely offset by the deployment of cash into loan growth. Average interest-earning asset yields of 2.88% decreased 9 basis points from 2.97% in the first quarter of 2021, while average interest-bearing liability costs of 0.23% decreased 13 basis points from 0.36% in the first quarter of 2021.

Average interest-earning assets of $169.3 billion increased $4.9 billion, or 3%, from the first quarter of 2021, as a $2.2 billion, or 8% increase in investments and a $6.3 billion, or 5%, increase in loans and leases was partially offset by a $2.8 billion decrease in cash held in interest-bearing deposits reflecting partial deployment of elevated liquidity. Loan growth was driven by a $6.6 billion increase in retail loans given growth in mortgage, auto and education, partially offset by planned runoff of personal unsecured installment loans. Commercial loans decreased $304 million as growth was more than offset by a $4.2 billion reduction in PPP loans.

Average deposits of $155.1 billion increased $8.4 billion, or 6%, from the first quarter of 2021, reflecting growth in lower cost deposits and the $2.9 billion impact of the HSBC transaction, partially offset by decreases in money market and term. Average total borrowed funds of $6.1 billion decreased $2.4 billion from the first quarter of 2021, given the pay down of senior debt. Total borrowed funds costs of $41 million decreased $8 million from the first quarter of 2021. The total borrowed funds cost of 2.66% increased 34 basis points from 2.32% in the first quarter of 2021.

Noninterest Income


Table 3: Noninterest Income
	Three Months Ended March 31,
(in millions)		2022	2021	Change	Percent
Capital markets fees		$93	$81	$12	15	%
Service charges and fees		98	99	(1)	(1)
Mortgage banking fees		69	165	(96)	(58)
Card fees		60	55	5	9
Trust and investment services fees		61	58	3	5
Letter of credit and loan fees		38	38	—	—
Foreign exchange and derivative products		51	28	23	82
Securities gains, net		4	3	1	33
Other income(1)		24	15	9	60
Noninterest income		$498	$542	($44)	(8	%)

(1) Includes bank-owned life insurance income and other income for all periods presented.

Noninterest income decreased $44 million, or 8%, from the first quarter of 2021, primarily reflecting lower mortgage banking fees partially offset by improved capital markets fees, foreign exchange and derivative products revenue, and other income.

•The decrease in mortgage banking fees was driven by lower gain-on-sale margins and production volumes.

•Companies we acquired in the second half of 2021 contributed $21 million of capital market fees in the first quarter of 2022. Excluding these acquisitions, capital markets fees reflect lower merger and acquisition advisory and underwriting fees, partially offset by higher loan syndication fees.

•Record foreign exchange and derivative products revenue increased reflecting growth in client interest rate and commodities hedging activity.

•The increase in other income primarily reflects higher investment income.

Citizens Financial Group, Inc. | 11

Noninterest Expense


Table 4: Noninterest Expense
	Three Months Ended March 31,
(in millions)		2022	2021	Change	Percent
Salaries and employee benefits		$594	$548	$46	8	%
Equipment and software		150	152	(2)	(1)
Outside services		169	139	30	22
Occupancy		83	88	(5)	(6)
Other operating expense		110	91	19	21
Noninterest expense		$1,106	$1,018	$88	9	%

Noninterest expense increased $88 million, or 9%, compared to the first quarter of 2021. On an Underlying basis, noninterest expense of $1.1 billion increased $60 million, or 6%, reflecting higher salaries and employee benefits given merit increases, and other operating expense associated with increased travel and advertising costs, partially offset by the benefit of efficiency initiatives.

Provision for Credit Losses

The provision for credit losses is the result of a detailed analysis performed to estimate our ACL. The total provision for credit losses includes the provision for loan and lease losses and the provision for unfunded commitments. Refer to “—Analysis of Financial Condition — Allowance for Credit Losses and Nonaccrual Loans and Leases” for more information.

Credit provision expense was $3 million for the first quarter of 2022, compared to a credit provision benefit of $140 million in the first quarter of 2021, reflecting strong economic growth that began in the fourth quarter of 2020 and continued solid credit performance. Underlying credit provision benefit of $21 million in the first quarter of 2022 excludes the “double count” of the $24 million day-one CECL provision expense tied to the HSBC transaction.

Income Tax Expense

Income tax expense of $116 million for the first quarter of 2022 decreased $54 million from $170 million in the first quarter of 2021 due to decreased taxable income. The effective income tax rate decreased to 21.7% in the first quarter of 2022 from 21.8% in the first quarter of 2021, primarily driven by the increased benefit of tax-advantaged investments on lower pre-tax income.

Business Operating Segments

We have two business operating segments: Consumer Banking and Commercial Banking. Segment results are derived by specifically attributing managed assets, liabilities, capital and related revenues, provision for credit losses, which at the segment level is equal to net charge-offs, and other expenses. The residual difference between the consolidated provision for credit losses and the business operating segments’ net charge-offs is reflected in Other.

Non-segment operations are classified as Other and include assets, liabilities, capital, revenues, provision for credit losses, expenses and income tax expense not attributed to our Consumer or Commercial Banking segments as well as treasury and community development. In addition, for impairment testing purposes, we allocate all goodwill to our Consumer Banking and Commercial Banking reporting units.

There have been no significant changes in our methodologies used to allocate items to our business operating segments as described in “—Results of Operations — Business Operating Segments” in our 2021 Form 10-K other than the change relative to our FTP methodology. See Note 17 for additional information.

Citizens Financial Group, Inc. | 12

The following table presents certain financial data of our business operating segments. Total business operating segment financial results differ from total consolidated financial results. These differences are reflected in Other non-segment operations. See Note 17 for additional information.


Table 5: Selected Financial Data for Business Operating Segments
	Consumer Banking		Commercial Banking
	Three Months Ended March 31,		Three Months Ended March 31,
(dollars in millions)	2022	2021	2022	2021
Net interest income	$857	$863	$416	$421
Noninterest income	257	351	213	170
Total revenue	1,114	1,214	629	591
Noninterest expense	784	750	272	227
Profit before credit losses	330	464	357	364
Net charge-offs	49	59	12	101
Income before income tax expense	281	405	345	263
Income tax expense	72	103	74	52
Net income	$209	$302	$271	$211
Average Balances:
Total assets	$77,551	$75,283	$61,118	$57,738
Total loans and leases(1)	73,233	70,188	58,007	54,813
Deposits	104,663	97,180	44,520	43,974
Interest-earning assets	74,052	71,135	58,312	55,175

(1) Includes LHFS.

Consumer Banking

Net interest income of $857 million decreased $6 million, or 1%, from the first quarter of 2021, driven by a reduced benefit from PPP loan forgiveness, partially offset by loan growth, including the impacts from the HSBC transaction. Average loans increased $3.0 billion driven by higher residential mortgages, including approximately $480 million from the HSBC transaction, automobile and education, partially offset by the impact of the reduction in PPP loans and planned runoff of personal unsecured installment loans. Deposits increased $7.5 billion, or 8%, including the $2.9 billion impact of the HSBC transaction. Growth in demand, checking with interest and savings were partially offset by decreases in money market and term.

Noninterest income decreased $94 million, or 27%, from the first quarter of 2021, driven by lower mortgage banking fees reflecting lower gain-on-sale margins and production volumes. This decrease was partially offset by higher trust and investment services fees driven by an increase in assets under management from strong net inflows and higher equity market levels, and higher card fees driven by higher debit and credit card volumes.

Noninterest expense increased $34 million, or 5%, from the first quarter of 2021, reflecting higher salaries and employee benefits given merit increases, as well as higher other operating expense associated with increased travel and advertising costs, partially offset by the benefit of efficiency initiatives.

Net charge-offs of $49 million decreased $10 million, or 17%, as consumers continue to benefit from the the fiscal support provided during the pandemic, the rapid growth in jobs, and elevated residential mortgage and auto loan collateral values.

Commercial Banking

Net interest income of $416 million decreased $5 million, or 1%, from $421 million in the first quarter of 2021, driven by lower earning asset yields, partially offset by improved funding mix and deposit pricing.

Noninterest income of $213 million increased $43 million, or 25%, from $170 million in the first quarter of 2021, driven by record foreign exchange and derivative products revenue reflecting increased client interest-rate and commodities hedging activity and capital markets fees driven by higher loan syndication fees, partially offset by lower mergers and acquisitions advisory and underwriting fees.

Noninterest expense of $272 million increased $45 million, or 20%, from $227 million in the first quarter of 2021, reflecting higher salaries and employee benefits given merit increases, as well as higher other operating expense associated with increased travel and advertising costs, partially offset by the benefit of efficiency initiatives.

Citizens Financial Group, Inc. | 13

Net charge-offs of $12 million decreased $89 million, or 88%, from the first quarter of 2021 given the strong economic growth that began in the fourth quarter of 2020 and continued solid credit performance.

ANALYSIS OF FINANCIAL CONDITION

Securities


Table 6: Amortized Cost and Fair Value of AFS and HTM Securities
	March 31, 2022		December 31, 2021
(in millions)	Amortized Cost	Fair Value	Amortized Cost	Fair Value
U.S. Treasury and other	$158	$154	$11	$11
State and political subdivisions	2	2	2	2
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities	25,074	23,498	24,607	24,442
Other/non-agency	412	401	397	405
Total mortgage-backed securities	25,486	23,899	25,004	24,847

Collateralized loan obligations	1,276	1,264	1,208	1,207
Total debt securities available for sale, at fair value	$26,922	$25,319	$26,225	$26,067
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities	$1,370	$1,355	$1,505	$1,557

Total mortgage-backed securities	1,370	1,355	1,505	1,557
Asset-backed securities	686	656	737	732
Total debt securities held to maturity	$2,056	$2,011	$2,242	$2,289
Total debt securities available for sale and held to maturity	$28,978	$27,330	$28,467	$28,356
Equity securities, at cost	$611	$611	$624	$624
Equity securities, at fair value	130	130	109	109

Our securities portfolio is managed to maintain prudent levels of liquidity, credit quality, and market risk while achieving returns that align with our overall portfolio management strategy. The portfolio primarily includes high quality, highly liquid investments reflecting our ongoing commitment to maintain strong contingent liquidity levels and pledging capacity. U.S. government-guaranteed notes and GSE-issued mortgage-backed securities represent 92% of the fair value of our debt securities portfolio holdings. Holdings backed by mortgages dominate our portfolio and facilitate our ability to pledge those securities to the FHLB for collateral purposes. For further discussion of the liquidity coverage ratios, see “Regulation and Supervision — Liquidity Requirements” in our 2021 Form 10-K.

The fair value of the AFS debt securities portfolio of $25.3 billion at March 31, 2022 decreased $748 million from $26.1 billion at December 31, 2021, reflecting $697 million in portfolio growth offset by a $1.4 billion increase in unrealized losses driven by higher rates. The decline in fair value of the HTM debt securities portfolio of $278 million reflects $191 million from portfolio runoff and $87 million due to higher rates.

As of March 31, 2022, the portfolio’s average effective duration was 5.3 years compared with 4.3 years as of December 31, 2021, as higher long-term rates drove a decrease in both actual and projected securities prepayment speeds. We manage our securities portfolio duration and convexity risk through asset selection and securities structure, and maintain duration levels within our risk appetite in the context of the broader interest rate risk framework and limits.

Citizens Financial Group, Inc. | 14

Loans and Leases


Table 7: Composition of Loans and Leases, Excluding LHFS
(in millions)	March 31, 2022	December 31, 2021	Change	Percent
Commercial and industrial(1)	$45,724	$44,500	$1,224	3	%
Commercial real estate	14,268	14,264	4	—
Leases	1,529	1,586	(57)	(4)
Total commercial	61,521	60,350	1,171	2
Residential mortgages	24,211	22,822	1,389	6
Home equity	12,264	12,015	249	2
Automobile	14,439	14,549	(110)	(1)
Education	13,306	12,997	309	2
Other retail	5,564	5,430	134	2
Total retail	69,784	67,813	1,971	3
Total loans and leases	$131,305	$128,163	$3,142	2	%

Total loans and leases increased $3.1 billion from $128.2 billion as of December 31, 2021, driven by 3% growth in retail, including the impact of the HSBC transaction, as well as growth in mortgage, education and home equity, and 2% growth in commercial.

Allowance for Credit Losses and Nonaccrual Loans and Leases

The ACL is a reserve to absorb estimated future credit losses in accordance with GAAP. For additional information regarding the ACL, see Note 5 of this report, and “—Critical Accounting Estimates — Allowance for Credit Losses” and Note 6 in our 2021 Form 10-K.

The ACL of $1.9 billion at March 31, 2022 remained stable compared to December 31, 2021. For further information, see Note 5.


Table 8: ACL and Related Coverage Ratios by Portfolio
	March 31, 2022				December 31, 2021
(in millions)	Loans and Leases	Allowance	Coverage		Loans and Leases	Allowance	Coverage
Allowance for Loan and Lease Losses
Commercial and industrial	$45,724	$525	1.15	%	$44,500	$555	1.25	%
Commercial real estate	14,268	214	1.50		14,264	220	1.54
Leases	1,529	39	2.54		1,586	46	2.92
Total commercial	61,521	778	1.26		60,350	821	1.36
Residential mortgages	24,211	144	0.60		22,822	144	0.63
Home equity	12,264	78	0.64		12,015	82	0.69
Automobile	14,439	149	1.03		14,549	154	1.05
Education	13,306	321	2.41		12,997	308	2.37
Other retail	5,564	250	4.49		5,430	249	4.59
Total retail	69,784	942	1.35		67,813	937	1.38
Total loans and leases	$131,305	$1,720	1.31	%	$128,163	$1,758	1.37	%
Allowance for Unfunded Lending Commitments
Commercial(1)		$147	1.50	%		$153	1.61	%
Retail(2)		11	1.37			23	1.42
Total allowance for unfunded lending commitments		158				176
Allowance for credit losses	$131,305	$1,878	1.43	%	$128,163	$1,934	1.51	%

(1) Coverage ratio includes total commercial allowance for unfunded lending commitments and total commercial allowance for loan and lease losses in the numerator and total commercial loans and leases in the denominator.

(2) Coverage ratio includes total retail allowance for unfunded lending commitments and total retail allowance for loan losses in the numerator and total retail loans in the denominator.

Citizens Financial Group, Inc. | 15


Table 9: Nonaccrual Loans and Leases
(dollars in millions)	March 31, 2022	December 31, 2021	Change	Percent
Commercial and industrial	$200	$171	$29	17	%
Commercial real estate	11	11	—	—
Leases	1	1	—	—
Total commercial	212	183	29	16
Residential mortgages(1)	243	201	42	21
Home equity	239	220	19	9
Automobile	52	55	(3)	(5)
Education	23	23	—	—
Other retail	20	20	—	—
Total retail	577	519

CITIZENS FINANCIAL GROUP INC/RI [CFG] Filings
CITIZENS FINANCIAL GROUP INC/RI [CFG-PD] Filings
CITIZENS FINANCIAL GROUP INC/RI [CFG-PE] Filings
10-Q	[2022-05-04]
10-K	[2022-02-23]
10-Q	[2021-11-03]
10-Q	[2021-08-03]
10-Q	[2021-05-05]
10-K	[2021-02-23]
10-Q	[2020-11-04]
10-Q	[2020-08-06]
10-Q	[2020-05-07]
10-K	[2020-02-24]
10-Q	[2019-11-06]
10-Q	[2019-08-06]
10-Q	[2019-05-08]
10-K	[2019-02-21]
10-Q	[2018-11-07]
10-Q	[2018-08-06]
10-Q	[2018-05-09]
10-K	[2018-02-22]
10-Q	[2017-11-03]
10-Q	[2017-08-03]
10-Q	[2017-05-04]
10-K	[2017-02-24]
10-Q	[2016-11-04]
10-Q	[2016-08-05]
10-Q	[2016-05-09]
10-K	[2016-02-26]
10-Q	[2015-11-06]
10-Q	[2015-08-07]
S-1	[2015-07-21]
S-1	[2015-07-21]
10-Q	[2015-05-08]
S-1	[2015-03-12]
10-K	[2015-03-03]
10-Q	[2014-11-14]
S-1	[2014-05-12]

CITIZENS FINANCIAL GROUP INC/RI [CFG] Filings

CITIZENS FINANCIAL GROUP INC/RI [CFG-PD] Filings

CITIZENS FINANCIAL GROUP INC/RI [CFG-PE] Filings