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Cover and table of contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended
December 31, 2019
☐ 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)
(401) 456-7000
(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 |
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☑ Yes ☐ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes ☑ No
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 (or for such shorter period that the registrant was required to file such reports) 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, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting 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
The aggregate market value of voting stock held by nonaffiliates of the Registrant was $16,145,696,534 (based on the June 30, 2019 closing price of Citizens Financial Group, Inc. common shares of $35.36 as reported on the New York Stock Exchange). There were 427,434,404 shares of Registrant’s common stock ($0.01 par value) outstanding on February 5, 2020.
Documents incorporated by reference
Portions of Citizens Financial Group, Inc.’s proxy statement to be filed with the United States Securities and Exchange Commission in connection with Citizens Financial Group, Inc.’s 2020 annual meeting of stockholders (the “Proxy Statement”) are incorporated by reference into Part III hereof. Such Proxy Statement will be filed within 120 days of Citizens Financial Group, Inc.’s fiscal year ended December 31, 2019.
| Citizens Financial Group, Inc. | 1 |
GLOSSARY OF ACRONYMS AND TERMS
The following is a list of common acronyms and terms we regularly use in our financial reporting:
| 2017 Tax Legislation | An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018 (Tax Cuts and Jobs Act) | |
| ACL | Allowance for Credit Losses | |
| Acquisitions | Refers to acquisitions after second quarter 2018, including Franklin American Mortgage Company, Clarfeld Financial Advisors, LLC and Bowstring Advisors LLC | |
| AFS | Available for Sale | |
| ALLL | Allowance for Loan and Lease Losses | |
| ALM | Asset and Liability Management | |
| AOCI | Accumulated Other Comprehensive Income (Loss) | |
| ASU | Accounting Standards Update | |
| ATM | Automated Teller Machine | |
| Bank Holding Company Act | The Bank Holding Company Act of 1956 | |
| Board or Board of Directors | The Board of Directors of Citizens Financial Group, Inc. | |
| bps | Basis Points | |
| Capital Plan Rule | Federal Reserve Regulation Y Capital Plan Rule | |
| CBNA | Citizens Bank, National Association | |
| CBPA | Citizens Bank of Pennsylvania | |
| CCAR | Comprehensive Capital Analysis and Review | |
| 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 | |
| CFPB | Consumer Financial Protection Bureau | |
| CFTC | Commodity Futures Trading Commission | |
| Citizens or CFG or the Company, we, us, or our | Citizens Financial Group, Inc. and its Subsidiaries | |
| CLTV | Combined Loan-to-Value | |
| CLO | Collateralized Loan Obligation | |
| CMO | Collateralized Mortgage Obligation | |
| CRA | Community Reinvestment Act | |
| CRE | Commercial Real Estate | |
| DIF | Deposit Insurance Fund | |
| Dodd-Frank Act | The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 | |
| EGRRCPA | Economic Growth, Regulatory Relief and Consumer Protection Act | |
| EPS | Earnings Per Share | |
| ESPP | Employee Stock Purchase Program | |
| ERISA | Employee Retirement Income Security Act of 1974 | |
| Exchange Act | The Securities Exchange Act of 1934 | |
| FAMC | Franklin American Mortgage Company | |
| FAMC acquisition | The August 1, 2018 acquisition of Franklin American Mortgage Company | |
| Fannie Mae (FNMA) | Federal National Mortgage Association | |
| FASB | Financial Accounting Standards Board |
| Citizens Financial Group, Inc. | 2 |
| FDIA | Federal Deposit Insurance Act | |
| FDIC | Federal Deposit Insurance Corporation | |
| FFIEC | Federal Financial Institutions Examination Council | |
| FHLB | Federal Home Loan Bank | |
| FICO | Fair Isaac Corporation (credit rating) | |
| FINRA | Financial Industry Regulation Authority | |
| FRB | 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 | |
| GLBA | Gramm-Leach-Bliley Act of 1999 | |
| Ginnie Mae (GNMA) | Government National Mortgage Association | |
| GSE | Government-Sponsored Enterprise | |
| HELOC | Home Equity Line of Credit | |
| HTM | Held To Maturity | |
| 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 | |
| LCR | Liquidity Coverage Ratio | |
| LHFS | Loans Held for Sale | |
| LGD | Loss Given Default | |
| LIBOR | London Interbank Offered Rate | |
| LIHTC | Low Income Housing Tax Credit | |
| LTV | Loan-to-Value | |
| 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 | |
| MSA | Metropolitan Statistical Area | |
| MSRs | Mortgage Servicing Rights | |
| New England | Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont | |
| NM | Not meaningful | |
| NSFR | Net Stable Funding Ratio | |
| OCC | Office of the Comptroller of the Currency | |
| OCI | Other Comprehensive Income | |
| OFAC | Office of Foreign Assets Control | |
| Parent Company | Citizens Financial Group, Inc. (the Parent Company of Citizens Bank, National Association and other subsidiaries) | |
| PD | Probability of Default | |
| peers or peer regional banks | BB&T, Comerica, Fifth Third, KeyCorp, M&T, PNC, Regions, SunTrust and U.S. Bancorp. Includes Truist for the period subsequent to the merger of BB&T and SunTrust | |
| REITs | Real Estate Investment Trusts | |
| ROTCE | Return on Average Tangible Common Equity | |
| RPA | Risk Participation Agreement |
| Citizens Financial Group, Inc. | 3 |
| SBA | Small Business Administration | |
| SBO | Serviced by Others loan portfolio | |
| SEC | United States Securities and Exchange Commission | |
| SVaR | Stressed Value-at-Risk | |
| 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 | |
| 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 | |
| VaR | Value-at-Risk | |
| VIE | Variable Interest Entities |
| Citizens Financial Group, Inc. | 4 |
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 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” 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 nonperforming 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; |
| • | Our ability to meet heightened supervisory requirements and expectations; |
| • | Liabilities and business restrictions resulting from litigation and regulatory investigations; |
| • | Our capital and liquidity requirements (including under regulatory capital standards, such as the U.S. Basel III capital rules) 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; 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, 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.
More information about factors that could cause actual results to differ materially from those described in the forward-looking statements can be found under Item 1A “Risk Factors”.
| Citizens Financial Group, Inc. | 5 |
PART I