Item 1. FINANCIAL STATEMENTS

						Page
Consolidated Balance Sheets (unaudited)						39
Consolidated Statements of Operations (unaudited)						40
Consolidated Statements of Comprehensive Income (unaudited)						41
Consolidated Statements of Changes in Stockholders’ Equity (unaudited)						42
Consolidated Statements of Cash Flows (unaudited)						44
Notes to Consolidated Financial Statements (unaudited)						45
Note 1 - Basis of Presentation						45
Note 2 - Acquisitions						45
Note 3 - Securities						50
Note 4 - Loans and Leases						53
Note 5 - Allowance for Credit Losses, Nonaccrual Loans and Leases, and Concentrations of Credit Risk						53
Note 6 - Mortgage Banking and Other						63
Note 7 - Goodwill and Intangible Assets						64
Note 8 - Variable Interest Entities						66
Note 9 - Borrowed Funds						66
Note 10 - Derivatives						68
Note 11 - Accumulated Other Comprehensive Income (Loss)						71
Note 12 - Stockholders’ Equity						72
Note 13 - Commitments and Contingencies						73
Note 14 - Fair Value Measurements						74
Note 15 - Noninterest Income						79
Note 16 - Other Operating Expense						79
Note 17 - Earnings Per Share						80
Note 18 - Business Operating Segments						80

Citizens Financial Group, Inc. | 38

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in millions, except share data)			June 30, 2022						December 31, 2021
ASSETS:
Cash and due from banks			$1,456						$1,155
Interest-bearing cash and due from banks			5,058						8,003
Interest-bearing deposits in banks			469						316
Debt securities available for sale, at fair value (including $328 and $640 pledged to creditors, respectively)(1)			24,961						26,067
Debt securities held to maturity (fair value of $9,361 and $2,289 respectively, and including $680 and $77 pledged to creditors, respectively)(1)			9,567						2,242
Loans held for sale, at fair value			1,377						2,733
Other loans held for sale			2,078						735
Loans and leases			156,172						128,163
Less: Allowance for loan and lease losses			(1,964)						(1,758)
Net loans and leases			154,208						126,405
Derivative assets			1,669						1,216
Premises and equipment, net			885						768
Bank-owned life insurance			3,207						2,843
Goodwill			8,081						7,116
Other assets			13,696						8,810
TOTAL ASSETS			$226,712						$188,409
LIABILITIES AND STOCKHOLDERS’ EQUITY:
LIABILITIES:
Deposits:
Noninterest-bearing			$54,169						$49,443
Interest-bearing			124,756						104,918
Total deposits			178,925						154,361
Short-term borrowed funds			3,763						74
Derivative liabilities			1,004						197
Long-term borrowed funds			14,440						6,932
Other liabilities			4,252						3,425
TOTAL LIABILITIES			202,384						164,989
Commitments and Contingencies (refer to Note 13)
STOCKHOLDERS’ EQUITY:
Preferred stock:
$25.00 par value,100,000,000 shares authorized; 2,050,000 shares issued and outstanding at June 30, 2022 and December 31, 2021			2,014						2,014
Common stock:
$0.01 par value, 1,000,000,000 shares authorized; 644,827,702 shares issued and 495,650,259 shares outstanding at June 30, 2022 and 571,259,135 shares issued and 422,137,197 shares outstanding at December 31, 2021			6						6
Additional paid-in capital			22,100						19,005
Retained earnings			8,346						7,978
Treasury stock, at cost, 149,177,443 and 149,121,938 shares at June 30, 2022 and December 31, 2021, respectively			(4,920)						(4,918)
Accumulated other comprehensive income (loss)			(3,218)						(665)
TOTAL STOCKHOLDERS’ EQUITY			24,328						23,420
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY			$226,712						$188,409

(1) Includes only collateral pledged by the Company where counterparties have the right to sell or pledge the collateral.

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

Citizens Financial Group, Inc. | 39

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

			Three Months Ended June 30,												Six Months Ended June 30,
(in millions, except share and per share data)			2022						2021						2022						2021
INTEREST INCOME:
Interest and fees on loans and leases			$1,370						$1,058						$2,418						$2,119
Interest and fees on loans held for sale			17						24						33						42
Interest and fees on other loans held for sale			25						2						32						8
Investment securities			201						124						339						252
Interest-bearing deposits in banks			13						3						17						6
Total interest income			1,626						1,211						2,839						2,427
INTEREST EXPENSE:
Deposits			54						42						79						92
Short-term borrowed funds			10						—						10						—
Long-term borrowed funds			57						45						98						94
Total interest expense			121						87						187						186
Net interest income			1,505						1,124						2,652						2,241
Provision (benefit) for credit losses			216						(213)						219						(353)
Net interest income after provision (benefit) for credit losses			1,289						1,337						2,433						2,594
NONINTEREST INCOME:
Capital markets fees			88						91						181						172
Service charges and fees			108						100						206						199
Mortgage banking fees			72						85						141						250
Card fees			71						64						131						119
Trust and investment services fees			66						60						127						118
Letter of credit and loan fees			40						38						78						76
Foreign exchange and derivative products			60						28						111						56
Securities gains, net			1						3						5						6
Other income			(12)						16						12						31
Total noninterest income			494						485						992						1,027
NONINTEREST EXPENSE:
Salaries and employee benefits			683						524						1,277						1,072
Equipment and software			169						155						319						307
Outside services			189						137						358						276
Occupancy			111						82						194						170
Other operating expense			153						93						263						184
Total noninterest expense			1,305						991						2,411						2,009
Income before income tax expense			478						831						1,014						1,612
Income tax expense			114						183						230						353
NET INCOME			$364						$648						$784						$1,259
Net income available to common stockholders			$332						$616						$728						$1,204
Weighted-average common shares outstanding:
Basic			491,497,026						425,948,706						457,140,258						425,951,197
Diluted			493,296,114						427,561,572						459,167,747						427,668,242
Per common share information:
Basic earnings			$0.68						$1.45						$1.59						$2.83
Diluted earnings			0.67						1.44						1.58						2.81

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

Citizens Financial Group, Inc. | 40

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

			Three Months Ended June 30,												Six Months Ended June 30,
(in millions)			2022						2021						2022						2021
Net income			$364						$648						$784						$1,259
Other comprehensive income (loss):
Net unrealized derivative instruments gains (losses) arising during the periods, net of income taxes of ($66), $16, ($236) and $9, respectively			(178)						46						(669)						25
Reclassification adjustment for net derivative (gains) losses included in net income, net of income taxes of ($3), ($10), ($11) and ($19), respectively			(8)						(27)						(32)						(52)
Net unrealized debt securities gains (losses) arising during the periods, net of income taxes of ($271), $3, ($628) and ($97), respectively			(779)						10						(1,856)						(297)
Reclassification of net debt securities (gains) losses to net income, net of income taxes of $0, $0, ($1) and ($1), respectively			(1)						(3)						(4)						(5)
Reclassification of actuarial loss to net income, net of income taxes of ($2), $1, ($1) and $1, respectively			6						4						8						8
Total other comprehensive income (loss), net of income taxes			(960)						30						(2,553)						(321)
Total comprehensive income (loss)			($596)						$678						($1,769)						$938

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

Citizens Financial Group, Inc. | 41

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

			Preferred Stock									Common Stock						Additional Paid-in Capital			Retained Earnings			Treasury Stock, at Cost			Accumulated Other Comprehensive Income (Loss)			Total
(in millions)			Shares			Amount						Shares			Amount
Balance at April 1, 2021			2			$1,965						426			$6			$18,945			$6,866			($4,718)			($411)			$22,653
Dividends to common stockholders			—			—						—			—			—			(168)			—			—			(168)
Dividends to preferred stockholders			—			—						—			—			—			(32)			—			—			(32)
Preferred stock issued			—			296						—			—			—			—			—			—			296
Preferred stock redemption			—			(247)						—			—			—			—			—			—			(247)
Share-based compensation plans			—			—						—			—			13			—			—			—			13
Employee stock purchase plan			—			—						—			—			6			—			—			—			6
Total comprehensive income (loss):
Net income			—			—						—			—			—			648			—			—			648
Other comprehensive income (loss)			—			—						—			—			—			—			—			30			30
Total comprehensive income (loss)			—			—						—			—			—			648			—			30			678
Balance at June 30, 2021			2			$2,014						426			$6			$18,964			$7,314			($4,718)			($381)			$23,199
Balance at April 1, 2022			2			$2,014						423			$6			$19,021			$8,209			($4,918)			($2,258)			$22,074
Dividends to common stockholders			—			—						—			—			—			(195)			—			—			(195)
Dividends to preferred stockholders			—			—						—			—			—			(32)			—			—			(32)
Issuance of common stock - business acquisition			—			—						72			—			3,036			—			—			—			3,036
Treasury stock purchased			—			—						—			—			—			—			(2)			—			(2)
Share-based compensation plans			—			—						1			—			36			—			—			—			36
Employee stock purchase plan			—			—						—			—			7			—			—			—			7
Total comprehensive income (loss):
Net income			—			—						—			—			—			364			—			—			364
Other comprehensive income (loss)			—			—						—			—			—			—			—			(960)			(960)
Total comprehensive income (loss)			—			—						—			—			—			364			—			(960)			(596)
Balance at June 30, 2022			2			$2,014						496			$6			$22,100			$8,346			($4,920)			($3,218)			$24,328

The accompanying Notes to unaudited interim Consolidated Financial Statements are an integral part of these statements.

Citizens Financial Group, Inc. | 42

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

			Preferred Stock									Common Stock						Additional Paid-in Capital			Retained Earnings			Treasury Stock, at Cost			Accumulated Other Comprehensive Income (Loss)			Total
(in millions)			Shares			Amount						Shares			Amount
Balance at January 1, 2021			2			$1,965						427			$6			$18,940			$6,445			($4,623)			($60)			$22,673
Dividends to common stockholders			—			—						—			—			—			(335)			—			—			(335)
Dividends to preferred stockholders			—			—						—			—			—			(55)			—			—			(55)
Preferred stock issued			—			296						—			—			—			—			—			—			296
Preferred stock redemption			—			(247)						—			—			—			—			—			—			(247)
Treasury stock purchased			—			—						(2)			—			—			—			(95)			—			(95)
Share-based compensation plans			—			—						1			—			13			—			—			—			13
Employee stock purchase plan			—			—						—			—			11			—			—			—			11
Total comprehensive income (loss):
Net income			—			—						—			—			—			1,259			—			—			1,259
Other comprehensive income (loss)			—			—						—			—			—			—			—			(321)			(321)
Total comprehensive income (loss)			—			—						—			—			—			1,259			—			(321)			938
Balance at June 30, 2021			2			$2,014						426			$6			$18,964			$7,314			($4,718)			($381)			$23,199
Balance at January 1, 2022			2			$2,014						422			$6			$19,005			$7,978			($4,918)			($665)			$23,420
Dividends to common stockholders			—			—						—			—			—			(360)			—			—			(360)
Dividends to preferred stockholders			—			—						—			—			—			(56)			—			—			(56)
Issuance of common stock - business acquisition			—			—						72			—			3,036			—			—			—			3,036
Treasury stock purchased			—			—						—			—			—			—			(2)			—			(2)
Share-based compensation plans			—			—						2			—			46			—			—			—			46
Employee stock purchase plan			—			—						—			—			13			—			—			—			13
Total comprehensive income (loss):
Net income			—			—						—			—			—			784			—			—			784
Other comprehensive income (loss)			—			—						—			—			—			—			—			(2,553)			(2,553)
Total comprehensive income (loss)			—			—						—			—			—			784			—			(2,553)			(1,769)
Balance at June 30, 2022			2			$2,014						496			$6			$22,100			$8,346			($4,920)			($3,218)			$24,328

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

Citizens Financial Group, Inc. | 43

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

			Six Months Ended June 30,
(in millions)			2022						2021
OPERATING ACTIVITIES
Net income			$784						$1,259
Adjustments to reconcile net income to net change in cash due to operating activities:
Provision (benefit) for credit losses			219						(353)
Net change in loans held for sale			1,220						322
Depreciation, amortization and accretion			327						317
Deferred income taxes			78						199
Share-based compensation			52						35
Net gain on sales of assets			(5)						(7)
Net (increase) decrease in other assets			(3,345)						(2,129)
Net increase (decrease) in other liabilities			348						247
Net change due to operating activities			(322)						(110)
INVESTING ACTIVITIES
Investment securities:
Purchases of debt securities available for sale			(8,638)						(6,413)
Proceeds from maturities and paydowns of debt securities available for sale			2,164						4,321
Proceeds from sales of debt securities available for sale			1,057						104
Proceeds from maturities and paydowns of debt securities held to maturity			502						530
Net (increase) decrease in interest-bearing deposits in banks			(153)						(95)
Acquisitions, net of cash acquired(1)			(234)						—
Purchases of loans			(979)						(1,005)
Sales of loans			417						563
Net (increase) decrease in loans and leases			(6,615)						939
Capital expenditures, net			(56)						(32)
Purchase of bank-owned life insurance			(100)						(500)
Other			(727)						(115)
Net change due to investing activities			(13,362)						(1,703)
FINANCING ACTIVITIES
Net increase (decrease) in deposits			4,347						3,472
Net increase (decrease) in short-term borrowed funds			3,674						(183)
Proceeds from issuance of long-term borrowed funds			5,217						—
Repayments of long-term borrowed funds			(1,756)						(1,357)
Treasury stock purchased			(2)						(95)
Net proceeds from issuance of preferred stock			—						296
Dividends declared and paid to common stockholders			(360)						(335)
Dividends declared and paid to preferred stockholders			(56)						(55)
Premium paid to exchange debt			—						(1)
Payments of employee tax withholding for share-based compensation			(24)						(21)
Net change due to financing activities			11,040						1,721
Net change in cash and cash equivalents**(2)**			(2,644)						(92)
Cash and cash equivalents at beginning of period**(2)**			9,158						12,733
Cash and cash equivalents at end of period**(2)**			$6,514						$12,641
Non-cash items:
Transfer of securities from available for sale to held to maturity			$7,810						$—
Investors Acquisition:
Fair value of assets acquired, excluding cash and cash equivalents			27,171						—
Goodwill and other intangible assets			918						—
Fair value of liabilities assumed			24,966						—
Common stock issued			3,035						—
Replacement equity awards			19						—

(1) Includes cash paid of $355 million to acquire Investors less $287 million in cash acquired, and $143 million and $23 million of cash paid for the HSBC transaction and acquisition of DH Capital, respectively, for the six months ended June 30, 2022. See Note 2 for more detailed information regarding these acquisitions.

(2) Cash and cash equivalents include cash and due from banks and interest-bearing cash and due from banks as reflected on the Consolidated Balance Sheets.

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

Citizens Financial Group, Inc. | 44

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 - BASIS OF PRESENTATION

Basis of Presentation

The unaudited interim Consolidated Financial Statements, including the Notes presented in this document, have been prepared in accordance with GAAP interim reporting requirements and, therefore, do not include all information and Notes included in the audited Consolidated Financial Statements in conformity with GAAP. The unaudited interim Consolidated Financial Statements and Notes presented in this document should be read in conjunction with the Company’s audited Consolidated Financial Statements and accompanying Notes included in the Company’s 2021 Form 10-K. The Company’s principal business activity is banking, conducted through its banking subsidiary CBNA.

The unaudited interim Consolidated Financial Statements include the accounts of Citizens and subsidiaries in which Citizens has a controlling financial interest. All intercompany transactions and balances have been eliminated. The Company has evaluated its unconsolidated entities and does not believe that any entity in which it has an interest, but does not currently consolidate, meets the requirements to be consolidated as a variable interest entity. The unaudited interim Consolidated Financial Statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods. The results for interim periods are not necessarily indicative of results for a full year.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near-term relate to the determination of the ACL.

Significant Accounting Policies

For further information regarding the Company’s significant accounting policies, see Note 1 in the Company’s 2021 Form 10-K.

NOTE 2 - ACQUISITIONS

Acquisition of HSBC

On February 18, 2022, CBNA closed on its previously announced HSBC transaction, which included 66 branches in the New York City metropolitan area, 9 branches in the Mid-Atlantic/Washington D.C. area, and 5 branches in Southeast Florida. The acquired liabilities and assets included approximately $6.3 billion in deposits and $1.5 billion in loans. The transaction resulted in an estimated increase to goodwill of approximately $119 million, which was allocated to the Consumer business segment as of June 30, 2022.

The Company’s second quarter results reflect the full quarter benefit of the HSBC transaction, and for the six months ended June 30, 2022 reflect the benefit of the HSBC transaction from the closing date of the transaction. The impact of the HSBC transaction, along with supplemental pro forma information as if the HSBC transaction had occurred on January 1, 2021, are not material to the Company’s Consolidated Statements of Operations.

The HSBC transaction has been accounted for as a business combination. Accordingly, the assets acquired and liabilities assumed from HSBC were recorded at fair value as of the transaction date. The determination of fair value requires management to make estimates about discount rates, future expected cash flows, market conditions and other future events that are highly subjective in nature and are subject to change. Fair value estimates related to the assets acquired and liabilities assumed from HSBC are subject to adjustment for up to one year after the closing date. As of June 30, 2022, the fair value of the assets acquired and liabilities assumed from HSBC are not material to the Company’s Consolidated Balance Sheet and are deemed to be final.

Citizens Financial Group, Inc. | 45

Investors acquisition

On April 6, 2022, Citizens completed its previously announced Investors acquisition pursuant to an agreement and plan of merger entered into on July 28, 2021. Pursuant to the terms of the agreement, Investors merged with Citizens, with Citizens as the surviving corporation, and Investors Bank, a New Jersey state-chartered bank and wholly-owned subsidiary of Investors, merged with CBNA, with CBNA as the surviving bank. The Investors acquisition builds Citizens’ 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.

The results of Investors’ operations are included in the Company’s consolidated statements of operations for the three and six months ended June 30, 2022 from the closing date of the acquisition.

Upon closing of the acquisition, each share of Investors common stock was converted into 0.297 of a share of the Company’s common stock. This conversion, coupled with the conversion of equity awards noted below under “—Share-Based Compensation Activity”, resulted in an increase of approximately 73.6 million basic and diluted shares. For the three months ended June 30, 2022, 68.6 million average shares were included in the dilutive earnings per share calculation, resulting from the Investors acquisition. The Company also paid $1.46 in cash to shareholders of Investors for each share they owned.

The Investors acquisition has been accounted for as a business combination. Accordingly, the assets acquired and liabilities assumed from Investors were recorded at fair value as of the closing date. The determination of fair value requires management to make estimates about discount rates, future expected cash flows, market conditions and other future events that are highly subjective in nature and are subject to change. Fair value estimates related to the assets acquired and liabilities assumed from Investors are subject to adjustment for up to one year after the closing date if new information is obtained about facts and circumstances that existed as of the closing date that, if known, would have affected the measurement of the amounts recognized as of that date.

Citizens considers its valuations of loans and leases, premises and equipment, and the core deposit intangible to be preliminary as of June 30, 2022. Accordingly, the amounts recorded for current and deferred tax assets and liabilities are also considered preliminary, as Citizens continues to evaluate the nature and extent of differences between the book and tax bases of the acquired assets and liabilities assumed. While the Company believes the information available as of April 6, 2022 provides a reasonable basis for estimating fair value, additional information may become available that would result in adjustments to the fair values presented, although any such adjustments are not expected to be material. Any adjustments identified during the one year period subsequent to the closing date will be recognized in the corresponding reporting period.

Share-Based Compensation Activity

Under the terms of the merger agreement with Investors, stock options and restricted shares granted by Investors that were outstanding as of April 6, 2022 were converted into CFG awards and remain subject to their original terms and conditions. Citizens issued 1,151,301 stock options and 259,316 restricted shares in connection with the transaction.

The fair value of stock option awards was measured using a lattice model as of the closing date. The portion of the fair value of the awards being replaced which was attributable to service prior to the merger was included as a component of the consideration paid in the merger.

Citizens Financial Group, Inc. | 46

The following table includes a preliminary allocation of the consideration paid for the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed from Investors:

(in millions, except share and per share data)			April 6, 2022
Consideration
CFG common shares issued			72,148,855
CFG share price on April 6, 2022			$42.08
Fair value of consideration for outstanding common stock			$3,036
Cash paid			355
Consideration related to equity awards			19
Fair value of merger consideration			3,410
Assets acquired
Cash and equivalents			287
Investment securities			3,825
Loans held for sale			2,183
Net loans and leases			20,158
Premises and equipment			123
Core deposit intangible and other intangible assets			119
Other assets			882
Total assets acquired			27,577
Liabilities assumed
Deposits			20,217
Borrowed funds			4,097
Other liabilities			652
Total liabilities assumed			24,966
Less: Net assets			2,611
Goodwill			$799

Preliminary goodwill of $799 million recorded in connection with the acquisition resulted from the expected synergies, operational efficiencies and expertise of Investors. The amount of goodwill recorded reflects the increased market share and related synergies that are expected to result from the acquisition, and represents the excess purchase price over the estimated fair value of the net assets acquired from Investors. The goodwill was allocated to each of our two business operating segments on a preliminary basis and is not deductible for income tax purposes.

Intangible assets from the Investors acquisition consist of core deposits and naming rights. For additional information on these intangibles and goodwill see Note 7.

The following table includes the fair value and unpaid principal balance of the loans acquired from Investors:

			April 6, 2022
(in millions)			Unpaid Principal Balance			Fair Value
Commercial and industrial			$3,021			$2,902
Commercial real estate			13,310			13,082
Leases			9			9
Total commercial			16,340			15,993
Residential mortgages			3,949			3,887
Home equity			267			274
Other retail			4			4
Total retail			4,220			4,165
Net loans and leases			$20,560			$20,158

Citizens Financial Group, Inc. | 47

Fair value is estimated as of April 6, 2022 and reflects a credit mark of $101 million on PCD loans recorded through purchase accounting, and an accretable discount of $300 million comprised of $159 million in interest rate mark and $141 million in non-PCD credit mark.

The following is a description of the methods used to determine the fair value of significant assets and liabilities:

Cash and Equivalents

The carrying amount of cash and cash equivalents is a reasonable estimate of fair value based on the short-term nature of these assets.

Investment Securities

Fair value estimates for AFS securities were determined by third-party pricing vendors. The third-party vendors use a variety of methods when pricing securities that incorporate relevant market data to arrive at an estimate of what a buyer in the marketplace would pay for a security under current market conditions. These methods include the use of quoted prices for an identical or similar security and an alternative market-based or income approach like the discounted cash flow pricing model. Substantially all of the investment securities acquired in connection with the Investors acquisition were sold subsequent to closing to align with Citizens’ portfolio management strategy.

Loans held for sale

Loans held for sale are valued based on quoted market prices, where available, prices for other traded loans with similar characteristics, and purchase commitments and bid information from market participants. The prices are adjusted as necessary to take into consideration the specific characteristics of certain loans that are priced based on the pricing of similar loans.

Loans and Leases

Fair values for loans and leases are based on a discounted cash flow methodology that considered factors including type of loan and lease and related collateral, fixed or variable interest rate, term, amortization status, credit loss and prepayment expectations, market interest rates and other market factors (e.g., liquidity) from the perspective of a market participant. Loans and leases were grouped together according to similar characteristics when applying various valuation techniques. The discount rates used are based on current market rates for new originations of comparable loans and leases and include adjustments for liquidity. The probability of default, loss given default, exposure at default and prepayment assumptions are the key factors driving credit losses which are embedded into the estimated cash flows.

Premises and Equipment

Fair value of premises is based on a market approach using third-party appraisals and broker opinions of value for land, office and branch space.

Core Deposit Intangible

Fair value of core deposit intangible represents the value of certain client deposit relationships, estimated utilizing the favorable source of funds method. Appropriate consideration was given to deposit costs including servicing costs, client retention and alternative funding source costs at the time of acquisition. The discount rate used was derived taking into account the estimated cost of equity, risk-free return rate and risk premium for the market, and specific risk related to the asset’s cash flows. The core deposit intangible is being amortized over 10 years using an accelerated depreciation methodology.

Deposits

Fair value of time deposits was estimated by discounting contractual cash flows using current market rates for instruments with similar maturities. For deposits with no defined maturity, carrying value approximates fair value.

Borrowed Funds

The fair value of borrowed funds was estimated by using a discounted cash flow methodology based on current incremental borrowing rates for similar types of instruments.

Citizens Financial Group, Inc. | 48

The following table presents the financial results of Investors included in the Consolidated Statements of Operations from the date of acquisition through June 30, 2022:

(in millions)			April 6, 2022 through June 30, 2022
Net interest income			$232
Noninterest income			13
Net income			114

The following table presents unaudited supplemental pro forma financial information as if the Investors acquisition had occurred on January 1, 2021 and includes the impact of (i) amortizing and accreting fair value adjustments associated with loans and leases, (ii) the amortization of recognized intangible assets and the elimination of Investors’ historical amortization of these assets, (iii) the elimination of Investors’ historical accretion and amortization of deferred fees and costs on loans and leases, (iv) the elimination of Investors’ historical accretion and amortization of discounts and premiums on loans and leases, debt securities and long-term borrowed funds and (v) the related estimated income tax effects. The pro forma financial information does not necessarily reflect the results that would have occurred had Citizens acquired Investors on January 1, 2021.

			Three Months Ended June 30,									Six Months Ended June 30,
(in millions)			2022			2021						2022			2021
Net interest income			$1,505			$1,339						$2,866			$2,652
Noninterest income			525			498						1,038			1,029
Net income(1)			581			737						1,083			1,169

(1) Excludes the acceleration of one-time executive compensation and Employee Stock Ownership Plan expenses of $122 million incurred by Investors in the first quarter of 2022.

In addition, the supplemental pro forma financial information includes non-recurring acquisition-related costs of $268 million and $275 million, respectively, incurred during the three and six months ended June 30, 2022, as summarized in the following table. These costs, along with the $13 million incurred during 2021, are included in the first quarter of 2021 for the purpose of reporting supplemental pro forma financial information presented above.

(in millions)			Three Months Ended June 30, 2022						Six Months Ended June 30, 2022
Provision for credit losses(1)			$145						$145
Salaries and employee benefits(2)			61						61
Outside services(3)			29						36
Mark-to-market losses on LHFS portfolio(4)			31						31
Other operating expense			2						2
Total acquisition-related costs			$268						$275

(1) Represents the initial provision for credit losses also recognized through a fair value mark as required by purchase accounting.

(2) Comprised primarily of severance and employee retention costs.

(3) Comprised primarily of technology, legal, advisory, and other professional related fees.

(4) Represents mark-to-market losses on loans acquired from Investors classified as LHFS.

Under CECL, Citizens is required to determine whether purchased loans held for investment have experienced more-than-insignificant deterioration in credit quality since origination. Citizens considers a variety of factors in connection with the identification of more-than-insignificant deterioration in credit quality including, but not limited to, nonperforming status, delinquency, risk ratings, TDR classification, FICO scores and other qualitative factors. Citizens initially measures the amortized cost of a PCD loan by adding the acquisition date estimate of expected credit losses to the loan's purchase price. The initial ALLL for PCD loans of $101 million was established through an adjustment to the Investors loan balance and related purchase accounting mark. Non-PCD loans and PCD loans had a fair value of $15.7 billion and $4.5 billion at the acquisition date and unpaid principal balance of $15.9 billion and $4.7 billion, respectively. In accordance with U.S. GAAP there was no carryover of the ACL that had been previously recorded by Investors. Subsequent to the acquisition, Citizens recorded an ACL on non-PCD loans of $145 million through provision expense for credit losses.

Citizens Financial Group, Inc. | 49

The following table presents PCD loan activity at the date of acquisition:

(in millions)			April 6, 2022
Principal balance			$4,685
ALLL at acquisition			(101)
Non-credit discount			(54)
Purchase price			$4,530

Acquisition of DH Capital

On June 8, 2022, Citizens completed the acquisition of DH Capital, a private investment banking firm serving companies in the internet infrastructure, software, IT services and communications sectors. The fair value of the assets acquired and liabilities assumed in connection with this acquisition are not material to the Company’s Consolidated Balance Sheet as of June 30, 2022.

The impact of the DH Capital acquisition, along with supplemental pro forma information as if the DH Capital acquisition had occurred on January 1, 2021, are not material to the Company’s Consolidated Statements of Operations.

NOTE 3 - SECURITIES

The following table presents the major components of securities at amortized cost and fair value:

			June 30, 2022															December 31, 2021
(in millions)			Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Fair Value						Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Fair Value
U.S. Treasury and other			$3,455			$1			($48)			$3,408						$11			$—			$—			$11
State and political subdivisions			3			—			—			3						2			—			—			2
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities			21,568			4			(1,483)			20,089						24,607			210			(375)			24,442
Other/non-agency			281			—			(20)			261						397			9			(1)			405
Total mortgage-backed securities			21,849			4			(1,503)			20,350						25,004			219			(376)			24,847
Collateralized loan obligations			1,248			—			(48)			1,200						1,208			—			(1)			1,207
Total debt securities available for sale, at fair value			$26,555			$5			($1,599)			$24,961						$26,225			$219			($377)			$26,067
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities			$8,921			$25			($199)			$8,747						$1,505			$52			$—			$1,557
Total mortgage-backed securities			8,921			25			(199)			8,747						1,505			52			—			1,557
Asset-backed securities			646			—			(32)			614						737			2			(7)			732
Total debt securities held to maturity			$9,567			$25			($231)			$9,361						$2,242			$54			($7)			$2,289
Equity securities, at cost			$1,162			$—			$—			$1,162						$624			$—			$—			$624
Equity securities, at fair value			138			—			—			138						109			—			—			109

Accrued interest receivable on debt securities totaled $94 million and $56 million as of June 30, 2022 and December 31, 2021, respectively, and is included in other assets in the Consolidated Balance Sheets.

Citizens Financial Group, Inc. | 50

The following table presents the amortized cost and fair value of debt securities by contractual maturity as of June 30, 2022. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without incurring penalties.

			Distribution of Maturities
(in millions)			1 Year or Less			After 1 Year through 5 Years			After 5 Years through 10 Years			After 10 Years			Total
Amortized cost:
U.S. Treasury and other			$11			$1,911			$1,533						$3,455
State and political subdivisions			1			—			—			2			3
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities			4			584			2,879			18,101			21,568
Other/non-agency			—			—			—			281			281
Collateralized loan obligations			—			—			25			1,223			1,248
Total debt securities available for sale			16			2,495			4,437			19,607			26,555
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities			—			—			—			8,921			8,921
Asset-backed securities			—			—			646			—			646
Total debt securities held to maturity			—			—			646			8,921			9,567
Total amortized cost of debt securities			$16			$2,495			$5,083			$28,528			$36,122
Fair value:
U.S. Treasury and other			$11			$1,881			$1,516			$—			$3,408
State and political subdivisions			1			—			—			2			3
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities			4			576			2,783			16,726			20,089
Other/non-agency			—			—			—			261			261
Collateralized loan obligations			—			—			23			1,177			1,200
Total debt securities available for sale			16			2,457			4,322			18,166			24,961
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities			—			—			—			8,747			8,747
Asset-backed securities			—			—			614			—			614
Total debt securities held to maturity			—			—			614			8,747			9,361
Total fair value of debt securities			$16			$2,457			$4,936			$26,913			$34,322

Taxable interest income from investment securities as presented in the Consolidated Statements of Operations was $201 million and $124 million for the three months ended June 30, 2022 and 2021, respectively, and $339 million and $252 million for the six months ended June 30, 2022 and 2021, respectively.

The following table presents realized gains and losses on securities:

			Three Months Ended June 30,												Six Months Ended June 30,
(in millions)			2022						2021						2022						2021
Gains on sale of securities			$2						$3						$9						$6
Losses on sale of securities			(1)						—						(4)						—
Securities gains, net			$1						$3						$5						$6

The following table presents the amortized cost and fair value of debt securities pledged:

			June 30, 2022									December 31, 2021
(in millions)			Amortized Cost			Fair Value						Amortized Cost			Fair Value
Pledged against derivatives, to qualify for fiduciary powers, and to secure public and other deposits as required by law			$5,763			$5,351						$4,816			$4,782
Pledged as collateral for FHLB borrowing capacity			245			225						325			333
Pledged against repurchase agreements			—			—						1			1

The Company regularly enters into security repurchase agreements with unrelated counterparties, which involve the transfer of a security from one party to another, and a subsequent transfer of substantially the same security back to the original party. These repurchase agreements are typically short-term in nature and are

Citizens Financial Group, Inc. | 51

accounted for as secured borrowed funds in the Company’s Consolidated Balance Sheets. The Company recognized no offsetting of short-term receivables or payables as of June 30, 2022 or December 31, 2021. The Company offsets certain derivative assets and derivative liabilities in the Consolidated Balance Sheets. For further information see Note 10.

Securitizations of mortgage loans retained in the investment portfolio were $40 million for the three and six months ended June 30, 2022. Securitizations of mortgage loans retained in the investment portfolio were $82 million and $163 million for the three and six months ended June 30, 2021, respectively. These securitizations include a substantive guarantee by a third party. The guarantors were FNMA and FHLMC in 2022 and 2021, and also included GNMA in 2021. The debt securities received from the guarantors are classified as AFS.

Impairment

The Company evaluated its existing HTM portfolio as of June 30, 2022 and concluded that in excess of 90% of HTM securities met the zero expected credit loss criteria and, therefore, no ACL was recognized. Lifetime expected credit losses on the remainder of the HTM portfolio were determined to be insignificant based on the modeling of the Company’s credit loss position in the securities. The Company monitors the credit exposure through the use of credit quality indicators. For these securities, the Company uses external credit ratings or an internally derived credit rating when an external rating is not available. All securities were determined to be investment grade at June 30, 2022.

The following tables present AFS debt securities with fair values below their respective carrying values, separated by the duration the securities have been in a continuous unrealized loss position:

			June 30, 2022
			Less than 12 Months									12 Months or Longer									Total
(dollars in millions)			Fair Value			Gross Unrealized Losses						Fair Value			Gross Unrealized Losses						Fair Value			Gross Unrealized Losses
U.S. Treasury and other			$3,236			($48)						$—			$—						$3,236			($48)
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities			18,048			(1,214)						1,498			(269)						19,546			(1,483)
Other/non-agency			261			(20)						—			—						261			(20)
Total mortgage-backed securities			18,309			(1,234)						1,498			(269)						19,807			(1,503)
Collateralized loan obligations			1,201			(48)						—			—						1,201			(48)
Total			$22,746			($1,330)						$1,498			($269)						$24,244			($1,599)

			December 31, 2021
			Less than 12 Months									12 Months or Longer									Total
(dollars in millions)			Fair Value			Gross Unrealized Losses						Fair Value			Gross Unrealized Losses						Fair Value			Gross Unrealized Losses
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities			$14,131			($320)						$1,236			($55)						$15,367			($375)
Other/non-agency			123			(1)						—			—						123			(1)
Total mortgage-backed securities			14,254			(321)						1,236			(55)						15,490			(376)
Collateralized loan obligations			736			(1)						—			—						736			(1)
Total			$14,990			($322)						$1,236			($55)						$16,226			($377)

Citizens does not currently have the intent to sell these debt securities, and it is not more likely than not that the Company will be required to sell these debt securities prior to recovery of their amortized cost bases. Citizens has determined that credit losses are not expected to be incurred on the U.S. Treasury securities, agency MBS, non-agency MBS, and CLOs identified with unrealized losses as of June 30, 2022. The unrealized losses on these debt securities reflect non-credit-related factors driven by changes in interest rates. Therefore, the Company has determined that these debt securities are not impaired.

Citizens Financial Group, Inc. | 52

NOTE 4 - LOANS AND LEASES

Loans held for investment are reported at the amount of their outstanding principal, net of charge-offs, unearned income, deferred loan origination fees and costs, and unamortized premiums or discounts on purchased loans.

The following table presents loans and leases, excluding LHFS:

(in millions)			June 30, 2022						December 31, 2021
Commercial and industrial			$51,801						$44,500
Commercial real estate			28,070						14,264
Leases			1,574						1,586
Total commercial			81,445						60,350
Residential mortgages			29,088						22,822
Home equity			13,122						12,015
Automobile			13,868						14,549
Education			13,141						12,997
Other retail			5,508						5,430
Total retail			74,727						67,813
Total loans and leases			$156,172						$128,163

Accrued interest receivable on loans and leases held for investment totaled $593 million and $450 million as of June 30, 2022 and December 31, 2021, respectively, and is included in other assets in the Consolidated Balance Sheets.

Loans pledged as collateral for FHLB borrowing capacity, primarily residential mortgages and home equity products, totaled $38.5 billion and $26.1 billion at June 30, 2022 and December 31, 2021, respectively. Loans pledged as collateral to support the contingent ability to borrow at the FRB discount window, if necessary, were primarily comprised of education, automobile, commercial and industrial, and commercial real estate loans, and totaled $37.9 billion and $35.8 billion at June 30, 2022 and December 31, 2021, respectively.

Interest income on direct financing and sales-type leases was $10 million and $12 million for the three months ended June 30, 2022 and 2021, respectively, and is reported within interest and fees on loans and leases in the Consolidated Statements of Operations. For the six months ended June 30, 2022 and 2021, this interest income was $21 million and $25 million, respectively.

The following table presents the composition of LHFS:

			June 30, 2022															December 31, 2021
(in millions)			Residential Mortgages**(1)**			Other retail**(3)**			Commercial**(2)**			Total						Residential Mortgages**(1)**						Commercial**(2)**			Total
Loans held for sale at fair value			$1,278			$—			$99			$1,377						$2,657						$76			$2,733
Other loans held for sale			—			488			1,590			2,078						—						735			735

(1) Residential mortgage LHFS are originated for sale.

(2) Commercial LHFS at fair value consist of loans managed by the Company’s commercial secondary loan desk. Other commercial LHFS consist of loans associated with the Company’s syndication business and loans acquired as part of the Investors acquisition.

(3) Consists of retail loans acquired as part of the Investors acquisition.

NOTE 5 - ALLOWANCE FOR CREDIT LOSSES, NONACCRUAL LOANS AND LEASES, AND CONCENTRATIONS OF CREDIT RISK

Allowance for Credit Losses

Recorded in the ACL is management’s estimate of expected credit losses in the Company’s loan and lease portfolios. See Note 6 in the Company’s 2021 Form 10-K for a detailed discussion of the ACL reserve methodology and estimation techniques as of December 31, 2021. There were no significant changes to the ACL reserve methodology during the six months ended June 30, 2022.

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The following table presents a summary of changes in the ACL for the three and six months ended June 30, 2022:

			Three Months Ended June 30, 2022												Six Months Ended June 30, 2022
(in millions)			Commercial			Retail			Total						Commercial			Retail			Total
Allowance for loan and lease losses, beginning of period			$778			$942			$1,720						$821			$937			$1,758
Allowance on PCD loans and leases at acquisition			99			2			101						99			2			101
Charge-offs(1)			(13)			(78)			(91)						(27)			(165)			(192)
Recoveries			3			39			42						6			78			84
Net charge-offs			(10)			(39)			(49)						(21)			(87)			(108)
Provision expense (benefit) for loans and leases(2)			120			72			192						88			125			213
Allowance for loan and lease losses, end of period			987			977			1,964						987			977			1,964
Allowance for unfunded lending commitments, beginning of period			147			11			158						153			23			176
Provision expense (benefit) for unfunded lending commitments			18			6			24						12			(6)			6
Allowance on PCD unfunded lending commitments at acquisition			1			—			1						1			—			1
Allowance for unfunded lending commitments, end of period			166			17			183						166			17			183
Total allowance for credit losses, end of period			$1,153			$994			$2,147						$1,153			$994			$2,147

(1) For the three and six months ended June 30, 2022, excludes $33 million of charge-offs previously taken by Investors or recognized upon completion of the Investors acquisition under purchase accounting. The initial allowance for loan and lease losses on PCD assets included these amounts and, after charging these amounts off upon acquisition, the net impact for PCD assets was $101 million of additional allowance for loan and lease losses.

(2) Includes $145 million and $169 million of initial provision expense related to non-PCD loans and leases acquired from Investors and HSBC for the three and six months ended June 30, 2022, respectively.

During the six months ended June 30, 2022, net charge-offs of $108 million, the ACL on PCD loans and leases and unfunded lending commitments at acquisition of $102 million, and a credit provision of $219 million resulted in an increase of $213 million to the ACL.

Retail NCOs reflected modest improvement for the three and six months ended June 30, 2022 compared to the same periods in 2021, as consumers continued to maintain a savings cushion, the economy approached full employment and residential mortgage and automobile loan collateral values remained elevated. Commercial NCOs decreased for the three and six months ended June 30, 2022 compared to the same periods in 2021, as credit performance remained strong.

To determine the ACL as of June 30, 2022, the Company utilized an economic forecast that generally reflects real GDP growth on an annual average basis of 2.1% and an average unemployment rate of 4.3% in 2022. This forecast incorporates the risk of a mild recession beginning in the latter half of the year. This compares to the Company’s December 31, 2021 forecast which reflected real GDP growth on an annual average basis of 2.8% and an average unemployment rate of 6% in 2022.

To address economic uncertainty, the Company utilizes a qualitative allowance framework to reassess and adjust ACL reserve levels. Macroeconomic forecast risk, driven by uncertainty around and volatility of key macroeconomic variables, is one of the primary factors influencing the Company’s qualitative reserve.

The Company’s June 2022 qualitative consideration for macroeconomic risk reflects the Federal Reserve’s aggressively tightening monetary policy and the contraction of fiscal policy, as pandemic-related support winds down. These conditions, weighed together with the impacts of Russia’s invasion of Ukraine on key global commodity prices, labor shortage-related wage increases and continuing supply-chain challenges contributing to surging inflation, possibly may push the U.S. economy into a mild recession and create volatility in key macroeconomic variables, including GDP and employment.

Citizens Financial Group, Inc. | 54

The following table presents a summary of changes in the ACL for the three and six months ended June 30, 2021:

			Three Months Ended June 30, 2021												Six Months Ended June 30, 2021
(in millions)			Commercial			Retail			Total						Commercial			Retail			Total
Allowance for loan and lease losses, beginning of period			$1,146			$1,048			$2,194						$1,233			$1,210			$2,443
Charge-offs			(45)			(80)			(125)						(179)			(173)			(352)
Recoveries			4			43			47						34			82			116
Net charge-offs			(41)			(37)			(78)						(145)			(91)			(236)
Provision expense (benefit) for loans and leases			(152)			(17)			(169)						(135)			(125)			(260)
Allowance for loan and lease losses, end of period			953			994			1,947						953			994			1,947
Allowance for unfunded lending commitments, beginning of period			165			13			178						186			41			227
Provision expense (benefit) for unfunded lending commitments			(44)			—			(44)						(65)			(28)			(93)
Allowance for unfunded lending commitments, end of period			121			13			134						121			13			134
Total allowance for credit losses, end of period			$1,074			$1,007			$2,081						$1,074			$1,007			$2,081

Credit Quality Indicators

The Company presents loan and lease portfolio segments and classes by credit quality indicator and vintage year. Citizens defines the vintage date for the purpose of this disclosure as the date of the most recent credit decision. In general, renewals are categorized as new credit decisions and reflect the renewal date as the vintage date. Loans modified in a TDR are considered a continuation of the original loan and vintage date corresponds with the most recent credit decision.

For commercial loans and leases, Citizens utilizes regulatory classification ratings to monitor credit quality. The assignment of regulatory classification ratings occurs at loan origination and are periodically re-evaluated by Citizens utilizing a risk-based approach, including any time management becomes aware of information affecting the borrowers' ability to fulfill their obligations. The review process considers both quantitative and qualitative factors. Loans with a “pass” rating are those that the Company believes will fully repay in accordance with the contractual loan terms. Commercial loans and leases identified as “criticized” have some weakness or potential weakness that indicate an increased probability of future loss. Citizens groups “criticized” loans into three categories, “special mention,” “substandard,” and “doubtful.” Special mention loans have potential weaknesses that, if left uncorrected, may result in deterioration of the Company’s credit position at some future date. Substandard loans are inadequately protected loans; these loans have well-defined weaknesses that could hinder normal repayment or collection of the debt. Doubtful loans have the same weaknesses as substandard, with the added characteristic that the possibility of loss is high and collection of the full amount of the loan is improbable.

Citizens Financial Group, Inc. | 55

The following table presents the amortized cost basis of commercial loans and leases, by vintage date and regulatory classification rating, as of June 30, 2022:

			Term Loans by Origination Year																																				Revolving Loans
(in millions)			2022						2021						2020						2019						2018						Prior to 2018						Within the Revolving Period			Converted to Term						Total
Commercial and industrial
Pass			$4,730						$9,806						$2,974						$2,830						$1,972						$2,845						$24,106			$90						$49,353
Special Mention			4						127						66						113						17						116						369			1						813
Substandard			3						142						112						332						129						290						458			13						1,479
Doubtful			8						5						14						4						9						24						89			3						156
Total commercial and industrial			4,745						10,080						3,166						3,279						2,127						3,275						25,022			107						51,801
Commercial real estate
Pass			3,193						6,487						3,867						3,638						2,602						4,449						2,171			3						26,410
Special Mention			—						21						75						268						102						93						2			—						561
Substandard			91						23						—						96						239						629						9			—						1,087
Doubtful			—						1						9						—						—						2						—			—						12
Total commercial real estate			3,284						6,532						3,951						4,002						2,943						5,173						2,182			3						28,070
Leases
Pass			114						410						281						125						147						480						—			—						1,557
Special Mention			—						3						2						—						3						1						—			—						9
Substandard			—						1						3						3						1						—						—			—						8
Doubtful			—						—						—						—						—						—						—			—						—
Total leases			114						414						286						128						151						481						—			—						1,574
Total commercial
Pass(1)			8,037						16,703						7,122						6,593						4,721						7,774						26,277			93						77,320
Special Mention			4						151						143						381						122						210						371			1						1,383
Substandard			94						166						115						431						369						919						467			13						2,574
Doubtful			8						6						23						4						9						26						89			3						168
Total commercial			$8,143						$17,026						$7,403						$7,409						$5,221						$8,929						$27,204			$110						$81,445

Citizens Financial Group, Inc. | 56

The following table presents the amortized cost basis of commercial loans and leases, by vintage date and regulatory classification rating, as of December 31, 2021:

			Term Loans by Origination Year																																				Revolving Loans
(in millions)			2021						2020						2019						2018						2017						Prior to 2017						Within the Revolving Period			Converted to Term						Total
Commercial and industrial
Pass			$10,218						$3,336						$3,599						$2,284						$1,426						$1,863						$19,406			$122						$42,254
Special Mention			47						71						155						114						41						64						316			1						809
Substandard			97						112						215						81						50						201						521			17						1,294
Doubtful			1						9						9						22						10						16						74			2						143
Total commercial and industrial			10,363						3,528						3,978						2,501						1,527						2,144						20,317			142						44,500
Commercial real estate
Pass			2,766						2,417						3,181						1,756						626						1,119						1,451			3						13,319
Special Mention			45						42						113						100						27						79						—			—						406
Substandard			27						—						88						267						78						59						9			—						528
Doubtful			1						9						—						—						—						1						—			—						11
Total commercial real estate			2,839						2,468						3,382						2,123						731						1,258						1,460			3						14,264
Leases
Pass			447						262						134						144						66						459						—			—						1,512
Special Mention			10						15						—						5						3						16						—			—						49
Substandard			1						16						5						2						—						—						—			—						24
Doubtful			—						—						—						—						—						1						—			—						1
Total leases			458						293						139						151						69						476						—			—						1,586
Total commercial
Pass(1)			13,431						6,015						6,914						4,184						2,118						3,441						20,857			125						57,085
Special Mention			102						128						268						219						71						159						316			1						1,264
Substandard			125						128						308						350						128						260						530			17						1,846
Doubtful			2						18						9						22						10						18						74			2						155
Total commercial			$13,660						$6,289						$7,499						$4,775						$2,327						$3,878						$21,777			$145						$60,350

For retail loans, Citizens utilizes FICO credit scores and the loan’s payment and delinquency status to monitor credit quality. Management believes FICO scores are the strongest indicator of credit losses over the contractual life of the loan and assist management in predicting the borrower’s future payment performance. Scores are based on current and historical national industry-wide consumer level credit performance data.

Citizens Financial Group, Inc. | 57

The following table presents the amortized cost basis of retail loans, by vintage date and FICO scores, as of June 30, 2022:

			Term Loans by Origination Year																																				Revolving Loans
(in millions)			2022						2021						2020						2019						2018						Prior to 2018						Within the Revolving Period			Converted to Term						Total
Residential mortgages
800+			$953						$4,170						$3,049						$1,156						$343						$3,023						$—			$—						$12,694
740-799			1,987						3,723						1,936						738						315						2,049						—			—						10,748
680-739			525						1,037						558						313						169						1,005						—			—						3,607
620-679			59						149						135						185						108						463						—			—						1,099
<620			5						51						77						170						151						456						—			—						910
No FICO available(1)			—						3						2						4						4						17						—			—						30
Total residential mortgages			3,529						9,133						5,757						2,566						1,090						7,013						—			—						29,088
Home equity
800+			2						3						2						6						6						122						4,714			301						5,156
740-799			4						5						2						5						6						117						4,017			291						4,447
680-739			1						1						2						7						14						137						1,940			245						2,347
620-679			—						—						2						9						17						110						448			162						748
<620			—						—						2						14						19						95						120			174						424
Total home equity			7						9						10						41						62						581						11,239			1,173						13,122
Automobile
800+			505						1,587						707						423						178						112						—			—						3,512
740-799			760						1,984						816						463						198						115						—			—						4,336
680-739			699						1,537						610						352						157						89						—			—						3,444
620-679			412						787						273						183						90						57						—			—						1,802
<620			86						289						137						128						76						55						—			—						771
No FICO available(1)			3						—						—						—						—						—						—			—						3
Total automobile			2,465						6,184						2,543						1,549						699						428						—			—						13,868
Education
800+			288						1,703						1,623						751						450						1,201						—			—						6,016
740-799			474						1,563						1,299						553						299						683						—			—						4,871
680-739			254						489						395						190						118						316						—			—						1,762
620-679			26						74						61						38						30						114						—			—						343
<620			2						11						15						12						11						48						—			—						99
No FICO available(1)			2						—						—						—						—						48						—			—						50
Total education			1,046						3,840						3,393						1,544						908						2,410						—			—						13,141
Other retail
800+			89						192						147						81						41						41						440			—						1,031
740-799			128						245						196						109						51						39						891			1						1,660
680-739			119						184						161						81						35						22						864			4						1,470
620-679			79						104						79						28						13						7						385			4						699
<620			20						35						30						12						6						3						142			6						254
No FICO available(1)			5						2						4						—						—						—						382			1						394
Total other retail			440						762						617						311						146						112						3,104			16						5,508
Total retail
800+			1,837						7,655						5,528						2,417						1,018						4,499						5,154			301						28,409
740-799			3,353						7,520						4,249						1,868						869						3,003						4,908			292						26,062
680-739			1,598						3,248						1,726						943						493						1,569						2,804			249						12,630
620-679			576						1,114						550						443						258						751						833			166						4,691
<620			113						386						261						336						263						657						262			180						2,458
No FICO available(1)			10						5						6						4						4						65						382			1						477
Total retail			$7,487						$19,928						$12,320						$6,011						$2,905						$10,544						$14,343			$1,189						$74,727

(1) Represents loans for which an updated FICO score was unavailable (e.g., due to recent profile changes).

Citizens Financial Group, Inc. | 58

The following table presents the amortized cost basis of retail loans, by vintage date and FICO scores, as of December 31, 2021:

			Term Loans by Origination Year																																				Revolving Loans
(in millions)			2021						2020						2019						2018						2017						Prior to 2017						Within the Revolving Period			Converted to Term						Total
Residential mortgages
800+			$2,431						$3,017						$1,230						$342						$672						$2,139						$—			$—						$9,831
740-799			4,015						1,876						746						246						360						1,086						—			—						8,329
680-739			1,116						572						335						152						172						585						—			—						2,932
620-679			111						130						161						93						107						276						—			—						878
<620			24						66						164						162						157						257						—			—						830
No FICO available(1)			3						8						1						—						—						10						—			—						22
Total residential mortgages			7,700						5,669						2,637						995						1,468						4,353						—			—						22,822
Home equity
800+			—						2						5						5						3						134						4,394			281						4,824
740-799			—						1						4						5						7						122						3,514			278						3,931
680-739			—						1						7						14						16						134						1,738			243						2,153
620-679			—						3						11						19						17						112						363			167						692
<620			—						2						16						23						20						87						91			176						415
Total home equity			—						9						43						66						63						589						10,100			1,145						12,015
Automobile
800+			1,887						829						538						244						148						57						—			—						3,703
740-799			2,418						1,051						615						288						156						58						—			—						4,586
680-739			1,968						827						500						234						123						48						—			—						3,700
620-679			1,029						378						257						131						72						32						—			—						1,899
<620			164						142						155						103						62						32						—			—						658
No FICO available(1)			3						—						—						—						—						—						—			—						3
Total automobile			7,469						3,227						2,065						1,000						561						227						—			—						14,549
Education
800+			1,361						1,771						840						514						470						880						—			—						5,836
740-799			1,555						1,577						672						371						275						514						—			—						4,964
680-739			512						474						229						140						107						262						—			—						1,724
620-679			50						66						45						34						28						99						—			—						322
<620			5						11						12						12						10						45						—			—						95
No FICO available(1)			4						—						—						—						—						52						—			—						56
Total education			3,487						3,899						1,798						1,071						890						1,852						—			—						12,997
Other retail
800+			233						214						122						65						30						29						386			—						1,079
740-799			323						296						173						84						38						26						764			2						1,706
680-739			246						240						122						56						23						12						709			5						1,413
620-679			149						119						43						19						7						4						299			5						645
<620			32						37						17						10						3						2						100			6						207
No FICO available(1)			44						5						—						—						—						—						330			1						380
Total other retail			1,027						911						477						234						101						73						2,588			19						5,430
Total retail
800+			5,912						5,833						2,735						1,170						1,323						3,239						4,780			281						25,273
740-799			8,311						4,801						2,210						994						836						1,806						4,278			280						23,516
680-739			3,842						2,114						1,193						596						441						1,041						2,447			248						11,922
620-679			1,339						696						517						296						231						523						662			172						4,436
<620			225						258						364						310						252						423						191			182						2,205
No FICO available(1)			54						13						1						—						—						62						330			1						461
Total retail			$19,683						$13,715						$7,020						$3,366						$3,083						$7,094						$12,688			$1,164						$67,813

(1) Represents loans for which an updated FICO score was unavailable (e.g., due to recent profile changes).

Citizens Financial Group, Inc. | 59

Nonaccrual and Past Due Assets

The following tables present an aging analysis of accruing loans and leases, and nonaccrual loans and leases:

			June 30, 2022
						Days Past Due and Accruing
(in millions)			Current			30-59			60-89			90+			Nonaccrual			Total			Nonaccrual with no related ACL
Commercial and industrial			$51,514			$37			$9			$39			$202			$51,801			$24
Commercial real estate			27,827			172			1			33			37			28,070			7
Leases			1,554			17			3			—			—			1,574			—
Total commercial			80,895			226			13			72			239			81,445			31
Residential mortgages(1)			28,119			59			34			623			253			29,088			208
Home equity			12,834			36			12			—			240			13,122			186
Automobile			13,660			120			38			—			50			13,868			9
Education			13,068			26			13			3			31			13,141			3
Other retail			5,409			35			24			14			26			5,508			1
Total retail			73,090			276			121			640			600			74,727			407
Total			$153,985			$502			$134			$712			$839			$156,172			$438

			December 31, 2021
						Days Past Due and Accruing
(in millions)			Current			30-59			60-89			90+			Nonaccrual			Total			Nonaccrual with no related ACL
Commercial and industrial			$44,247			$47			$26			$9			$171			$44,500			$36
Commercial real estate			14,247			6			—			—			11			14,264			1
Leases			1,570			14			1			—			1			1,586			—
Total commercial			60,064			67			27			9			183			60,350			37
Residential mortgages(1)			21,918			102			52			549			201			22,822			137
Home equity			11,745			38			12			—			220			12,015			186
Automobile			14,324			131			39			—			55			14,549			22
Education			12,926			34			13			1			23			12,997			2
Other retail			5,331			40			23			16			20			5,430			2
Total retail			66,244			345			139			566			519			67,813			349
Total			$126,308			$412			$166			$575			$702			$128,163			$386

(1) 90+ days past due and accruing includes $623 million and $544 million of loans fully or partially guaranteed by the FHA, VA, and USDA at June 30, 2022 and December 31, 2021, respectively.

Interest income is generally not recognized for loans and leases that are on nonaccrual status. The Company reverses accrued interest receivable with a charge to interest income upon classifying the loan or lease as nonaccrual.

At June 30, 2022 and December 31, 2021, the Company had collateral-dependent residential mortgage and home equity loans totaling $552 million and $542 million, respectively. At June 30, 2022 and December 31, 2021, the Company had collateral-dependent commercial loans totaling $27 million and $103 million, respectively.

The amortized cost basis of mortgage loans collateralized by residential real estate for which formal foreclosure proceedings were in process was $228 million and $142 million as of June 30, 2022 and December 31, 2021, respectively.

Citizens Financial Group, Inc. | 60

Troubled Debt Restructurings

The following tables summarize loans modified during the three and six months ended June 30, 2022 and 2021. The balances represent the post-modification outstanding amortized cost basis and may include loans that became TDRs during the period and were subsequently paid off in full, charged off, or sold prior to period end. Pre-modification balances for modified loans approximate the post-modification balances shown.

									Three Months Ended June 30, 2022
									Amortized Cost Basis
(dollars in millions)			Number of Contracts									Interest Rate Reduction**(1)**						Maturity Extension**(2)**									Other**(3)**						Total
Commercial and industrial			9									$—									$—									$27						$27
Total commercial			9									—									—									27						27
Residential mortgages			290									16									39									21						76
Home equity			72									—									1									5						6
Automobile			147									—									—									1						1
Education			93									—									—									5						5
Other retail			567									3									—									1						4
Total retail			1,169									19									40									33						92
Total			1,178									$19									$40									$60						$119

												Three Months Ended June 30, 2021
												Amortized Cost Basis
(dollars in millions)			Number of Contracts									Interest Rate Reduction**(1)**									Maturity Extension**(2)**									Other**(3)**						Total
Commercial and industrial			15									$—									$3									$54						$57
Total commercial			15									—									3									54						57
Residential mortgages			671									8									120									44						172
Home equity			102									1									3									3						7
Automobile			379									1									—									5						6
Education			265									—									—									9						9
Other retail			585									1									—									—						1
Total retail			2,002									11									123									61						195
Total			2,017									$11									$126									$115						$252

Citizens Financial Group, Inc. | 61

												Six Months Ended June 30, 2022
												Amortized Cost Basis
(dollars in millions)			Number of Contracts									Interest Rate Reduction**(1)**									Maturity Extension**(2)**									Other**(3)**						Total
Commercial and industrial			19									$—									$24									$34						$58
Total commercial			19									—									24									34						58
Residential mortgages			1,471									38									53									235						326
Home equity			250									2									1									14						17
Automobile			312									1									—									2						3
Education			236									—									—									11						11
Other retail			1,088									5									—									1						6
Total retail			3,357									46									54									263						363
Total			3,376									$46									$78									$297						$421

												Six Months Ended June 30, 2021
												Amortized Cost Basis
(dollars in millions)			Number of Contracts									Interest Rate Reduction**(1)**									Maturity Extension**(2)**									Other**(3)**						Total
Commercial and industrial			22									$—									$6									$54						$60
Total commercial			22									—									6									54						60
Residential mortgages			713									12									126									47						185
Home equity			249									3									8									7						18
Automobile			1,048									1									—									13						14
Education			412									—									—									13						13
Other retail			1,215									4									—									1						5
Total retail			3,637									20									134									81						235
Total			3,659									$20									$140									$135						$295

(1) Includes modifications that consist of multiple concessions, one of which is an interest rate reduction.

(2) Includes modifications that consist of multiple concessions, one of which is a maturity extension (unless one of the other concessions was an interest rate reduction).

(3) Includes modifications other than interest rate reductions or maturity extensions, such as lowering scheduled payments for a specified period of time, principal forgiveness, and capitalizing arrearages. Also included are the following: deferrals, trial modifications, certain bankruptcies, loans in forbearance and prepayment plans. Modifications can include the deferral of accrued interest resulting in post-modification balances being higher than pre-modification.

Modified TDRs resulted in charge-offs of $1 million and $2 million for the three months ended June 30, 2022 and 2021, respectively, and $2 million and $4 million for the six months ended June 30, 2022 and 2021, respectively.

Unfunded commitments related to TDRs were $90 million and $56 million at June 30, 2022 and December 31, 2021, respectively.

The following table provides a summary of TDRs that defaulted (became 90 days or more past due) within 12 months of their modification date:

			Three Months Ended June 30,												Six Months Ended June 30,
(dollars in millions)			2022						2021						2022						2021
Commercial TDRs			$—						$1						$—						$23
Retail TDRs(1)			181						14						196						29
Total			$181						$15						$196						$52

(1) Includes $146 million and $1 million of loans fully or partially government guaranteed by the FHA, VA, and USDA for the three months ended June 30, 2022 and 2021, respectively, and $156 million and $3 million for the six months ended June 30, 2022 and 2021, respectively.

Citizens Financial Group, Inc. | 62

Concentrations of Credit Risk

Most of the Company’s lending activity is with customers located in the New England, Mid-Atlantic and Midwest regions. Generally, loans are collateralized by assets including real estate, inventory, accounts receivable, other personal property and investment securities. As of June 30, 2022 and December 31, 2021, Citizens had a significant amount of loans collateralized by residential and commercial real estate. There were no significant concentration risks within the commercial or retail loan portfolios. Exposure to credit losses arising from lending transactions may fluctuate with fair values of collateral supporting loans, which may not perform according to contractual agreements. The Company’s policy is to collateralize loans to the extent necessary; however, unsecured loans are also granted on the basis of the financial strength of the applicant and facts surrounding the transaction.

NOTE 6 - MORTGAGE BANKING AND OTHER

The Company sells residential mortgages into the secondary market. The Company retains no beneficial interests in these sales, but may retain the servicing rights for the loans sold. The Company may exercise its option to repurchase eligible government guaranteed residential mortgages or may be obligated to subsequently repurchase a loan if the purchaser discovers a representation or warranty violation such as noncompliance with eligibility or servicing requirements, or customer fraud that should have been identified in a loan file review.

The following table summarizes activity related to residential mortgage loans sold with servicing rights retained:

			Three Months Ended June 30,												Six Months Ended June 30,
(in millions)			2022						2021						2022						2021
Cash proceeds from residential mortgage loans sold with servicing retained			$4,576						$10,540						$11,158						$19,577
Repurchased residential mortgages(1)			—						1,169						87						1,169
Gain on sales(2)			23						85						53						225
Contractually specified servicing, late and other ancillary fees(2)			71						60						138						118

(1) Includes government insured or guaranteed loans eligible for repurchase through the exercise of our removal of account provision option.

(2) Reported in mortgage banking fees in the Consolidated Statements of Operations.

The unpaid principal balance of residential mortgage loans related to our MSR was $95.5 billion and $90.2 billion at June 30, 2022 and December 31, 2021, respectively. The Company manages an active hedging strategy to manage the risk associated with changes in the value of the MSR portfolio, which includes the purchase of freestanding derivatives.

The following table summarizes changes in MSRs recorded using the fair value method:

			As of and for the Three Months Ended June 30,												As of and for the Six Months Ended June 30,
(in millions)			2022						2021						2022						2021
Fair value as of beginning of the period			$1,241						$893						$1,029						$658
Amounts capitalized			79						122						174						209
Servicing rights acquired			16						—						16						—
Changes in unpaid principal balance during the period(1)			(32)						(47)						(71)						(105)
Changes in fair value during the period(2)			107						(66)						263						140
Fair value at end of the period			$1,411						$902						$1,411						$902

(1) 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.

(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 fair value of MSRs is estimated by using the present value of estimated future net servicing cash flows, taking into consideration actual and expected mortgage loan prepayment rates, discount rates, contractual servicing fee income, servicing costs, default rates, ancillary income, and other economic factors, which are determined based on current market interest rates. The valuation does not attempt to forecast or predict the future direction of interest rates.

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The sensitivity analysis below presents the impact to the current MSR fair value of an immediate 10% and 20% adverse change in key economic assumptions. These sensitivities are hypothetical, with the effect of a variation in a particular assumption on the fair value of the MSRs calculated independently without changing any other assumption. In reality, changes in one factor may result in changes in another (e.g., changes in interest rates, which drive changes in prepayment rates, could result in changes in the discount rates), which may amplify or counteract the sensitivities. The primary risk inherent in the Company’s MSRs is an increase in prepayments of the underlying mortgage loans serviced, which is largely dependent upon movements in market interest rates.

(dollars in millions)			June 30, 2022						December 31, 2021
Fair value			$1,411						$1,029
Weighted average life (years)			8.5						6.4
Weighted average constant prepayment rate			7.6%						10.7%
Decline in fair value from 10% adverse change			$24						$45
Decline in fair value from 20% adverse change			$59						$87
Weighted average option adjusted spread			615 bps						596 bps
Decline in fair value from 10% adverse change			$39						$25
Decline in fair value from 20% adverse change			$77						$50

The Company’s mortgage banking derivatives include commitments to originate mortgages held for sale, certain loan sale agreements, and other financial instruments that meet the definition of a derivative. Refer to Note 10 for additional information.

Other Serviced Loans

From time to time, Citizens engages in other servicing relationships. The following table presents the unpaid principal balance of other serviced loans:

(in millions)			June 30, 2022						December 31, 2021
Education			$661						$761
Commercial and industrial(1)			89						80

(1) Represents the government guaranteed portion of SBA loans sold to outside investors.

NOTE 7 - GOODWILL AND INTANGIBLE ASSETS

Goodwill is the purchase premium associated with the acquisition of a business and is assigned to the Company’s reporting units at the acquisition date. A reporting unit is a business operating segment or a component of a business operating segment. Citizens has identified and assigned goodwill to two reporting units - Consumer Banking and Commercial Banking - based upon reviews of the structure of the Company’s executive team and supporting functions, resource allocations and financial reporting processes. Once goodwill has been assigned to reporting units, it no longer retains its association with a particular acquisition, and all of the activities within a reporting unit, whether acquired or organically grown, are available to support the value of the goodwill. For additional information on goodwill see Note 26 in the Company’s 2021 Form 10-K.

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Changes in the carrying value of goodwill for the six months ended June 30, 2022 are presented below.

(in millions)			Consumer Banking						Commercial Banking						Total
Balance at December 31, 2021			$2,258						$4,858						$7,116
Business acquisitions			319						646						965
Balance at June 30, 2022			$2,577						$5,504						$8,081

Goodwill increased during the six months ended June 30, 2022 primarily as a result of the Investors and DH Capital acquisitions and the HSBC transaction. Goodwill for the Investors acquisition was allocated between the Consumer and Commercial segments, and goodwill for the DH Capital acquisition was allocated to the Commercial segment. Both allocations are preliminary and subject to change. Goodwill for the HSBC transaction was allocated to the Consumer segment and is considered final. For additional information regarding the Investors and DH Capital acquisitions and the HSBC transaction see Note 2.

A summary of the carrying value of intangible assets is presented below.

						June 30, 2022												December 31, 2021
(in millions)			Amortizable Lives (years)			Gross**(1)**			Accumulated Amortization			Net						Gross			Accumulated Amortization			Net
Core deposits			10			$144			$7			$137						$—			$—			$—
Acquired technology			5 - 7			21			15			6						21			11			10
Acquired relationships			2 - 15			53			17			36						53			14			39
Naming rights			5 - 10			31			5			26						10			3			7
Other			2 - 7			12			6			6						13			5			8
Total						$261			$50			$211						$97			$33			$64

(1) Includes $97 million and $47 million of core deposits from the Investors acquisition and the HSBC transaction, respectively, and $22 million of naming rights from the Investors acquisition.

Intangible assets from the Investors acquisition and the HSBC transaction, consisting of core deposits and naming rights, are the primary driver of the increase in intangible assets during the six months ended June 30, 2022.

As of June 30, 2022, all of the Company’s intangible assets are being amortized. Amortization expense recognized on intangible assets was $12 million and $17 million for the three and six months ended June 30, 2022, respectively, and $2 million and $5 million for the three and six months ended June 30, 2021, respectively. The Company’s projection of amortization expense is based on balances as of June 30, 2022, including estimated amounts related to the Investors and DH Capital acquisitions. Future amortization expense may vary from these projections.

Estimated intangible asset amortization expense for the remainder of 2022 and the next five years is as follows:

(in millions)			Total
2022			$24
2023			40
2024			34
2025			31
2026			26
2027			21

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NOTE 8 - VARIABLE INTEREST ENTITIES

Citizens is involved in various entities that are considered VIEs, including investments in limited partnerships that sponsor affordable housing projects, limited liability companies that sponsor renewable energy projects or asset-backed securities, and lending to special purpose entities. Citizens’ maximum exposure to loss as a result of its involvement with these entities is limited to the balance sheet carrying amount of its investment in equity and asset-backed securities, unfunded commitments, and outstanding principal balance of loans to special purpose entities. The Company does not consolidate any of its investments in these entities. These investments are included in other assets in the Consolidated Balance Sheets. For more details see Note 11 in the Company’s 2021 Form 10-K.

A summary of these investments is presented below:

(in millions)			June 30, 2022						December 31, 2021
Lending to special purpose entities included in loans and leases			$3,341						$2,646
LIHTC investment included in other assets			2,175						1,978
LIHTC unfunded commitments included in other liabilities			1,045						927
Asset-backed investments included in HTM securities			646						737
Renewable energy investments included in other assets			401						429

Lending to Special Purpose Entities

Citizens provides lending facilities to third-party sponsored special purpose entities. As of June 30, 2022 and December 31, 2021, the lending facilities had aggregate unpaid principal balances of $3.3 billion and $2.6 billion, respectively, and undrawn commitments to extend credit of $2.4 billion and $1.9 billion, respectively.

Low Income Housing Tax Credit Partnerships

The purpose of the Company’s equity investments is to assist in achieving the goals of the Community Reinvestment Act and to earn an adequate return of capital.

The following table presents other information related to the Company’s affordable housing tax credit investments:

			Three Months Ended June 30,												Six Months Ended June 30,
(in millions)			2022						2021						2022						2021
Tax credits included in income tax expense			$60						$51						$121						$102
Other tax benefits included in income tax expense			16						13						31						25
Total tax benefits included in income tax expense			76						64						152						127
Less: Amortization included in income tax expense			65						53						129						106
Net benefit from affordable housing tax credit investments included in income tax expense			$11						$11						$23						$21

No LIHTC investment impairment losses were recognized during the three and six months ended June 30, 2022 and 2021.

NOTE 9 - BORROWED FUNDS

Short-term borrowed funds

Short-term borrowed funds were $3.8 billion and $74 million as of June 30, 2022 and December 31, 2021, respectively.

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Long-term borrowed funds

The following table presents a summary of the Company’s long-term borrowed funds:

(in millions)			June 30, 2022						December 31, 2021
Parent Company:
4.150% fixed-rate subordinated debt, due September 2022			$168						$168
3.750% fixed-rate subordinated debt, due July 2024			90						90
4.023% fixed-rate subordinated debt, due October 2024			17						17
4.350% fixed-rate subordinated debt, due August 2025			133						133
4.300% fixed-rate subordinated debt, due December 2025			336						336
2.850% fixed-rate senior unsecured notes, due July 2026			498						498
6.500% fixed to floating rate subordinated debt, due October 2027(1)			14						—
2.500% fixed-rate senior unsecured notes, due February 2030			298						298
3.250% fixed-rate senior unsecured notes, due April 2030			745						745
3.750% fixed-rate reset subordinated debt, due February 2031			69						69
4.300% fixed-rate reset subordinated debt, due February 2031			135						135
4.350% fixed-rate reset subordinated debt, due February 2031			60						60
2.638% fixed-rate subordinated debt, due September 2032			553						550
5.641% fixed-rate reset subordinated debt, due May 2037			398						—
CBNA’s Global Note Program:
3.250% senior unsecured notes, due February 2022			—						700
0.845% floating-rate senior unsecured notes, due February 2022(2)			—						300
1.318% floating-rate senior unsecured notes, due May 2022(2)			—						250
2.650% senior unsecured notes, due May 2022			—						503
3.700% senior unsecured notes, due March 2023			499						512
3.182% floating-rate senior unsecured notes, due March 2023(2)			250						250
2.250% senior unsecured notes, due April 2025			747						746
4.119% fixed/floating-rate senior unsecured notes, due May 2025			648						—
3.750% senior unsecured notes, due February 2026			491						524
Additional Borrowings by CBNA and Other Subsidiaries:
Federal Home Loan Bank advances, 1.695% weighted average rate, due through 2041			8,269						19
Other			22						29
Total long-term borrowed funds			$14,440						$6,932

(1) Assumed in the Investors acquisition.

(2) Rate disclosed reflects the floating rate as of June 30, 2022, or final floating rate as applicable.

The Parent Company’s long-term borrowed funds as of June 30, 2022 and December 31, 2021 included principal balances of $3.6 billion and $3.2 billion, respectively, and unamortized deferred issuance costs and/or discounts of $79 million and $80 million, respectively. CBNA and other subsidiaries’ long-term borrowed funds as of June 30, 2022 and December 31, 2021 included principal balances of $10.9 billion and $3.8 billion, respectively, with unamortized deferred issuance costs and/or discounts of $6 million and $7 million, respectively, and hedging basis adjustments of ($9) million and $42 million, respectively. See Note 10 for further information about the Company’s hedging of certain long-term borrowed funds.

Advances, lines of credit and letters of credit from the FHLB are collateralized primarily by residential mortgages and home equity products at least sufficient to satisfy the collateral maintenance level established by the FHLB. The utilized borrowing capacity for FHLB advances and letters of credit was $19.6 billion and $2.3 billion at June 30, 2022 and December 31, 2021, respectively. The Company’s available FHLB borrowing capacity was $7.9 billion and $15.9 billion at June 30, 2022 and December 31, 2021, respectively. Citizens can also borrow from the FRB discount window to meet short-term liquidity requirements. Collateral, including certain loans, is pledged to support this borrowing capacity. At June 30, 2022, the Company’s unused secured borrowing capacity was approximately $61.5 billion, which includes unencumbered securities, FHLB borrowing capacity, and FRB discount window capacity.

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The following table presents a summary of maturities for the Company’s long-term borrowed funds at June 30, 2022:

(in millions)			Parent Company			CBNA and Other Subsidiaries			Consolidated
Year
2022			$168			$4			$172
2023			—			9,002			9,002
2024			107			—			107
2025			469			1,409			1,878
2026			498			491			989
2027 and thereafter			2,272			20			2,292
Total			$3,514			$10,926			$14,440

NOTE 10 - DERIVATIVES

In the normal course of business, Citizens enters into a variety of derivative transactions to meet the financing and hedging needs of its customers and to reduce its own exposure to fluctuations in interest rates and foreign currency exchange rates. These transactions include interest rate swap contracts, interest rate options, foreign exchange contracts, residential loan commitment rate locks, interest rate future contracts, swaptions, certain commodities, forward commitments to sell TBAs, forward sale contracts and purchase options. The Company does not use derivatives for speculative purposes. Information regarding the valuation methodology and inputs used to estimate the fair value of the Company’s derivative instruments is described in Note 20 in the Company’s 2021 Form 10-K.

The following table presents derivative instruments included in the Consolidated Balance Sheets:

			June 30, 2022												December 31, 2021
(in millions)			Notional Amount**(1)**			Derivative Assets			Derivative Liabilities						Notional Amount**(1)**			Derivative Assets			Derivative Liabilities
Derivatives designated as hedging instruments:
Interest rate contracts			$22,930			$100			$1						$23,450			$12			$2
Derivatives not designated as hedging instruments:
Interest rate contracts			188,383			79			857						142,987			680			174
Foreign exchange contracts			26,102			523			494						21,336			263			231
Commodities contracts			897			1,630			1,621						514			508			505
TBA contracts			4,482			21			19						7,776			8			8
Other contracts			2,360			18			11						3,555			38			2
Total derivatives not designated as hedging instruments						2,271			3,002									1,497			920
Gross derivative fair values						2,371			3,003									1,509			922
Less: Gross amounts offset in the Consolidated Balance Sheets(2)						(461)			(461)									(235)			(235)
Less: Cash collateral applied(2)						(241)			(1,538)									(58)			(490)
Total net derivative fair values presented in the Consolidated Balance Sheets						$1,669			$1,004									$1,216			$197

(1) The notional or contractual amount of interest rate derivatives and foreign exchange contracts is the amount upon which interest and other payments under the contract are based. For interest rate contracts, the notional amount is typically not exchanged. Therefore, notional amounts should not be taken as the measure of credit or market risk, as they do not measure the true economic risk of these contracts.

(2) Amounts represent the impact of enforceable master netting agreements that allow the Company to net settle positive and negative positions as well as collateral paid and received.

The Company’s derivative transactions are internally divided into three sub-groups: institutional, customer and residential loan. Certain derivative transactions within these sub-groups are designated as fair value or cash flow hedges, as described below:

Derivatives Designated As Hedging Instruments

The Company’s institutional derivatives qualify for hedge accounting treatment. The net interest accruals on interest rate swaps designated in a fair value or cash flow hedge relationship are treated as an adjustment to interest income or interest expense of the item being hedged. The Company formally documents all hedging relationships at inception, as well as risk management objectives and strategies for undertaking various

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accounting hedges. Additionally, the Company monitors the effectiveness of its hedge relationships during the duration of the hedge period. The methods utilized to assess hedge effectiveness vary based on the hedge relationship and the Company monitors each relationship to ensure that management’s initial intent continues to be satisfied. The Company discontinues hedge accounting treatment when it is determined that a derivative is not expected to be, or has ceased to be, effective as a hedge and subsequently reflects changes in the fair value of the derivative in earnings after termination of the hedge relationship.

Fair Value Hedges

As of June 30, 2022, Citizens has outstanding interest rate swap agreements utilized to manage the interest rate exposure on its long-term borrowings and loans held for sale. Certain fair value hedges were designated as a last-of-layer hedge during the six months ended June 30, 2022, but are no longer active as of June 30, 2022. These hedges afforded the Company the ability to execute a fair value hedge of the interest rate risk associated with a portfolio of similar prepayable assets whereby the last dollar amount estimated to remain in the portfolio of assets is identified as the hedged item.

The following table presents the change in fair value of interest rate contracts designated as fair value hedges, as well as the change in fair value of the related hedged items attributable to the risk being hedged, included in the Consolidated Statements of Operations:

			Three Months Ended June 30,												Six Months Ended June 30,
(in millions)			2022						2021						2022						2021			Affected Line Item in the Consolidated Statements of Operations
Interest rate swaps hedging borrowed funds			($15)						($10)						($52)						($38)			Interest expense - long-term borrowed funds
Hedged long-term debt attributable to the risk being hedged			14						9						51						37			Interest expense - long-term borrowed funds
Interest rate swaps hedging loans held for sale			(3)						—						(3)						—			Interest and fees on loans and leases
Hedged loans held for sale attributable to the risk being hedged			4						—						4						—			Interest and fees on loans and leases
Interest rate swaps hedging debt securities available for sale			—						4						29						32			Interest income - investment securities
Hedged debt securities available for sale attributable to risk being hedged			—						(4)						(29)						(32)			Interest income - investment securities

The following table reflects amounts recorded in the Consolidated Balance Sheets related to cumulative basis adjustments for fair value hedges:

			June 30, 2022												December 31, 2021
(in millions)			Debt securities available for sale			Long-term borrowed funds			Loans and leases held for sale						Debt securities available for sale**(1)**			Long-term borrowed funds
Carrying amount of hedged assets			$—			$—			$937						$6,042			$—
Carrying amount of hedged liabilities			—			989			—						—			2,239
Cumulative amount of fair value hedging adjustments included in the carrying amount of the hedged items			—			(9)			4						29			42

(1) The Company designated $2.0 billion as the hedged amount (from a closed portfolio of prepayable financial assets with an amortized cost basis of $6.0 billion as of December 31, 2021) in a last-of-layer hedging relationship, which commenced in the third quarter of 2019 and was terminated in the first quarter of 2022.

Cash Flow Hedges

Citizens has outstanding interest rate swap agreements designed to hedge a portion of the Company’s floating-rate assets and liabilities. All of these swaps have been deemed highly effective cash flow hedges. During the next 12 months, there are $334 million in pre-tax net losses on derivative instruments included in OCI expected to be reclassified to net interest income in the Consolidated Statements of Operations. This amount could differ from amounts actually recognized due to changes in interest rates, hedge de-designations and the addition of other hedges subsequent to June 30, 2022.

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The following table presents the pre-tax net gains (losses) recorded in the Consolidated Statements of Operations and in the Consolidated Statements of Comprehensive Income related to derivative instruments designated as cash flow hedges:

			Three Months Ended June 30,												Six Months Ended June 30,
(in millions)			2022						2021						2022						2021
Amount of pre-tax net gains (losses) recognized in OCI			($244)						$62						($905)						$34
Amount of pre-tax net gains (losses) reclassified from OCI into interest income			12						49						49						95
Amount of pre-tax net gains (losses) reclassified from OCI into interest expense			(1)						(12)						(6)						(24)

Derivatives Not Designated As Hedging Instruments

Economic Hedges

The Company’s economic hedges include those related to offsetting customer derivatives, residential mortgage loan derivatives (including interest rate lock commitments and forward sales commitments) and derivatives to hedge its residential MSR portfolio. Customer derivatives include interest rate, foreign exchange and commodity derivative contracts designed to meet the hedging and financing needs of the Company’s customers, and are economically hedged by the Company to offset its market exposure. Interest rate lock commitments on residential mortgage loans that will be held for sale are considered derivative instruments, and are economically hedged by entering into forward sale commitments to manage changes in fair value due to interest rate risk. Residential MSR portfolio derivatives are entered to hedge the risk of changes in the fair value of the Company’s MSRs.

The following table presents the effect of economic hedges on noninterest income:

			Amounts Recognized in Noninterest Income for the
			Three Months Ended June 30,												Six Months Ended June 30,									Affected Line Item in the Consolidated Statements of Operations
(in millions)			2022						2021						2022						2021
Economic hedge type:
Customer interest rate contracts			($408)						$133						($1,175)						($215)			Foreign exchange and derivative products
Derivatives hedging interest rate risk			428						(129)						1,221						227			Foreign exchange and derivative products
Customer foreign exchange contracts			(149)						19						(123)						(97)			Foreign exchange and derivative products
Derivatives hedging foreign exchange risk			246						(11)						249						139			Foreign exchange and derivative products
Customer commodity contracts			372						319						1,524						413			Foreign exchange and derivative products
Derivatives hedging commodity price risk			(365)						(317)						(1,513)						(409)			Foreign exchange and derivative products
Residential loan commitments			(62)						67						(223)						(171)			Mortgage banking fees
Derivatives hedging residential loan commitments and mortgage loans held for sale, at fair value			126						(141)						397						134			Mortgage banking fees
Derivative contracts used to hedge residential MSRs			(96)						53						(242)						(129)			Mortgage banking fees
Total			$92						($7)						$115						($108)

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NOTE 11 - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following tables present the changes in the balances, net of income taxes, of each component of AOCI:

						As of and for the Three Months Ended June 30,
(in millions)						Net Unrealized Gains (Losses) on Derivatives						Net Unrealized Gains (Losses) on Debt Securities						Employee Benefit Plans						Total AOCI
Balance at April 1, 2021						($57)						$71						($425)						($411)
Other comprehensive income (loss) before reclassifications						46						10						—						56
Amounts reclassified to the Consolidated Statements of Operations						(27)						(3)						4						(26)
Net other comprehensive income (loss)						19						7						4						30
Balance at June 30, 2021						($38)						$78						($421)						($381)
Balance at April 1, 2022						($676)						($1,236)						($346)						($2,258)
Other comprehensive income (loss) before reclassifications						(178)						(779)						—						(957)
Amounts reclassified to the Consolidated Statements of Operations						(8)						(1)						6						(3)
Net other comprehensive income (loss)						(186)						(780)						6						(960)
Balance at June 30, 2022						($862)						($2,016)						($340)						($3,218)
Primary location in the Consolidated Statements of Operations of amounts reclassified from AOCI						Net interest income						Securities gains, net						Other operating expense

						As of and for the Six Months Ended June 30,
(in millions)						Net Unrealized Gains (Losses) on Derivatives						Net Unrealized Gains (Losses) on Debt Securities						Employee Benefit Plans						Total AOCI
Balance at January 1, 2021						($11)						$380						($429)						($60)
Other comprehensive income (loss) before reclassifications						25						(297)						—						(272)
Amounts reclassified to the Consolidated Statements of Operations						(52)						(5)						8						(49)
Net other comprehensive income (loss)						(27)						(302)						8						(321)
Balance at June 30, 2021						($38)						$78						($421)						($381)
Balance at January 1, 2022						($161)						($156)						($348)						($665)
Other comprehensive income (loss) before reclassifications						(669)						(1,856)						—						(2,525)
Amounts reclassified to the Consolidated Statements of Operations						(32)						(4)						8						(28)
Net other comprehensive income (loss)						(701)						(1,860)						8						(2,553)
Balance at June 30, 2022						($862)						($2,016)						($340)						($3,218)
Primary location in the Consolidated Statements of Operations of amounts reclassified from AOCI						Net interest income						Securities gains, net						Other operating expense

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NOTE 12 - STOCKHOLDERS’ EQUITY

Preferred Stock

The following table summarizes the Company’s preferred stock:

									June 30, 2022												December 31, 2021
(in millions, except per share and share data)			Liquidation value per share						Preferred Shares						Carrying Amount						Preferred Shares						Carrying Amount
Authorized ($25 par value per share)									100,000,000												100,000,000
Issued and outstanding:
Series B			$1,000						300,000						$296						300,000						$296
Series C			1,000						300,000						297						300,000						297
Series D			1,000			(1)			300,000			(2)			293						300,000						293
Series E			1,000			(1)			450,000			(3)			437						450,000						437
Series F			1,000						400,000						395						400,000						395
Series G			1,000						300,000						296						300,000						296
Total									2,050,000						$2,014						2,050,000						$2,014

(1) Equivalent to $25 per depositary share.

(2) Represented by 12,000,000 depositary shares each representing a 1/40th interest in the Series D Preferred Stock.

(3) Represented by 18,000,000 depositary shares each representing a 1/40th interest in the Series E Preferred Stock.

For further detail regarding the terms and conditions of the Company’s preferred stock, see Note 17 in the Company’s 2021 Form 10-K.

Dividends

						Three Months Ended June 30, 2022												Three Months Ended June 30, 2021
(in millions, except per share data)						Dividends Declared per Share			Dividends Declared			Dividends Paid						Dividends Declared per Share			Dividends Declared			Dividends Paid
Common stock						$0.39			$195			$195						$0.39			$168			$168
Preferred stock
Series A						$—			$—			$—						$10.50			$2			$2
Series B						30.00			9			—						30.00			9			—
Series C						15.94			5			5						15.94			5			5
Series D						15.87			4			4						15.88			4			4
Series E						12.50			6			6						12.50			6			6
Series F						14.12			5			5						14.13			6			6
Series G						10.00			3			3						—			—			—
Total preferred stock									$32			$23									$32			$23

						Six Months Ended June 30, 2022												Six Months Ended June 30, 2021
(in millions, except per share data)						Dividends Declared per Share			Dividends Declared			Dividends Paid						Dividends Declared per Share			Dividends Declared			Dividends Paid
Common stock						$0.78			$360			$360						$0.78			$335			$335
Preferred stock
Series A						$—			$—			$—						$20.99			$5			$5
Series B						30.00			9			9						30.00			9			9
Series C						31.88			10			10						31.88			10			10
Series D						31.75			9			9						31.75			9			9
Series E						25.00			11			11						25.00			11			11
Series F						28.25			11			11						28.25			11			11
Series G						20.00			6			6						—			—			—
Total preferred stock									$56			$56									$55			$55

Treasury Stock

During the six months ended June 30, 2022, the Company repurchased $2 million, or 55,505 shares, of its outstanding common stock, which are held in treasury stock.

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NOTE 13 - COMMITMENTS AND CONTINGENCIES

A summary of outstanding off-balance sheet arrangements is presented below. For more information on these arrangements, see Note 19 in the Company’s 2021 Form 10-K.

(in millions)			June 30, 2022						December 31, 2021
Commitments to extend credit			$91,778						$84,206
Letters of credit			2,101						1,998
Risk participation agreements			14						39
Loans sold with recourse			232						82
Marketing rights			23						26
Total			$94,148						$86,351

Commitments to Extend Credit

Commitments to extend credit are agreements to lend to customers in accordance with conditions contractually agreed upon in advance. Generally, the commitments have fixed expiration dates or termination clauses and may require payment of a fee. Since many of these commitments are expected to expire without being drawn upon, the contract amounts are not necessarily indicative of future cash requirements.

Letters of Credit

Letters of credit in the table above reflect commercial, standby financial and standby performance letters of credit. Financial and performance standby letters of credit are issued by the Company for the benefit of its customers. They are used as conditional guarantees of payment to a third party in the event the customer either fails to make specific payments (financial) or fails to complete a specific project (performance). The Company’s exposure to credit loss in the event of counterparty nonperformance in connection with the above instruments is represented by the contractual amount of those instruments. Generally, letters of credit are collateralized by cash, accounts receivable, inventory or investment securities. Credit risk associated with letters of credit is considered in determining the appropriate amounts of allowances for unfunded commitments. Standby letters of credit and commercial letters of credit are issued for terms of up to ten years and one year, respectively.

Other Commitments

Citizens has additional off-balance sheet arrangements that are summarized below:

• Marketing Rights - During 2003, Citizens entered into a 25-year agreement to acquire the naming and marketing rights of a baseball stadium in Pennsylvania.

• Loans sold with recourse - Citizens is an originator and servicer of residential mortgages and routinely sells such mortgage loans in the secondary market and to GSEs. In the context of such sales, the Company makes certain representations and warranties regarding the characteristics of the underlying loans and, as a result, may be contractually required to repurchase such loans or indemnify certain parties against losses for certain breaches of those representations and warranties. The Company also sells the government guaranteed portion of certain SBA loans to outside investors, for which it retains the servicing rights.

• Risk Participation Agreements - RPAs are guarantees issued by the Company to other parties for a fee, whereby the Company agrees to participate in the credit risk of a derivative customer of the other party. The current amount of credit exposure is spread out over multiple counterparties. At June 30, 2022, the remaining terms on these RPAs ranged from less than one year to seven years.

Contingencies

The Company operates in a legal and regulatory environment that exposes it to potentially significant risks. A certain amount of litigation ordinarily results from the nature of the Company’s banking and other businesses. The Company is a party to legal proceedings, including class actions. The Company is also the subject of investigations, reviews, subpoenas, and regulatory matters arising out of its normal business operations, which, in some instances, relate to concerns about fair lending, unfair and/or deceptive practices, and mortgage-related issues. In addition, the Company engages in discussions with relevant governmental and regulatory authorities on a regular and ongoing basis regarding various issues, and any issues discussed or

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identified may result in investigatory or other action being taken. Litigation and regulatory matters may result in settlements, damages, fines, penalties, public or private censure, increased costs, required remediation, restrictions on business activities, or other impacts on the Company.

In these disputes and proceedings, the Company contests liability and the amount of damages as appropriate. Given their complex nature, and based on the Company's experience, it may be years before some of these matters are finally resolved. Moreover, before liability can be reasonably estimated for a claim, numerous legal and factual issues may need to be examined, including through potentially lengthy discovery and determination of important factual matters, and by addressing novel or unsettled legal issues relevant to the proceedings in question. The Company cannot predict with certainty if, how, or when such claims will be resolved or what the eventual settlement, fine, penalty or other relief, if any, may be, particularly for claims that are at an early stage in their development or where claimants seek substantial or indeterminate damages. The Company recognizes a provision for a claim when, in the opinion of management after seeking legal advice, it is probable that a liability exists and the amount of loss can be reasonably estimated. In many proceedings, however, it is not possible to determine whether any loss is probable or to estimate the amount of any loss.

Based on information currently available, the advice of legal counsel and other advisers, and established reserves, management believes that the aggregate liabilities, if any, potentially arising from these proceedings will not have a materially adverse effect on the Company’s unaudited interim Consolidated Financial Statements.

NOTE 14 - 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. Additionally, fair value is 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. Citizens also applies the fair value measurement guidance 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, 2022												December 31, 2021
(in millions)			Aggregate Fair Value			Aggregate Unpaid Principal			Aggregate Fair Value Greater (Less) Than Aggregate Unpaid Principal						Aggregate Fair Value			Aggregate Unpaid Principal			Aggregate Fair Value Greater (Less) Than Aggregate Unpaid Principal
Residential mortgage loans held for sale, at fair value			$1,278			$1,266			$12						$2,657			$2,591			$66
Commercial and industrial, and commercial real estate loans held for sale, at fair value			99			118			(19)						76			79			(3)

For more information on the election of the fair value option for these assets see Note 20 in the Company’s 2021 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 recurring fair value see Note 20 in the Company’s 2021 Form 10-K.

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The following table presents assets and liabilities measured at fair value, including gross derivative assets and liabilities, on a recurring basis at June 30, 2022:

(in millions)			Total			Level 1			Level 2			Level 3
Debt securities available for sale:
Mortgage-backed securities			$20,350			$—			$20,350			$—
Collateralized loan obligations			1,200			—			1,200			—
State and political subdivisions			3			—			3			—
U.S. Treasury and other			3,408			3,408			—			—
Total debt securities available for sale			24,961			3,408			21,553			—
Loans held for sale, at fair value:
Residential loans held for sale			1,278			—			1,278			—
Commercial loans held for sale			99			—			99			—
Total loans held for sale, at fair value			1,377			—			1,377			—
Mortgage servicing rights			1,411			—			—			1,411
Derivative assets:
Interest rate contracts			179			—			179			—
Foreign exchange contracts			523			—			523			—
Commodities contracts			1,630			—			1,630			—
TBA contracts			21			—			21			—
Other contracts			18			—			—			18
Total derivative assets			2,371			—			2,353			18
Equity securities, at fair value(1)			114			108			6			—
Total assets			$30,234			$3,516			$25,289			$1,429
Derivative liabilities:
Interest rate contracts			$858			$—			$858			$—
Foreign exchange contracts			494			—			494			—
Commodities contracts			1,621			—			1,621			—
TBA contracts			19			—			19			—
Other contracts			11			—			4			7
Total derivative liabilities			3,003			—			2,996			7
Total liabilities			$3,003			$—			$2,996			$7

(1) Excludes investments of $24 million that are measured at fair value using the net asset value per share (or its equivalent) practical expedient. These nonredeemable investments include capital contributions to private investment funds and have unfunded capital commitments of $24 million at June 30, 2022, 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.

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The following table presents assets and liabilities measured at fair value, including gross derivative assets and liabilities, on a recurring basis at December 31, 2021:

(in millions)			Total			Level 1			Level 2			Level 3
Debt securities available for sale:
Mortgage-backed securities			$24,847			$—			$24,847			$—
Collateralized loan obligations			1,207			—			1,207			—
State and political subdivisions			2			—			2			—
U.S. Treasury and other			11			11			—			—
Total debt securities available for sale			26,067			11			26,056			—
Loans held for sale, at fair value:
Residential loans held for sale			2,657			—			2,657			—
Commercial loans held for sale			76			—			76			—
Total loans held for sale, at fair value			2,733			—			2,733			—
Mortgage servicing rights			1,029			—			—			1,029
Derivative assets:
Interest rate contracts			692			—			692			—
Foreign exchange contracts			263			—			263			—
Commodities contracts			508			—			508			—
TBA contracts			8			—			8			—
Other contracts			38			—			—			38
Total derivative assets			1,509			—			1,471			38
Equity securities, at fair value(1)			102			95			7			—
Total assets			$31,440			$106			$30,267			$1,067
Derivative liabilities:
Interest rate contracts			$176			$—			$176			$—
Foreign exchange contracts			231			—			231			—
Commodities contracts			505			—			505			—
TBA contracts			8			—			8			—
Other contracts			2			—			2			—
Total derivative liabilities			922			—			922			—
Total liabilities			$922			$—			$922			$—

(1) Excludes investments of $7 million that are measured at fair value using the net asset value per share (or its equivalent) practical expedient.

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The following tables present a roll forward of the balance sheet amounts for assets measured at fair value on a recurring basis and classified as Level 3:

			Three Months Ended June 30, 2022									Six Months Ended June 30, 2022
(in millions)			Mortgage Servicing Rights			Other Derivative Contracts						Mortgage Servicing Rights			Other Derivative Contracts
Beginning balance			$1,241			($21)						$1,029			$38
Issuances			79			23						174			64
Acquisitions(1)			16			—						16			—
Settlements(2)			(32)			71						(71)			132
Changes in fair value during the period recognized in earnings(3)			107			(62)						263			(223)
Ending balance			$1,411			$11						$1,411			$11

			Three Months Ended June 30, 2021									Six Months Ended June 30, 2021
(in millions)			Mortgage Servicing Rights			Other Derivative Contracts						Mortgage Servicing Rights			Other Derivative Contracts
Beginning balance			$893			$38						$658			$197
Issuances			122			81						209			243
Settlements(2)			(47)			(97)						(105)			(180)
Changes in fair value during the period recognized in earnings(3)			(66)			67						140			(171)
Ending balance			$902			$89						$902			$89

(1) Represents MSRs acquired as part of the Investors acquisition.

(2) 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.

(3) 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 the Company’s Level 3 assets, including the range and weighted-average of the significant unobservable inputs used to fair value these assets, as well as valuation techniques used.

			As of June 30, 2022
			Valuation Technique			Unobservable Input			Range (Weighted Average)
Mortgage servicing rights			Discounted Cash Flow			Constant prepayment rate			6.59-20.34% CPR (7.6% CPR)
Option adjusted spread			398-1,058 bps (615 bps)
Other derivative contracts			Internal Model			Pull through rate			23.72-99.90% (82.39%)
MSR value			2.56-144.00 bps (94.43 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 nonrecurring fair value see Note 20 in the Company’s 2021 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,
(in millions)			2022						2021						2022						2021
Collateral-dependent loans			($1)						$—						($3)						($19)

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The following table presents assets measured at fair value on a nonrecurring basis:

			June 30, 2022															December 31, 2021
(in millions)			Total			Level 1			Level 2			Level 3						Total			Level 1			Level 2			Level 3
Collateral-dependent loans			$579			$—			$579			$—						$645			$—			$645			$—

Fair Value of Financial Instruments

The following tables present the estimated fair value for financial instruments not recorded at fair value in the unaudited interim Consolidated Financial Statements. The carrying amounts are recorded in the Consolidated Balance Sheets under the indicated captions:

			June 30, 2022
			Total									Level 1									Level 2									Level 3
(in millions)			Carrying Value			Estimated Fair Value						Carrying Value			Estimated Fair Value						Carrying Value			Estimated Fair Value						Carrying Value			Estimated Fair Value
Financial assets:
Debt securities held to maturity			$9,567			$9,361						$—			$—						$8,921			$8,747						$646			$614
Other loans held for sale			2,078			2,058						—			—						—			—						2,078			2,058
Loans and leases			156,172			152,496						—			—						579			579						155,593			151,917
Other assets			1,162			1,162						—			—						1,146			1,146						16			16
Financial liabilities:
Deposits			178,925			178,807						—			—						178,925			178,807						—			—
Short-term borrowed funds			3,763			3,763						—			—						3,763			3,763						—			—
Long-term borrowed funds			14,440			14,299						—			—						14,440			14,299						—			—

			December 31, 2021
			Total									Level 1									Level 2									Level 3
(in millions)			Carrying Value			Estimated Fair Value						Carrying Value			Estimated Fair Value						Carrying Value			Estimated Fair Value						Carrying Value			Estimated Fair Value
Financial assets:
Debt securities held to maturity			$2,242			$2,289						$—			$—						$1,505			$1,557						$737			$732
Other loans held for sale			735			735						—			—						—			—						735			735
Loans and leases			128,163			128,156						—			—						645			645						127,518			127,511
Other assets			624			624						—			—						609			609						15			15
Financial liabilities:
Deposits			154,361			154,366						—			—						154,361			154,366						—			—
Short-term borrowed funds			74			74						—			—						74			74						—			—
Long-term borrowed funds			6,932			7,188						—			—						6,932			7,188						—			—

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NOTE 15 - NONINTEREST INCOME

Revenues from Contracts with Customers

The following tables present the components of revenue from contracts with customers disaggregated by revenue stream and business operating segment:

			Three Months Ended June 30, 2022															Three Months Ended June 30, 2021
(in millions)			Consumer Banking			Commercial Banking			Other			Consolidated						Consumer Banking			Commercial Banking			Other			Consolidated
Service charges and fees			$73			$34			$1			$108						$74			$26			$—			$100
Card fees			60			10			—			70						56			8			—			64
Capital markets fees			—			90			—			90						—			84			—			84
Trust and investment services fees			66			—			—			66						60			—			—			60
Other banking fees			—			5			—			5						—			2			—			2
Total revenue from contracts with customers			$199			$139			$1			$339						$190			$120			$—			$310
Total revenue from other sources(1)			81			82			(8)			155						93			58			24			175
Total noninterest income			$280			$221			($7)			$494						$283			$178			$24			$485

			Six Months Ended June 30, 2022															Six Months Ended June 30, 2021
(in millions)			Consumer Banking			Commercial Banking			Other			Consolidated						Consumer Banking			Commercial Banking			Other			Consolidated
Service charges and fees			$142			$61			$2			$205						$148			$51			$—			$199
Card fees			110			20			—			130						103			15			—			118
Capital markets fees			—			168			—			168						—			156			—			156
Trust and investment services fees			127			—			—			127						118			—			—			118
Other banking fees			1			7			1			9						—			4			—			4
Total revenue from contracts with customers			$380			$256			$3			$639						$369			$226			$—			$595
Total revenue from other sources(1)			157			178			18			353						265			122			45			432
Total noninterest income			$537			$434			$21			$992						$634			$348			$45			$1,027

(1) Includes bank-owned life insurance income of $21 million and $16 million for the three months ended June 30, 2022 and 2021, respectively, and $42 million and $30 million for the six months ended June 30, 2022 and 2021, respectively.

The Company recognized trailing commissions of $4 million for both the three months ended June 30, 2022 and 2021, and $8 million for both the six months ended June 30, 2022 and 2021, related to ongoing commissions from previous investment sales.

NOTE 16 - OTHER OPERATING EXPENSE

The following table presents the details of other operating expense:

			Three Months Ended June 30,												Six Months Ended June 30,
(in millions)			2022						2021						2022						2021
Marketing			$39						$31						$65						$50
Deposit insurance			26						16						46						31
Other			88						46						152						103
Other operating expense			$153						$93						$263						$184

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NOTE 17 - EARNINGS PER SHARE

			Three Months Ended June 30,												Six Months Ended June 30,
(in millions, except share and per share data)			2022						2021						2022						2021
Numerator (basic and diluted):
Net income			$364						$648						$784						$1,259
Less: Preferred stock dividends			32						32						56						55
Net income available to common stockholders			$332						$616						$728						$1,204
Denominator:
Weighted-average common shares outstanding - basic			491,497,026						425,948,706						457,140,258						425,951,197
Dilutive common shares: share-based awards			1,799,088						1,612,866						2,027,489						1,717,045
Weighted-average common shares outstanding - diluted			493,296,114						427,561,572						459,167,747						427,668,242
Earnings per common share:
Basic			$0.68						$1.45						$1.59						$2.83
Diluted(1)			0.67						1.44						1.58						2.81

(1) Potential dilutive common shares are excluded from the computation of diluted EPS in the periods where the effect would be antidilutive. Excluded from the computation of diluted EPS were weighted average antidilutive shares totaling 1,647,051 and 76,984 for the three months ended June 30, 2022 and 2021, respectively, and 784,372 and 43,877 for the six months ended June 30, 2022 and 2021, respectively.

NOTE 18 - BUSINESS OPERATING SEGMENTS

Citizens is managed by its Chief Executive Officer on a segment basis. The Company’s two business operating segments are Consumer Banking and Commercial Banking. The business segments are determined based on the products and services provided, or the type of customer served. Each segment has a segment head who reports directly to the Chief Executive Officer. The Chief Executive Officer has final authority over resource allocation decisions and performance assessment. The business segments reflect this management structure and the manner in which financial information is currently evaluated by the Chief Executive Officer. For more information on the Company’s business operating segments, as well as Other non-segment operations, see Note 26 in the Company’s 2021 Form 10-K.

			As of and for the Three Months Ended June 30, 2022
(in millions)			Consumer Banking						Commercial Banking						Other						Consolidated
Net interest income			$995						$534						($24)						$1,505
Noninterest income			280						221						(7)						494
Total revenue			1,275						755						(31)						1,999
Noninterest expense			881						308						116						1,305
Profit (loss) before provision (benefit) for credit losses			394						447						(147)						694
Provision (benefit) for credit losses			39						10						167						216
Income (loss) before income tax expense (benefit)			355						437						(314)						478
Income tax expense (benefit)			90						96						(72)						114
Net income (loss)			$265						$341						($242)						$364
Total average assets			$88,881						$78,638						$53,448						$220,967

			As of and for the Three Months Ended June 30, 2021
(in millions)			Consumer Banking						Commercial Banking						Other						Consolidated
Net interest income			$897						$419						($192)						$1,124
Noninterest income			283						178						24						485
Total revenue			1,180						597						(168)						1,609
Noninterest expense			751						226						14						991
Profit (loss) before provision (benefit) for credit losses			429						371						(182)						618
Provision (benefit) for credit losses			45						34						(292)						(213)
Income (loss) before income tax expense (benefit)			384						337						110						831
Income tax expense (benefit)			98						72						13						183
Net income (loss)			$286						$265						$97						$648
Total average assets			$75,600						$57,527						$51,329						$184,456

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			As of and for the Six Months Ended June 30, 2022
(in millions)			Consumer Banking						Commercial Banking						Other						Consolidated
Net interest income			$1,852						$950						($150)						$2,652
Noninterest income			537						434						21						992
Total revenue			2,389						1,384						(129)						3,644
Noninterest expense			1,665						580						166						2,411
Profit (loss) before provision (benefit) for credit losses			724						804						(295)						1,233
Provision (benefit) for credit losses			88						22						109						219
Income (loss) before income tax expense (benefit)			636						782						(404)						1,014
Income tax expense (benefit)			162						170						(102)						230
Net income (loss)			$474						$612						($302)						$784
Total average assets			$83,247						$69,927						$51,558						$204,732

			As of and for the Six Months Ended June 30, 2021
(in millions)			Consumer Banking						Commercial Banking						Other						Consolidated
Net interest income			$1,760						$840						($359)						$2,241
Noninterest income			634						348						45						1,027
Total revenue			2,394						1,188						(314)						3,268
Noninterest expense			1,501						453						55						2,009
Profit (loss) before provision (benefit) for credit losses			893						735						(369)						1,259
Provision (benefit) for credit losses			104						135						(592)						(353)
Income (loss) before income tax expense (benefit)			789						600						223						1,612
Income tax expense (benefit)			201						124						28						353
Net income (loss)			$588						$476						$195						$1,259
Total average assets			$75,443						$57,632						$50,443						$183,518

Citizens utilizes a FTP system to eliminate the effect of interest rate risk from the segments’ net interest income. This risk is centrally managed within the Treasury function and reported in the Other segment. The FTP methodology provides a funds credit for sources of funds and a funds charge for the use of funds by each segment. The sum of the interest income/expense and FTP charges/credits for each segment is its designated net interest income. The offset to these FTP charges and credits is recorded in the Other segment.

Effective January 1, 2022, the Company refined its FTP credit methodology for deposits provided by each business segment. The rationale for this FTP refinement is to better estimate the net interest income resulting from the strong growth in deposits caused by the COVID-19 government stimulus. This resulted in lower net interest income, primarily in Consumer, offset by an increase in Other. Prior periods have not been restated.

There have been no other significant changes in the management accounting practices utilized by the Company regarding the basis of presentation for segment results as discussed in Note 26 in the Company’s 2021 Form 10-K.