Item 1. FINANCIAL STATEMENTS

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Item 1. FINANCIAL STATEMENTS


						Page
Consolidated Balance Sheets (unaudited)						38
Consolidated Statements of Operations (unaudited)						39
Consolidated Statements of Comprehensive Income (unaudited)						40
Consolidated Statements of Changes in Stockholders’ Equity (unaudited)						41
Consolidated Statements of Cash Flows (unaudited)						42
Notes to Consolidated Financial Statements (unaudited)						43
Note 1 - Significant Accounting Policies						43
Note 2 - Securities						44
Note 3 - Loans and Leases						47
Note 4 - Credit Quality and the Allowance for Credit Losses						47
Note 5 - Mortgage Banking and Other						56
Note 6 - Variable Interest Entities						58
Note 7 - Borrowed Funds						60
Note 8 - Derivatives						61
Note 9 - Accumulated Other Comprehensive Income (Loss)						65
Note 10 - Stockholders’ Equity						65
Note 11 - Commitments and Contingencies						66
Note 12 - Fair Value Measurements						67
Note 13 - Noninterest Income						73
Note 14 - Other Operating Expense						73
Note 15 - Earnings Per Share						74
Note 16 - Business Operating Segments						74

Citizens Financial Group, Inc. | 37

CONSOLIDATED BALANCE SHEETS (UNAUDITED)


(dollars in millions, except par value)	March 31, 2024	December 31, 2023
ASSETS:
Cash and due from banks(1)	$1,098	$1,794
Interest-bearing cash and due from banks	10,501	9,834
Interest-bearing deposits in banks(1)	392	405
Debt securities available for sale, at fair value (including $80 and $110 pledged to creditors, respectively)(2)	31,187	29,777
Debt securities held to maturity (fair value of $8,132 and $8,350 respectively, and including $183 and $204 pledged to creditors, respectively)(2)	9,054	9,184
Loans held for sale, at fair value	505	676
Other loans held for sale	50	103
Loans and leases	143,188	145,959
Less: Allowance for loan and lease losses	(2,086)	(2,098)
Net loans and leases(1)	141,102	143,861
Derivative assets	469	440
Premises and equipment, net	872	895
Bank-owned life insurance	3,311	3,291
Goodwill	8,188	8,188
Other intangible assets(3)	148	157
Other assets(1)	13,571	13,359
TOTAL ASSETS	$220,448	$221,964
LIABILITIES AND STOCKHOLDERS’ EQUITY:
LIABILITIES:
Deposits:
Noninterest-bearing	$36,593	$37,107
Interest-bearing	139,835	140,235
Total deposits	176,428	177,342
Short-term borrowed funds	9	505
Derivative liabilities	1,705	1,562
Long-term borrowed funds(1)	13,804	13,467
Other liabilities(1)	4,741	4,746
TOTAL LIABILITIES	196,687	197,622
Commitments and Contingencies (refer to Note 11)
STOCKHOLDERS’ EQUITY:
Preferred stock:
$25.00 par value,100,000,000 shares authorized; 2,050,000 shares issued and outstanding at March 31, 2024 and December 31, 2023	2,014	2,014
Common stock:
$0.01 par value, 1,000,000,000 shares authorized; 649,141,636 shares issued and 458,485,032 shares outstanding at March 31, 2024 and 647,829,720 shares issued and 466,418,055 shares outstanding at December 31, 2023	6	6
Additional paid-in capital	22,272	22,250
Retained earnings	9,923	9,816
Treasury stock, at cost, 190,656,604 and 181,411,665 shares at March 31, 2024 and December 31, 2023, respectively	(6,290)	(5,986)
Accumulated other comprehensive income (loss)	(4,164)	(3,758)
TOTAL STOCKHOLDERS’ EQUITY	23,761	24,342
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$220,448	$221,964

(1) Includes amounts in consolidated VIEs. See Note 6 for additional information.

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

(3) Excludes MSRs, which are reported in Other assets.

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

Citizens Financial Group, Inc. | 38

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)


	Three Months Ended March 31,
(dollars in millions, except per share data)	2024	2023
INTEREST INCOME:
Interest and fees on loans and leases	$2,051	$2,047
Interest and fees on loans held for sale	14	15
Interest and fees on other loans held for sale	6	5
Investment securities	399	266
Interest-bearing deposits in banks	140	69
Total interest income	2,610	2,402
INTEREST EXPENSE:
Deposits	987	550
Short-term borrowed funds	7	6
Long-term borrowed funds	174	203
Total interest expense	1,168	759
Net interest income	1,442	1,643
Provision (benefit) for credit losses	171	168
Net interest income after provision (benefit) for credit losses	1,271	1,475
NONINTEREST INCOME:
Service charges and fees	96	100
Capital markets fees	118	83
Card fees	86	72
Trust and investment services fees	68	63
Mortgage banking fees	49	57
Foreign exchange and derivative products	36	48
Letter of credit and loan fees	42	40
Securities gains, net	5	5
Other income	17	17
Total noninterest income	517	485
NONINTEREST EXPENSE:
Salaries and employee benefits	691	658
Equipment and software	192	169
Outside services	158	176
Occupancy	114	124
Other operating expense	203	169
Total noninterest expense	1,358	1,296
Income before income tax expense	430	664
Income tax expense	96	153
NET INCOME	$334	$511
Net income available to common stockholders	$304	$488
Weighted-average common shares outstanding:
Basic	461,358,681	485,444,313
Diluted	463,797,964	487,712,146
Per common share information:
Basic earnings	$0.66	$1.00
Diluted earnings	0.65	1.00

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

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)


	Three Months Ended March 31,
(dollars in millions)	2024	2023
Net income	$334	$511
Other comprehensive income (loss):
Net unrealized derivative instruments gains (losses) arising during the periods, net of income taxes of ($145) and $60, respectively	(405)	173
Reclassification adjustment for net derivative (gains) losses included in net income, net of income taxes of $54 and $33, respectively	149	94
Net unrealized debt securities gains (losses) arising during the periods, net of income taxes of ($56) and $109, respectively	(173)	327
Reclassification of net debt securities (gains) losses to net income, net of income taxes of $5 and $7, respectively	14	20
Employee benefit plans:
Actuarial gain (loss), net of income taxes of $1 and $—, respectively	4	—
Reclassification of actuarial (gain) loss to net income, net of income taxes of $1 and $1, respectively	5	3
Total other comprehensive income (loss), net of income taxes	(406)	617
Total comprehensive income (loss)	($72)	$1,128

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

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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
(dollars and shares in millions)	Shares	Amount	Shares	Amount
Balance at January 1, 2023	2	$2,014	492	$6	$22,142	$9,159	($5,071)	($4,560)	$23,690
Dividends to common stockholders	—	—	—	—	—	(205)	—	—	(205)
Dividends to preferred stockholders	—	—	—	—	—	(23)	—	—	(23)



Treasury stock purchased	—	—	(10)	—	—	—	(400)	—	(400)
Share repurchase excise tax	—	—	—	—	—	—	(4)	—	(4)
Share-based compensation plans	—	—	2	—	33	—	—	—	33
Employee stock purchase plan	—	—	—	—	8	—	—	—	8
Cumulative effect of change in accounting principle	—	—	—	—	—	(26)	—	—	(26)
Total comprehensive income (loss):
Net income	—	—	—	—	—	511	—	—	511
Other comprehensive income (loss)	—	—	—	—	—	—	—	617	617
Total comprehensive income (loss)	—	—	—	—	—	511	—	617	1,128
Balance at March 31, 2023	2	$2,014	484	$6	$22,183	$9,416	($5,475)	($3,943)	$24,201
Balance at January 1, 2024	2	$2,014	466	$6	$22,250	$9,816	($5,986)	($3,758)	$24,342
Dividends to common stockholders	—	—	—	—	—	(197)	—	—	(197)
Dividends to preferred stockholders	—	—	—	—	—	(30)	—	—	(30)



Treasury stock purchased	—	—	(9)	—	—	—	(300)	—	(300)
Share repurchase excise tax	—	—	—	—	—	—	(4)	—	(4)
Share-based compensation plans	—	—	1	—	15	—	—	—	15
Employee stock purchase plan	—	—	—	—	7	—	—	—	7

Total comprehensive income (loss):
Net income	—	—	—	—	—	334	—	—	334
Other comprehensive income (loss)	—	—	—	—	—	—	—	(406)	(406)
Total comprehensive income (loss)	—	—	—	—	—	334	—	(406)	(72)
Balance at March 31, 2024	2	$2,014	458	$6	$22,272	$9,923	($6,290)	($4,164)	$23,761

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

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CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


	Three Months Ended March 31,
(dollars in millions)	2024	2023
OPERATING ACTIVITIES
Net income	$334	$511
Adjustments to reconcile net income to net change due to operating activities:
Provision (benefit) for credit losses	171	168
Net change in loans held for sale, at fair value	171	(81)
Depreciation, amortization and accretion	102	118
Deferred income tax expense (benefit)	—	(63)
Share-based compensation	34	33
Net gain on sale of assets	(5)	(5)
Net (increase) decrease in other assets	(47)	(372)
Net increase (decrease) in other liabilities	(206)	845
Net change due to operating activities	554	1,154
INVESTING ACTIVITIES
Investment securities:
Purchases of debt securities available for sale	(3,057)	(1,223)
Proceeds from maturities and paydowns of debt securities available for sale	593	423
Proceeds from sales of debt securities available for sale	692	1,395

Proceeds from maturities and paydowns of debt securities held to maturity	150	182

Net (increase) decrease in interest-bearing deposits in banks	13	(17)


Purchases of loans	(345)	—
Sales of loans	107	315
Net (increase) decrease in loans and leases	2,873	696
Capital expenditures, net	(10)	(52)

Other	23	(227)
Net change due to investing activities	1,039	1,492
FINANCING ACTIVITIES
Net increase (decrease) in deposits	(914)	(8,530)
Net increase (decrease) in short-term borrowed funds	(496)	1,015
Proceeds from issuance of long-term borrowed funds	5,765	5,710
Repayments of long-term borrowed funds	(5,437)	(2,752)
Treasury stock purchased	(300)	(400)


Dividends paid to common stockholders	(197)	(205)
Dividends paid to preferred stockholders	(31)	(33)

Other	(12)	(24)
Net change due to financing activities	(1,622)	(5,219)
Net change in cash and cash equivalents(1)	(29)	(2,573)
Cash and cash equivalents at beginning of period(1)	11,628	10,547
Cash and cash equivalents at end of period(1)	$11,599	$7,974
Non-cash items:
Transfer of loans from loans held for investment to loans held for sale	$107	$—

(1) 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited interim Consolidated Financial Statements and Notes have been prepared in accordance with the instructions for Form 10-Q and, therefore, do not include all information and notes included in annual financial statements prepared in accordance with GAAP. The Consolidated Financial Statements include all adjustments, consisting of normal recurring adjustments, necessary for the fair presentation of the interim period results presented. These unaudited interim financial statements and notes should be read in conjunction with the audited Consolidated Financial Statements and Notes included in the Company’s 2023 Form 10-K. The results of operations for interim periods are not necessarily indicative of the results that may be expected for the full year.

The unaudited interim Consolidated Financial Statements include the accounts of Citizens and its subsidiaries, including VIEs in which Citizens is a primary beneficiary. Investments in VIEs in which the Company does not have the ability to exercise significant influence are not consolidated. All intercompany transactions and balances have been eliminated in consolidation.

During the third quarter of 2023, the Company’s indirect auto and certain purchased consumer loan portfolios were transferred from the Consumer Banking segment into a new Non-Core segment to reflect the manner in which management is currently assessing performance and allocating resources. Prior period results have been revised to conform to the new segment presentation. See Note 16 for additional information.

During the first quarter of 2024, the Company modified the presentation of its loans and leases portfolio to include leases in the commercial and industrial financing receivable class. Prior period results have been revised to conform to the new presentation. See Notes 3 and 4 for additional information relative to the Company’s loans and leases portfolio.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change include the determination of the ACL, fair value measurements and the evaluation and measurement of goodwill impairment.

Significant Accounting Policies

For further information regarding the Company’s significant accounting policies, see Note 1 in the Company’s 2023 Form 10-K.

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NOTE 2 - SECURITIES

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


	March 31, 2024				December 31, 2023
(dollars in millions)	Amortized Cost(1)	Gross Unrealized Gains	Gross Unrealized Losses	Fair Value	Amortized Cost(1)	Gross Unrealized Gains	Gross Unrealized Losses	Fair Value
U.S. Treasury and other	$4,944	$8	($182)	$4,770	$4,493	$26	($139)	$4,380
State and political subdivisions	1	—	—	1	1	—	—	1
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities	27,989	26	(2,150)	25,865	26,289	45	(1,857)	24,477
Other/non-agency	278	—	(21)	257	279	—	(24)	255
Total mortgage-backed securities	28,267	26	(2,171)	26,122	26,568	45	(1,881)	24,732
Collateralized loan obligations	293	1	—	294	667	—	(3)	664
Total debt securities available for sale, at fair value	$33,505	$35	($2,353)	$31,187	$31,729	$71	($2,023)	$29,777
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities	$8,587	$1	($906)	$7,682	$8,696	$9	($818)	$7,887
Total mortgage-backed securities	8,587	1	(906)	7,682	8,696	9	(818)	7,887
Asset-backed securities	467	1	(18)	450	488	—	(25)	463
Total debt securities held to maturity	$9,054	$2	($924)	$8,132	$9,184	$9	($843)	$8,350
Equity securities, at cost(2)	$791	$—	$—	$791	$869	$—	$—	$869
Equity securities, at fair value(2)	178	—	—	178	173	—	—	173

(1) Excludes portfolio level basis adjustments of $(74) million and $60 million, respectively, for securities designated in active fair value hedge relationships at March 31, 2024 and December 31, 2023.

(2) Included in other assets in the Consolidated Balance Sheets.

Accrued interest receivable on debt securities totaled $142 million and $125 million as of March 31, 2024 and December 31, 2023, respectively, and is included in other assets in the Consolidated Balance Sheets.

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The following table presents the amortized cost and fair value of debt securities by contractual maturity as of March 31, 2024. 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
(dollars 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	$—	$3,507	$1,437	$—	$4,944
State and political subdivisions	—	—	—	1	1
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities	—	1,853	2,056	24,080	27,989
Other/non-agency	—	—	—	278	278
Collateralized loan obligations	—	—	59	234	293
Total debt securities available for sale	—	5,360	3,552	24,593	33,505
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities	—	—	—	8,587	8,587
Asset-backed securities	—	467	—	—	467
Total debt securities held to maturity	—	467	—	8,587	9,054
Total amortized cost of debt securities	$—	$5,827	$3,552	$33,180	$42,559

Fair value:
U.S. Treasury and other	$—	$3,334	$1,436	$—	$4,770
State and political subdivisions	—	—	—	1	1
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities	—	1,761	1,945	22,159	25,865
Other/non-agency	—	—	—	257	257
Collateralized loan obligations	—	—	59	235	294
Total debt securities available for sale	—	5,095	3,440	22,652	31,187
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities	—	—	—	7,682	7,682
Asset-backed securities	—	450	—	—	450
Total debt securities held to maturity	—	450	—	7,682	8,132
Total fair value of debt securities	$—	$5,545	$3,440	$30,334	$39,319

Taxable interest income from investment securities as presented in the Consolidated Statements of Operations was $399 million and $266 million for the three months ended March 31, 2024 and 2023, respectively.

The following table presents realized gains and losses on the sale of securities:


	Three Months Ended March 31,
(dollars in millions)	2024	2023
Gains	$5	$9
Losses	—	(4)
Securities gains, net	$5	$5

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


	March 31, 2024		December 31, 2023
(dollars in millions)	Amortized Cost	Fair Value	Amortized Cost	Fair Value
Pledged against derivatives, to qualify for fiduciary powers, or to secure public and other deposits as required by law	$7,402	$6,838	$5,619	$5,305
Pledged as collateral for FHLB borrowing capacity	242	222	242	220
Pledged against repurchase agreements	—	—	—	—

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The Company 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 accounted for as secured borrowed funds in the Company’s Consolidated Balance Sheets. The Company recognized no offsetting short-term receivables or payables associated with security repurchase agreements as of March 31, 2024 or December 31, 2023.

There were no securitizations of mortgage loans retained in the investment portfolio for the three months ended March 31, 2024 and 2023.

Impairment

The Company evaluated its existing HTM portfolio as of March 31, 2024 and concluded that 95% 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 March 31, 2024.

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:


	March 31, 2024
	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	$758	($7)	$3,211	($175)	$3,969	($182)
State and political subdivisions	—	—	1	—	1	—
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities	5,710	(39)	16,007	(2,111)	21,717	(2,150)
Other/non-agency	—	—	257	(21)	257	(21)
Total mortgage-backed securities	5,710	(39)	16,264	(2,132)	21,974	(2,171)
Collateralized loan obligations	74	—	10	—	84	—
Total	$6,542	($46)	$19,486	($2,307)	$26,028	($2,353)


	December 31, 2023
	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	$49	$—	$3,245	($139)	$3,294	($139)
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities	2,939	(24)	16,398	(1,833)	19,337	(1,857)
Other/non-agency	—	—	255	(24)	255	(24)
Total mortgage-backed securities	2,939	(24)	16,653	(1,857)	19,592	(1,881)
Collateralized loan obligations	56	—	607	(3)	663	(3)
Total	$3,044	($24)	$20,505	($1,999)	$23,549	($2,023)

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 AFS debt securities identified with unrealized losses as of March 31, 2024. 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.

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NOTE 3 - 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:


(dollars in millions)	March 31, 2024	December 31, 2023
Commercial and industrial	$43,951	$44,974
Commercial real estate	28,872	29,471

Total commercial	72,823	74,445
Residential mortgages	31,512	31,332
Home equity	15,113	15,040
Automobile	7,277	8,258
Education	11,646	11,834
Other retail	4,817	5,050
Total retail	70,365	71,514
Total loans and leases	$143,188	$145,959

Accrued interest receivable on loans and leases held for investment totaled $850 million and $875 million as of March 31, 2024 and December 31, 2023, 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 $36.3 billion and $36.0 billion at March 31, 2024 and December 31, 2023, 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 $31.1 billion and $31.9 billion at March 31, 2024 and December 31, 2023, respectively.

Interest income on direct financing and sales-type leases for the three months ended March 31, 2024 and 2023 was $11 million and $12 million, respectively, and is reported within interest and fees on loans and leases in the Consolidated Statements of Operations.

The following table presents the composition of LHFS:


	March 31, 2024			December 31, 2023
(dollars in millions)	Residential Mortgages(1)	Commercial(2)	Total	Residential Mortgages(1)	Commercial(2)	Total
Loans held for sale at fair value	$437	$68	$505	$614	$62	$676
Other loans held for sale	—	50	50	—	103	103

(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 primarily consist of loans associated with the Company’s syndication business.

NOTE 4 - CREDIT QUALITY AND THE ALLOWANCE FOR CREDIT LOSSES

Allowance for Credit Losses

The Company’s estimate of expected credit losses in its loan and lease portfolios is recorded in the ACL and considers extensive historical loss experience, including the impact of loss mitigation and restructuring programs that the Company offers to borrowers experiencing financial difficulty, as well as projected loss severity as a result of loan default.

For a detailed discussion of the ACL reserve methodology and estimation techniques as of December 31, 2023, see Note 6 in the Company’s 2023 Form 10-K. There were no significant changes to the ACL reserve methodology during the three months ended March 31, 2024.

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The following table presents a summary of changes in the ACL for the three months ended March 31, 2024:


	Three Months Ended March 31, 2024
(dollars in millions)	Commercial	Retail	Total
Allowance for loan and lease losses, beginning of period	$1,250	$848	$2,098



Charge-offs	(102)	(129)	(231)
Recoveries	17	33	50
Net charge-offs	(85)	(96)	(181)
Provision expense (benefit) for loans and leases	69	100	169
Allowance for loan and lease losses, end of period	1,234	852	2,086
Allowance for unfunded lending commitments, beginning of period	175	45	220


Provision expense (benefit) for unfunded lending commitments	16	(14)	2

Allowance for unfunded lending commitments, end of period	191	31	222
Total allowance for credit losses, end of period	$1,425	$883	$2,308

During the three months ended March 31, 2024, net charge-offs of $181 million and a provision for expected credit losses of $171 million resulted in an decrease of $10 million to the ACL.

As of March 31, 2024, the ACL accounts for an economic forecast over a two-year reasonable and supportable period with peak unemployment of approximately 4.9% and start-to-trough real GDP decline of approximately 0.3%. This forecast reflects a mild recession over the two-year reasonable and supportable period.

The following table presents a summary of changes in the ACL for the three months ended March 31, 2023:


	Three Months Ended March 31, 2023
(dollars in millions)	Commercial	Retail	Total
Allowance for loan and lease losses, beginning of period	$1,060	$923	$1,983



Charge-offs	(59)	(112)	(171)
Recoveries	7	31	38
Net charge-offs	(52)	(81)	(133)
Provision expense (benefit) for loans and leases	103	64	167
Allowance for loan and lease losses, end of period	1,111	906	2,017
Allowance for unfunded lending commitments, beginning of period	207	50	257


Provision expense (benefit) for unfunded lending commitments	8	(7)	1

Allowance for unfunded lending commitments, end of period	215	43	258
Total allowance for credit losses, end of period	$1,326	$949	$2,275

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. Renewals are categorized as new credit decisions and reflect the renewal date as the vintage date, except for renewals of loans modified for borrowers experiencing financial difficulty, or FDMs, which are presented in the original vintage.

Citizens utilizes internal risk ratings to monitor credit quality for commercial loans and leases. For more information on these ratings see Note 6 in the Company’s 2023 Form 10-K.

Citizens Financial Group, Inc. | 48

The following table presents the amortized cost basis of commercial loans and leases by vintage date and internal risk rating as of March 31, 2024:


	Term Loans and Leases by Origination Year						Revolving Loans
(dollars in millions)	2024	2023	2022	2021	2020	Prior to 2020	Within the Revolving Period	Converted to Term	Total
Commercial and industrial
Pass	$1,261	$3,535	$5,966	$5,103	$1,280	$2,843	$20,606	$49	$40,643
Special Mention	—	56	219	353	66	106	312	—	1,112
Substandard Accrual	—	22	187	305	188	387	802	11	1,902
Nonaccrual	—	5	67	31	6	112	66	7	294
Total commercial and industrial	1,261	3,618	6,439	5,792	1,540	3,448	21,786	67	43,951
Commercial real estate
Pass	466	1,555	5,966	6,009	2,258	5,626	1,621	3	23,504
Special Mention	—	6	915	502	370	452	129	—	2,374
Substandard Accrual	—	49	284	271	368	1,330	95	—	2,397
Nonaccrual	—	—	78	34	12	470	3	—	597
Total commercial real estate	466	1,610	7,243	6,816	3,008	7,878	1,848	3	28,872






Total commercial
Pass	1,727	5,090	11,932	11,112	3,538	8,469	22,227	52	64,147
Special Mention	—	62	1,134	855	436	558	441	—	3,486
Substandard Accrual	—	71	471	576	556	1,717	897	11	4,299
Nonaccrual	—	5	145	65	18	582	69	7	891
Total commercial	$1,727	$5,228	$13,682	$12,608	$4,548	$11,326	$23,634	$70	$72,823

The following table presents the amortized cost basis of commercial loans and leases by vintage date and internal risk rating as of December 31, 2023:


	Term Loans and Leases by Origination Year						Revolving Loans
(dollars in millions)	2023	2022	2021	2020	2019	Prior to 2019	Within the Revolving Period	Converted to Term	Total
Commercial and industrial
Pass	$3,694	$6,512	$5,331	$1,445	$1,147	$2,299	$21,033	$53	$41,514
Special Mention	59	221	355	30	50	113	368	—	1,196
Substandard Accrual	8	189	337	218	125	287	792	11	1,967
Nonaccrual	1	72	54	4	5	102	53	6	297
Total commercial and industrial	3,762	6,994	6,077	1,697	1,327	2,801	22,246	70	44,974
Commercial real estate
Pass	1,906	5,791	6,062	2,555	2,294	3,895	1,975	8	24,486
Special Mention	—	713	539	222	183	260	75	—	1,992
Substandard Accrual	—	277	203	469	528	939	100	—	2,516
Nonaccrual	1	66	2	23	144	238	3	—	477
Total commercial real estate	1,907	6,847	6,806	3,269	3,149	5,332	2,153	8	29,471






Total commercial
Pass	5,600	12,303	11,393	4,000	3,441	6,194	23,008	61	66,000
Special Mention	59	934	894	252	233	373	443	—	3,188
Substandard Accrual	8	466	540	687	653	1,226	892	11	4,483
Nonaccrual	2	138	56	27	149	340	56	6	774
Total commercial	$5,669	$13,841	$12,883	$4,966	$4,476	$8,133	$24,399	$78	$74,445

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. | 49

The following table presents the amortized cost basis of retail loans by vintage date and current FICO score as of March 31, 2024:


	Term Loans by Origination Year						Revolving Loans
(dollars in millions)	2024	2023	2022	2021	2020	Prior to 2020	Within the Revolving Period	Converted to Term	Total
Residential mortgages
800+	$152	$1,165	$3,188	$5,210	$3,050	$4,217	$—	$—	$16,982
740-799	299	1,099	1,827	2,421	1,420	2,111	—	—	9,177
680-739	92	317	630	754	462	1,071	—	—	3,326
620-679	5	57	116	168	90	557	—	—	993
<620	—	18	55	118	87	736	—	—	1,014
No FICO available(1)	—	—	—	2	1	17	—	—	20
Total residential mortgages	548	2,656	5,816	8,673	5,110	8,709	—	—	31,512
Home equity
800+	—	—	4	4	1	89	4,938	212	5,248
740-799	—	1	2	2	1	76	4,822	239	5,143
680-739	—	—	1	1	2	92	2,822	192	3,110
620-679	—	—	2	1	2	76	731	144	956
<620	—	—	3	2	1	79	331	240	656

Total home equity	—	1	12	10	7	412	13,644	1,027	15,113
Automobile
800+	—	73	483	936	309	155	—	—	1,956
740-799	—	123	609	919	322	166	—	—	2,139
680-739	—	134	520	627	215	122	—	—	1,618
620-679	—	83	287	309	98	72	—	—	849
<620	—	46	224	274	91	80	—	—	715

Total automobile	—	459	2,123	3,065	1,035	595	—	—	7,277
Education
800+	55	373	673	1,630	1,376	1,699	—	—	5,806
740-799	69	413	658	961	784	968	—	—	3,853
680-739	22	175	267	305	254	405	—	—	1,428
620-679	6	50	64	68	57	130	—	—	375
<620	1	8	20	26	24	68	—	—	147
No FICO available(1)	2	1	—	—	—	34	—	—	37
Total education	155	1,020	1,682	2,990	2,495	3,304	—	—	11,646
Other retail
800+	38	151	56	30	27	24	483	—	809
740-799	55	211	70	35	35	29	924	1	1,360
680-739	46	177	61	30	30	21	925	2	1,292
620-679	24	99	40	18	14	7	397	2	601
<620	3	40	35	15	11	4	247	1	356
No FICO available(1)	4	3	—	—	2	—	390	—	399
Total other retail	170	681	262	128	119	85	3,366	6	4,817
Total retail
800+	245	1,762	4,404	7,810	4,763	6,184	5,421	212	30,801
740-799	423	1,847	3,166	4,338	2,562	3,350	5,746	240	21,672
680-739	160	803	1,479	1,717	963	1,711	3,747	194	10,774
620-679	35	289	509	564	261	842	1,128	146	3,774
<620	4	112	337	435	214	967	578	241	2,888
No FICO available(1)	6	4	—	2	3	51	390	—	456
Total retail	$873	$4,817	$9,895	$14,866	$8,766	$13,105	$17,010	$1,033	$70,365

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

Citizens Financial Group, Inc. | 50

The following table presents the amortized cost basis of retail loans by vintage date and current FICO score as of December 31, 2023:


	Term Loans by Origination Year						Revolving Loans
(dollars in millions)	2023	2022	2021	2020	2019	Prior to 2019	Within the Revolving Period	Converted to Term	Total
Residential mortgages
800+	$889	$3,067	$5,172	$3,117	$1,131	$3,125	$—	$—	$16,501
740-799	1,333	1,940	2,560	1,411	592	1,625	—	—	9,461
680-739	367	631	758	466	266	873	—	—	3,361
620-679	54	135	165	90	121	445	—	—	1,010
<620	9	48	104	95	161	561	—	—	978
No FICO available(1)	1	—	2	1	3	14	—	—	21
Total residential mortgages	2,653	5,821	8,761	5,180	2,274	6,643	—	—	31,332
Home equity
800+	—	4	4	1	4	91	5,078	222	5,404
740-799	—	1	2	1	3	82	4,708	241	5,038
680-739	1	1	1	2	5	93	2,693	202	2,998
620-679	—	1	1	2	8	77	718	137	944
<620	—	2	1	1	10	80	332	230	656

Total home equity	1	9	9	7	30	423	13,529	1,032	15,040
Automobile
800+	81	539	1,062	368	162	47	—	—	2,259
740-799	134	671	1,038	375	165	52	—	—	2,435
680-739	147	577	708	252	118	39	—	—	1,841
620-679	94	316	345	112	65	26	—	—	958
<620	44	232	291	100	66	32	—	—	765

Total automobile	500	2,335	3,444	1,207	576	196	—	—	8,258
Education
800+	296	671	1,637	1,418	600	1,185	—	—	5,807
740-799	368	694	1,050	850	369	678	—	—	4,009
680-739	143	289	333	273	134	298	—	—	1,470
620-679	30	65	68	58	32	107	—	—	360
<620	5	18	25	23	15	55	—	—	141
No FICO available(1)	10	—	1	—	—	36	—	—	47
Total education	852	1,737	3,114	2,622	1,150	2,359	—	—	11,834
Other retail
800+	183	70	38	35	16	18	500	—	860
740-799	258	87	46	45	21	19	963	1	1,440
680-739	214	76	39	39	18	11	973	2	1,372
620-679	118	48	23	19	6	4	419	2	639
<620	31	35	18	14	4	2	251	2	357
No FICO available(1)	7	1	—	1	—	—	373	—	382
Total other retail	811	317	164	153	65	54	3,479	7	5,050
Total retail
800+	1,449	4,351	7,913	4,939	1,913	4,466	5,578	222	30,831
740-799	2,093	3,393	4,696	2,682	1,150	2,456	5,671	242	22,383
680-739	872	1,574	1,839	1,032	541	1,314	3,666	204	11,042
620-679	296	565	602	281	232	659	1,137	139	3,911
<620	89	335	439	233	256	730	583	232	2,897
No FICO available(1)	18	1	3	2	3	50	373	—	450
Total retail	$4,817	$10,219	$15,492	$9,169	$4,095	$9,675	$17,008	$1,039	$71,514

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

Citizens Financial Group, Inc. | 51

The following tables present gross charge-offs by vintage date for the Company’s loan and lease portfolios:


	Three Months Ended March 31, 2024
	Term Loans and Leases by Origination Year						Revolving Loans
(dollars in millions)	2024	2023	2022	2021	2020	Prior to 2020	Within the Revolving Period	Converted to Term	Total
Commercial and industrial	$—	$5	$1	$4	$—	$1	$3	$—	$14
Commercial real estate	—	—	—	—	59	29	—	—	88

Total commercial	—	5	1	4	59	30	3	—	102
Residential mortgages	—	—	—	—	—	2	—	—	2
Home equity	—	—	—	—	—	1	2	1	4
Automobile	—	2	9	11	3	3	—	—	28
Education	—	—	1	6	7	18	—	—	32
Other retail	4	9	4	3	—	4	39	—	63
Total retail	4	11	14	20	10	28	41	1	129
Total loans and leases	$4	$16	$15	$24	$69	$58	$44	$1	$231


	Three Months Ended March 31, 2023
	Term Loans and Leases by Origination Year						Revolving Loans
(dollars in millions)	2023	2022	2021	2020	2019	Prior to 2019	Within the Revolving Period	Converted to Term	Total
Commercial and industrial	$—	$—	$27	$4	$—	$—	$24	$—	$55
Commercial real estate	—	—	—	—	1	3	—	—	4

Total commercial	—	—	27	4	1	3	24	—	59
Residential mortgages	—	—	—	—	—	1	—	—	1
Home equity	—	—	—	—	—	1	1	—	2
Automobile	—	7	11	4	4	4	—	—	30
Education	—	2	3	4	3	11	—	—	23
Other retail	5	15	4	3	3	3	23	—	56
Total retail	5	24	18	11	10	20	24	—	112
Total loans and leases	$5	$24	$45	$15	$11	$23	$48	$—	$171

Citizens Financial Group, Inc. | 52

Nonaccrual and Past Due Assets

The following tables present an aging analysis of accruing and nonaccrual loans and leases as of March 31, 2024 and December 31, 2023:


	March 31, 2024
		Days Past Due and Accruing
(dollars in millions)	Current	30-59	60-89	90+	Nonaccrual	Total	Nonaccrual with no related ACL
Commercial and industrial	$43,530	$76	$28	$23	$294	$43,951	$25
Commercial real estate	27,938	291	7	39	597	28,872	54

Total commercial	71,468	367	35	62	891	72,823	79
Residential mortgages	30,742	271	116	209	174	31,512	136
Home equity	14,720	79	26	—	288	15,113	192
Automobile	7,085	115	30	—	47	7,277	6
Education	11,556	40	19	2	29	11,646	4
Other retail	4,677	43	30	27	40	4,817	1
Total retail	68,780	548	221	238	578	70,365	339
Total	$140,248	$915	$256	$300	$1,469	$143,188	$418
Guaranteed residential mortgages(1)	$714	$116	$59	$202	$—	$1,091	$—


	December 31, 2023
		Days Past Due and Accruing
(dollars in millions)	Current	30-59	60-89	90+	Nonaccrual	Total	Nonaccrual with no related ACL
Commercial and industrial	$44,591	$62	$18	$6	$297	$44,974	$30
Commercial real estate	28,745	150	59	40	477	29,471	71

Total commercial	73,336	212	77	46	774	74,445	101
Residential mortgages	30,499	282	118	256	177	31,332	144
Home equity	14,640	82	33	—	285	15,040	198
Automobile	8,005	144	48	—	61	8,258	7
Education	11,732	49	23	2	28	11,834	3
Other retail	4,899	49	34	29	39	5,050	—
Total retail	69,775	606	256	287	590	71,514	352
Total	$143,111	$818	$333	$333	$1,364	$145,959	$453
Guaranteed residential mortgages(1)	$675	$128	$76	$243	$—	$1,122	$—

(1) Guaranteed residential mortgages represent loans fully or partially guaranteed by the FHA, VA, and USDA, and are included in the amounts presented for Residential mortgages.

At March 31, 2024 and December 31, 2023, the Company had collateral-dependent residential mortgage and home equity loans totaling $542 million and $556 million, respectively, and collateral-dependent commercial loans totaling $339 million and $233 million, respectively.

The amortized cost basis of mortgage loans collateralized by residential real estate for which formal foreclosure proceedings were in-process was $328 million and $336 million as of March 31, 2024 and December 31, 2023, respectively.

Loan Modifications to Borrowers Experiencing Financial Difficulty

The Company offers loan modifications to retail and commercial borrowers as a result of its loss mitigation activities that may result in a payment delay, interest rate reduction, term extension, principal forgiveness, or combination thereof. Payment delays consist of modifications that result in a delay of contractual amounts due greater than three months over a rolling 12-month period.

Citizens Financial Group, Inc. | 53

Commercial loan modifications are offered on a case-by-case basis and generally include a payment delay, term extension and/or interest rate reduction. The Company does not typically offer principal forgiveness for commercial loans. Retail loan modifications are offered through structured loan modification programs, which are summarized below.

Forbearance programs provide borrowers experiencing some form of hardship a period of time during which their contractual payment obligations are suspended, resulting in a payment delay and/or term extension.
Other repayment plans are offered due to hardship and include an interest rate reduction and/or term extension designed to enable the borrower to return the loan to current status in an expeditious manner.
Settlement agreements may be executed with borrowers experiencing a long-term hardship or who are delinquent, resulting in principal forgiveness. Upon fulfillment of the terms of the settlement agreement, the unpaid principal amount is forgiven resulting in a charge-off of the outstanding principal balance.
Certain reorganization bankruptcy judgments may result in any one of the four modification types or some combination thereof.

The following tables present the period-end amortized cost of loans to borrowers experiencing financial difficulty that were modified during the three months ended March 31, 2024 and 2023, disaggregated by class of financing receivable and modification type. The modification type reflects the cumulative effect of all FDMs received during the indicated period.


	Three Months Ended March 31, 2024
(dollars in millions)	Interest Rate Reduction	Term Extension	Payment Delay	Principal Forgiveness	Interest Rate Reduction and Term Extension	Term Extension and Payment Delay	Total	Total as a % of Loan Class(1)
Commercial and industrial	$—	$85	$65	$—	$1	$32	$183	0.42	%
Commercial real estate	—	443	24	—	40	1	508	1.76
Total commercial	—	528	89	—	41	33	691	0.95
Residential mortgages	1	37	5	—	3	—	46	0.15
Home equity	1	1	—	—	4	—	6	0.04
Automobile	—	—	—	—	—	—	—	—
Education	3	—	18	—	—	—	21	0.18
Other retail	5	—	—	—	—	—	5	0.10
Total retail	10	38	23	—	7	—	78	0.11
Total(2)	$10	$566	$112	$—	$48	$33	$769	0.54	%


	Three Months Ended March 31, 2023
(dollars in millions)	Interest Rate Reduction	Term Extension	Payment Delay	Principal Forgiveness	Interest Rate Reduction and Term Extension	Term Extension and Payment Delay	Total	Total as a % of Loan Class(1)
Commercial and industrial	$—	$44	$32	$—	$—	$21	$97	0.19	%
Commercial real estate	—	55	—	—	—	—	55	0.19
Total commercial	—	99	32	—	—	21	152	0.19
Residential mortgages	2	19	—	—	3	—	24	0.08
Home equity	—	1	—	—	2	—	3	0.02
Automobile	—	—	—	—	—	—	—	—
Education	1	—	1	—	—	—	2	0.02
Other retail	3	—	—	—	—	—	3	0.06
Total retail	6	20	1	—	5	—	32	0.04
Total(2)	$6	$119	$33	$—	$5	$21	$184	0.12	%

(1) Represents the total amortized cost as of period-end divided by the period-end amortized cost of the corresponding loan class. Accrued interest receivable is excluded from amortized cost and is immaterial.

(2) Excludes borrowers that had their debt discharged by means of a Chapter 7 bankruptcy filing.

Citizens Financial Group, Inc. | 54

The following tables present the financial effect of loans to borrowers experiencing financial difficulty that were modified during the three months ended March 31, 2024 and 2023, disaggregated by class of financing receivable.


	Three Months Ended March 31, 2024
(dollars in millions)	Weighted-Average Interest Rate Reduction(1)		Weighted-Average Term Extension (in Months)(1)	Weighted-Average Payment Deferral(1)	Amount of Principal Forgiven(2)
Commercial and industrial	4.49	%	9	$1	$—
Commercial real estate	0.53		16	1	—
Residential mortgages	2.01		88	—	—
Home equity	3.16		88	—	—
Automobile	—		—	—	—
Education	4.31		—	—	—
Other retail	19.80		—	—	2


	Three Months Ended March 31, 2023
(dollars in millions)	Weighted-Average Interest Rate Reduction(1)		Weighted-Average Term Extension (in Months)(1)	Weighted-Average Payment Deferral(1)	Amount of Principal Forgiven(2)
Commercial and industrial	4.05	%	9	$1	$—
Commercial real estate	—		14	—	—
Residential mortgages	1.47		44	—	—
Home equity	2.02		139	—	—
Automobile	2.76		23	—	—
Education	5.77		—	—	—
Other retail	17.79		22	—	1

(1) Weighted based on period-end amortized cost.

(2) Amounts are recorded as charge-offs.

The following tables present an aging analysis of the period-end amortized cost of loans to borrowers experiencing financial difficulty that were modified during the twelve month period ending March 31, 2024 and the three month period ending March 31, 2023, disaggregated by class of financing receivable. A loan in a forbearance or repayment plan is reported as past due according to its contractual terms until contractually modified. Subsequent to modification, it is reported as past due based on its restructured terms.


	March 31, 2024
		Days Past Due and Accruing
(dollars in millions)	Current	30-59	60-89	90+	Nonaccrual	Total
Commercial and industrial	$223	$1	$5	$—	$144	$373
Commercial real estate	667	38	5	33	136	879
Total commercial	890	39	10	33	280	1,252
Residential mortgages	71	17	—	22	15	125
Home equity	5	—	—	—	10	15
Automobile	—	—	—	—	—	—
Education	51	1	—	—	6	58
Other retail	10	1	1	—	1	13
Total retail	137	19	1	22	32	211
Total	$1,027	$58	$11	$55	$312	$1,463

Citizens Financial Group, Inc. | 55


	March 31, 2023
		Days Past Due and Accruing
(dollars in millions)	Current	30-59	60-89	90+	Nonaccrual	Total
Commercial and industrial	$76	$—	$—	$—	$21	$97
Commercial real estate	55	—	—	—	—	55
Total commercial	131	—	—	—	21	152
Residential mortgages	16	4	—	2	2	24
Home equity	1	—	—	—	2	3
Automobile	—	—	—	—	—	—
Education	2	—	—	—	—	2
Other retail	3	—	—	—	—	3
Total retail	22	4	—	2	4	32
Total	$153	$4	$—	$2	$25	$184

The following table presents the period-end amortized cost of loans to borrowers experiencing financial difficulty that defaulted during the period presented and were modified within the previous 12 months preceding the default, disaggregated by class of financing receivable and modification type. The period-end amortized cost of loans modified during the three months ended March 31, 2023 that subsequently defaulted is immaterial and not presented as a result. The modification type reflects the cumulative effect of all FDMs at the time of default. A loan is considered to be in default if, subsequent to modification, it becomes 90 or more days past due or is placed on nonaccrual status.


	Three Months Ended March 31, 2024
(dollars in millions)	Interest Rate Reduction	Term Extension	Total
Commercial and industrial	$—	$34	$34
Commercial real estate	—	38	38
Total commercial	—	72	72
Residential mortgages	—	6	6
Home equity	—	—	—
Automobile	—	—	—
Education	2	—	2
Other retail	—	—	—
Total retail	2	6	8
Total	$2	$78	$80

Unfunded commitments related to loans modified during the three months ended March 31, 2024 were $32 million at March 31, 2024. Unfunded commitments related to loans modified during the year ended December 31, 2023 were $221 million at December 31, 2023.

Concentrations of Credit Risk

The Company’s lending activity is geographically well diversified with an emphasis in our core markets 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 March 31, 2024 and December 31, 2023, there were no material 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, the facts surrounding the transaction and the strength of the Company’s enterprise value.

NOTE 5 - MORTGAGE BANKING AND OTHER SERVICED LOANS

The Company sells residential mortgages into the secondary market and retains no beneficial interest 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.

Citizens Financial Group, Inc. | 56

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


	Three Months Ended March 31,
(dollars in millions)	2024	2023
Cash proceeds from residential mortgage loans sold with servicing retained	$1,488	$1,575

Gain on sales(1)	15	19
Contractually specified servicing, late and other ancillary fees(1)	79	77

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

The unpaid principal balance of residential mortgage loans related to our MSRs was $97.0 billion and $97.4 billion at March 31, 2024 and December 31, 2023, respectively. The Company manages the risk associated with changes in the value of the MSRs with an active economic hedging strategy, 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 March 31,
(dollars in millions)		2024	2023
Fair value as of beginning of the period		$1,552	$1,530


Amounts capitalized		18	21

Changes in unpaid principal balance during the period(1)		(46)	(41)
Changes in fair value during the period(2)		40	(14)
Fair value at end of the period		$1,564	$1,496

(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.

The sensitivity analysis below presents the impact of an immediate 10% and 20% adverse change in key economic assumptions to the current fair value of MSRs. 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. 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 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)	March 31, 2024	December 31, 2023
Fair value	$1,564	$1,552
Weighted average life (years)	8.9	8.8
Weighted average constant prepayment rate	7.0%	7.2%
Decline in fair value from 10% adverse change	$41	$37
Decline in fair value from 20% adverse change	$75	$71
Weighted average option adjusted spread	632 bps	630 bps
Decline in fair value from 10% adverse change	$44	$43
Decline in fair value from 20% adverse change	$87	$87

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 8 for additional information.

Citizens Financial Group, Inc. | 57

Other Serviced Loans

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


(dollars in millions)	March 31, 2024	December 31, 2023
Education	$479	$502
Commercial and industrial(1)	98	94

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

NOTE 6 - VARIABLE INTEREST ENTITIES

Citizens, in the normal course of business, engages in a variety of activities with entities that are considered VIEs, as defined by GAAP, with its variable interest arising from contractual, ownership or other monetary interests in the entity. A VIE typically does not have sufficient equity at risk to finance its activities without additional subordinated financial support from other parties.

For more details regarding the Company’s involvement with VIEs see Note 11 in the Company’s 2023 Form 10-K.

Consolidated VIEs

The Company has consolidated VIEs related to secured borrowings collateralized by auto loans. The following table summarizes the carrying amount of assets and liabilities for the Company’s consolidated VIEs:


(dollars in millions)	March 31, 2024	December 31, 2023
Assets:
Cash and due from banks	$—	$13
Interest-bearing deposits in banks	169	106
Net loans and leases	4,039	3,194

Other assets	17	14
Total assets	$4,225	$3,327
Liabilities:
Long-term borrowed funds	$3,530	$2,692
Other liabilities	9	8
Total liabilities	$3,539	$2,700

Secured Borrowings

Citizens utilizes a portion of its auto loan portfolio to support certain secured borrowing arrangements, which provide a source of funding for the Company and involves the transfer of auto loans to bankruptcy remote special purpose entities (“SPEs”). These SPEs then issue asset-backed notes to third-parties collateralized by the transferred loans.

The assets of a particular VIE are the primary source of funds to settle its obligations. Creditors of these VIEs do not have recourse to the general credit of the Company. The performance of the loans transferred to the SPEs is the most significant driver impacting the economic performance of the VIEs.

Citizens Financial Group, Inc. | 58

Unconsolidated VIEs

Citizens is involved with various VIEs that are not consolidated including lending to special purpose entities, investments in asset-backed securities and investments in entities that sponsor affordable housing, renewable energy and economic development projects. Citizens’ maximum exposure to loss resulting from its involvement with these entities is limited to the balance sheet carrying amount of its investments, unfunded commitments, and the outstanding principal balance of loans to special purpose entities.

A summary of these investments is presented below:


(dollars in millions)	March 31, 2024	December 31, 2023
Lending to special purpose entities included in loans and leases	$4,737	$4,760
LIHTC investments included in other assets	2,472	2,444
LIHTC unfunded commitments included in other liabilities	1,046	1,025
Asset-backed investments included in HTM securities	467	488
Renewable energy investments included in other assets	298	314
NMTC investments included in other assets	3	3

Lending to Special Purpose Entities

Citizens provides lending facilities to third-party sponsored special purpose entities. As of March 31, 2024 and December 31, 2023, the lending facilities had undrawn commitments to extend credit of $2.7 billion. For more information on commitments to extend credit see Note 11.

Asset-backed securities

The Company’s investments in asset-backed securities are collateralized by education loans sold to a third-party sponsored VIE. Citizens acts as the primary servicer for the sold loans and receives a servicing fee. A third-party servicer is responsible for all loans that become significantly delinquent.

Low Income Housing Tax Credit Partnerships

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

Renewable Energy Entities

The Company’s investments in certain renewable energy entities provide benefits from government incentives and other tax attributes (e.g., tax depreciation).

Contingent commitments related to the Company’s renewable energy investments were $63 million at March 31, 2024, and are expected to be paid in varying amounts through 2026. These payments are contingent upon the level of electricity production attained by the renewable energy entity relative to its targeted threshold and changes in the production tax credit rates set by the Internal Revenue Service.

New Markets Tax Credit Program

The Company participates in the NMTC program which provides a tax incentive for private sector investment into economic development projects and businesses located in low-income communities.

Citizens Financial Group, Inc. | 59

The following table summarizes the impact to the Consolidated Statements of Operations relative to the Company’s tax credit programs for which it has elected to apply the proportional amortization method of accounting:


	Three Months Ended March 31,
(dollars in millions)	2024	2023
Tax credits recognized	$97	$87
Other tax benefits recognized	23	18
Amortization	(99)	(81)
Net benefit (expense) included in income tax expense	21	24
Other income	1	1
Allocated income (loss) on investments	(3)	(3)
Net benefit (expense) included in noninterest income	(2)	(2)
Net benefit (expense) included in the Consolidated Statements of Operations(1)	$19	$22

(1) Includes the impact of tax credit investments when the election to apply the proportional amortization method was in effect during the periods presented. For 2024 and 2023, this includes LIHTC, renewable energy and NMTC investments.

The Company did not recognize impairment losses resulting from the forfeiture or ineligibility of income tax credits or other circumstances during the three months ended March 31, 2024 and 2023.

NOTE 7 - BORROWED FUNDS

Short-term borrowed funds

Short-term borrowed funds were $9 million and $505 million as of March 31, 2024 and December 31, 2023, respectively.

Long-term borrowed funds

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


(dollars in millions)	March 31, 2024	December 31, 2023
Parent Company:
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	499	499
5.841% fixed/floating-rate senior unsecured notes, due January 2030	1,244	—
2.500% fixed-rate senior unsecured notes, due February 2030	298	298
3.250% fixed-rate senior unsecured notes, due April 2030	747	746
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	565	563
5.641% fixed-rate reset subordinated debt, due May 2037	398	398
CBNA’s Global Note Program:
2.250% senior unsecured notes, due April 2025	749	749
4.119% fixed/floating-rate senior unsecured notes, due May 2025	650	649
6.064% fixed/floating-rate senior unsecured notes, due October 2025	599	599
5.284% fixed/floating-rate senior unsecured notes, due January 2026	350	349
3.750% senior unsecured notes, due February 2026	480	483
4.575% fixed/floating-rate senior unsecured notes, due August 2028	798	798
Additional Borrowings by CBNA and Other Subsidiaries:
Federal Home Loan Bank advances, 5.499% weighted average rate, due through 2043(1)	2,036	3,786
Secured borrowings, 5.479% weighted average rate, due through 2030(1)(2)	3,530	2,692
Other	21	18
Total long-term borrowed funds	$13,804	$13,467

(1) Rate disclosed reflects the weighted average rate as of March 31, 2024.

(2) Collateralized by auto loans. See Note 6 for additional information.

Citizens Financial Group, Inc. | 60

At March 31, 2024, the Company’s long-term borrowed funds include principal balances of $13.9 billion, unamortized debt issuance costs and discounts of $75 million, and hedging basis adjustments of ($19) million. At December 31, 2023, the Company’s long-term borrowed funds include principal balances of $13.6 billion, unamortized debt issuance costs and discounts of $74 million, and hedging basis adjustments of ($17) million. See Note 8 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 sufficient to satisfy the collateral maintenance level established by the FHLB. The utilized FHLB borrowing capacity, primarily for advances and letters of credit, was $6.0 billion and $9.2 billion at March 31, 2024 and December 31, 2023, respectively. The Company’s available FHLB borrowing capacity was $18.7 billion and $15.9 billion at March 31, 2024 and December 31, 2023, 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 March 31, 2024, the Company’s unused secured borrowing capacity was approximately $70.6 billion, which includes unencumbered securities, FHLB borrowing capacity, and FRB discount window capacity.

The following table presents a summary of maturities for the Company’s long-term borrowed funds at March 31, 2024:


(dollars in millions)	Parent Company	CBNA and Other Subsidiaries	Consolidated
Year
2024	$107	$—	$107
2025	469	4,193	4,662
2026	499	2,472	2,971
2027	—	9	9
2028	—	2,218	2,218
2029 and thereafter	3,516	321	3,837
Total	$4,591	$9,213	$13,804

NOTE 8 - DERIVATIVES

In the normal course of business, Citizens enters into derivative transactions to meet the financing and hedging needs of its customers and 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 2023 Form 10-K.

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


	March 31, 2024			December 31, 2023
(dollars in millions)	Notional Amount	Derivative Assets	Derivative Liabilities	Notional Amount	Derivative Assets	Derivative Liabilities
Derivatives designated as hedging instruments:
Interest rate contracts	$82,579	$259	$43	$86,895	$173	$44
Derivatives not designated as hedging instruments:
Interest rate contracts	193,442	222	1,273	185,993	291	1,105
Foreign exchange contracts	30,398	389	290	32,528	434	378
Commodities contracts	1,062	711	665	1,251	685	640
TBA contracts	2,501	2	5	2,337	3	16
Other contracts	729	8	—	549	7	—
Total derivatives not designated as hedging instruments	228,132	1,332	2,233	222,658	1,420	2,139
Total gross derivatives	310,711	1,591	2,276	309,553	1,593	2,183
Less: Gross amounts offset in the Consolidated Balance Sheets(1)		(480)	(480)		(471)	(471)
Less: Cash collateral applied(1)		(642)	(91)		(682)	(150)
Total net derivatives presented in the Consolidated Balance Sheets		$469	$1,705		$440	$1,562

(1) 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 facilitation 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. All hedging relationships are formally documented at inception, as well as risk management objectives and strategies for undertaking various accounting hedges. In addition, the effectiveness of hedge relationships is monitored during the duration of the hedge period. The methods utilized to assess hedge effectiveness vary based on the hedge relationship and each relationship is monitored to ensure that management’s initial intent continues to be satisfied. Hedge accounting treatment is discontinued when the derivative is terminated or when it is determined that a derivative is not expected to be, or has ceased to be, effective as a hedge. Changes in the fair value of a derivative are reflected in earnings after termination of the hedge relationship.

Fair Value Hedges

In a fair value hedge, changes in the fair value of both the derivative instrument and the hedged asset or liability attributable to the risk being hedged are recognized in the same income statement line item in the Consolidated Statements of Operations when the changes in fair value occur. During 2023, the Company entered into fair value hedges to manage interest rate risk within the AFS securities portfolio.

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The following table presents the effect of fair value hedges on the Consolidated Statements of Operations and the respective line items affected for each hedged item:


	Location and Amount of Gains (Losses) Recognized
	Interest Income	Interest Expense
(dollars in millions)	Investment Securities	Long-Term Borrowed Funds
Three Months Ended March 31, 2024
Gains (losses) on fair value hedges recognized on:
Hedged items	($135)	$3
Derivatives	139	(3)
Amounts related to interest settlements on derivatives	25	(4)
Total income (expense) recognized on fair value hedges	$29	($4)
Three Months Ended March 31, 2023
Gains (losses) on fair value hedges recognized on:
Hedged items	$—	($8)
Derivatives	—	8
Amounts related to interest settlements on derivatives	—	(5)
Total income (expense) recognized on fair value hedges	$—	($5)

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


(dollars in millions)	March 31, 2024		December 31, 2023
	Debt securities available for sale(1)	Long-term borrowed funds		Debt securities available for sale(1)	Long-term borrowed funds
Carrying amount of hedged assets	$9,125	$—		$7,253	$—
Carrying amount of hedged liabilities	—	480		—	483
Cumulative amount of fair value hedging adjustments included in the carrying amount of the hedged items	(74)	(19)		60	(17)

(1) Includes the amortized cost basis of closed portfolios used to designate hedging relationships under the portfolio layer method. The hedged item is a layer of the closed portfolio which is expected to be remaining at the end of the hedging relationship. As of March 31, 2024 and December 31, 2023, the amortized cost basis of the closed portfolios used in these hedging relationships was $6.8 billion and $5.9 billion, respectively, including associated cumulative basis adjustments of $(58) million and $39 million, respectively. The amount of the designated hedging instruments was $4.8 billion and $4.0 billion at March 31, 2024 and December 31, 2023, respectively.

Cash Flow Hedges

In a cash flow hedge the entire change in the fair value of the interest rate swap included in the assessment of hedge effectiveness is initially recorded in OCI and is subsequently reclassified from AOCI into earnings in the period during which the hedged item affects earnings.

Citizens has entered into interest rate swap agreements designed to hedge a portion of the Company’s floating-rate assets and liabilities. All of these swaps are deemed highly effective cash flow hedges. The Company has also entered into certain interest rate option agreements that utilize interest rate floors and caps, or some combination thereof, providing the ability to hedge the variability in cash flows within different interest rate bands. Option premiums paid and received are excluded from the assessment of hedge effectiveness and are amortized over the life of the instruments.

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 March 31,
(dollars in millions)	2024	2023
Amount of pre-tax net gains (losses) recognized in OCI	($550)	$233
Amount of pre-tax net gains (losses) reclassified from AOCI into interest income	(203)	(127)
Amount of pre-tax net gains (losses) reclassified from AOCI into interest expense	—	—

Citizens Financial Group, Inc. | 63

Using the interest rate curve at March 31, 2024 with respect to cash flow hedge strategies, the Company estimates that approximately $938 million in pre-tax net losses will be reclassified from AOCI to net interest income over the next 12 months, including $456 million related to terminated swaps. 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 March 31, 2024.

Derivatives Not Designated As Hedging Instruments

The Company offers derivatives to customers in connection with their risk management needs consisting primarily of interest rate, foreign exchange and commodity contracts. Market risk exposure from customer transactions is primarily managed by entering into a variety of hedging transactions with third-party dealers. Gains and losses on customer-related derivatives are reported in foreign exchange and derivatives products in the Consolidated Statements of Operations.

Residential mortgage loans that will be sold in the secondary market and the related loan commitments, which are considered derivatives, are accounted for at fair value. Forward contracts to sell mortgage-backed securities are utilized to hedge the fair value of the loans and related commitments. Gains and losses on the loans and related commitments, and the derivatives used to economically hedge them, are reported in mortgage banking fees in the Consolidated Statements of Operations.

Residential MSRs are accounted for at fair value. Derivatives utilized to hedge the fair value of residential MSRs include interest rate futures, swaps, options, and forward contracts to purchase mortgage-backed securities. Gains and losses on residential MSRs and the related derivatives are reported in mortgage banking fees in the Consolidated Statements of Operations.

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


	Amounts Recognized in Noninterest Income for the
	Three Months Ended March 31,		Affected Line Item in the Consolidated Statements of Operations
(dollars in millions)	2024	2023
Economic hedge type:
Customer interest rate contracts	($494)	$34		Foreign exchange and derivative products
Derivatives hedging interest rate risk	503	(19)		Foreign exchange and derivative products
Customer foreign exchange contracts	(110)	(4)		Foreign exchange and derivative products
Derivatives hedging foreign exchange risk	145	(2)		Foreign exchange and derivative products
Customer commodity contracts	35	(475)		Foreign exchange and derivative products
Derivatives hedging commodity price risk	(32)	486		Foreign exchange and derivative products
Residential loan commitments	(2)	2		Mortgage banking fees
Derivatives hedging residential loan commitments and mortgage loans held for sale, at fair value	3	(11)		Mortgage banking fees
Derivative contracts used to hedge residential MSRs	(38)	16		Mortgage banking fees
Total	$10	$27

Citizens Financial Group, Inc. | 64

NOTE 9 - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table presents the changes in the balances, net of income taxes, of each component of AOCI:


	As of and for the Three Months Ended March 31,
(dollars in millions)	Net Unrealized Gains (Losses) on Derivatives	Net Unrealized Gains (Losses) on Debt Securities	Employee Benefit Plans	Total AOCI
Balance at January 1, 2023	($1,416)	($2,771)	($373)	($4,560)
Other comprehensive income (loss) before reclassifications	173	327	—	500
Amounts reclassified to the Consolidated Statements of Operations	94	20	3	117
Net other comprehensive income (loss)	267	347	3	617
Balance at March 31, 2023	($1,149)	($2,424)	($370)	($3,943)
Balance at January 1, 2024	($1,087)	($2,338)	($333)	($3,758)
Other comprehensive income (loss) before reclassifications	(405)	(173)	4	(574)
Amounts reclassified to the Consolidated Statements of Operations	149	14	5	168
Net other comprehensive income (loss)	(256)	(159)	9	(406)
Balance at March 31, 2024	($1,343)	($2,497)	($324)	($4,164)
Primary location in the Consolidated Statements of Operations of amounts reclassified from AOCI	Net interest income	Securities gains, net and Net interest income	Other operating expense

NOTE 10 - STOCKHOLDERS’ EQUITY

Preferred Stock

The following table summarizes the Company’s preferred stock:


			March 31, 2024			December 31, 2023
(dollars in millions, except per 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 2023 Form 10-K.

Citizens Financial Group, Inc. | 65

Dividends

The following table summarizes the Company’s dividend activity for the three months ended March 31, 2024 and 2023.


	Three Months Ended March 31, 2024			Three Months Ended March 31, 2023
(dollars in millions, except per share data)	Dividends Declared per Share	Dividends Declared	Dividends Paid	Dividends Declared per Share	Dividends Declared	Dividends Paid
Common stock	$0.42	$197	$197	$0.42	$205	$205
Preferred stock
Series B	$21.72	$7	$7	$—	$—	$9
Series C	15.94	5	5	15.94	5	5
Series D	15.88	5	5	15.88	5	5
Series E	12.50	5	5	12.50	5	5
Series F	14.13	5	6	14.13	5	6
Series G	10.00	3	3	10.00	3	3
Total preferred stock		$30	$31		$23	$33

Treasury Stock

During the three months ended March 31, 2024 and 2023, the Company repurchased $300 million, or 9,244,939 shares, and repurchased $400 million, or 10,089,291 shares, respectively, of its outstanding common stock, which are held in treasury stock.

NOTE 11 - 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 2023 Form 10-K.


(dollars in millions)	March 31, 2024	December 31, 2023
Commitments to extend credit	$94,436	$94,201
Letters of credit	2,055	1,977
Loans sold with recourse	99	96
Marketing rights	17	18
Risk participation agreements	1	3
Total	$96,608	$96,295

Commitments to Extend Credit

Commitments to extend credit are agreements to lend to customers in accordance with conditions contractually agreed upon in advance. These commitments generally 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. Letters of credit are generally collateralized by cash, accounts receivable, inventory or investment securities. Credit risk associated with letters of credit is considered in determining the appropriate amount of allowances for unfunded commitments. Standby letters of credit and commercial letters of credit are issued for terms of up to two years and one year, respectively.

Citizens Financial Group, Inc. | 66

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 March 31, 2024, the remaining terms on these RPAs ranged from less than one year to ten 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 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 12 - 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. Fair value is also 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. Fair value measurement guidance is also applied 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.

Citizens Financial Group, Inc. | 67

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:


	March 31, 2024			December 31, 2023
(dollars 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	$437	$427	$10	$614	$593	$21
Commercial and industrial, and commercial real estate loans held for sale, at fair value	68	74	(6)	62	69	(7)

For more information on the election of the fair value option for these assets see Note 20 in the Company’s 2023 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 fair value on a recurring basis, see Note 20 in the Company’s 2023 Form 10-K.

Short-term investments

Short-term investments include corporate bonds and U.S. Treasury securities managed by the Company’s trading desks. U.S. Treasury securities are classified as Level 1 in the fair value hierarchy as quoted prices in active markets are readily available. The fair value of corporate bonds is estimated using a combination of direct market quotes for a particular bond, or a comparable bond if recent market data is not available, and a discounted cash flow model that incorporates certain credit attributes of the bond issuer. External pricing services are utilized to corroborate the fair value of corporate bonds, which may result in an adjustment to the underlying bond’s valuation if price differences exceed certain thresholds. Corporate bonds are classified as Level 2 in the fair value hierarchy given the observable market inputs utilized to value these instruments. Short-term investments are included in interest-bearing deposits in banks in the Consolidated Balance Sheets.

Short-term borrowed funds

Short-term borrowed funds include short positions in corporate bonds held by the Company’s trading desks and are classified as Level 2 in the fair value hierarchy. See “Short-term investments” above for more information regarding the valuation technique utilized to value corporate bonds.

Citizens Financial Group, Inc. | 68

The following table presents assets and liabilities measured at fair value, including gross derivative assets and liabilities, on a recurring basis at March 31, 2024:


(dollars in millions)	Total	Level 1	Level 2	Level 3
Debt securities available for sale:
Mortgage-backed securities	$26,122	$—	$26,122	$—

Collateralized loan obligations	294	—	294	—
State and political subdivisions	1	—	1	—
U.S. Treasury and other	4,770	4,770	—	—
Total debt securities available for sale	31,187	4,770	26,417	—
Loans held for sale, at fair value:
Residential loans held for sale	437	—	437	—
Commercial loans held for sale	68	—	68	—
Total loans held for sale, at fair value	505	—	505	—
Mortgage servicing rights	1,564	—	—	1,564
Derivative assets:
Interest rate contracts	481	—	481	—
Foreign exchange contracts	389	—	389	—
Commodities contracts	711	—	711	—
TBA contracts	2	—	2	—
Other contracts	8	—	—	8
Total derivative assets	1,591	—	1,583	8
Equity securities, at fair value(1)	118	118	—	—
Short-term investments	21	10	11	—
Total assets	$34,986	$4,898	$28,516	$1,572
Derivative liabilities:
Interest rate contracts	$1,316	$—	$1,316	$—
Foreign exchange contracts	290	—	290	—
Commodities contracts	665	—	665	—
TBA contracts	5	—	5	—
Other contracts	—	—	—	—
Total derivative liabilities	2,276	—	2,276	—
Short-term borrowed funds	9	—	9	—
Total liabilities	$2,285	$—	$2,285	$—

(1) Excludes investments of $60 million included in other assets in the Consolidated Balance Sheets that are measured at fair value using the net asset value per share (or its equivalent) practical expedient. These investments include capital contributions to private investment funds and have unfunded capital commitments of $25 million at March 31, 2024, 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.

Citizens Financial Group, Inc. | 69

The following table presents assets and liabilities measured at fair value, including gross derivative assets and liabilities, on a recurring basis at December 31, 2023:


(dollars in millions)	Total	Level 1	Level 2	Level 3
Debt securities available for sale:
Mortgage-backed securities	$24,732	$—	$24,732	$—
Collateralized loan obligations	664	—	664	—
State and political subdivisions	1	—	1	—
U.S. Treasury and other	4,380	4,380	—	—
Total debt securities available for sale	29,777	4,380	25,397	—
Loans held for sale, at fair value:
Residential loans held for sale	614	—	614	—
Commercial loans held for sale	62	—	62	—
Total loans held for sale, at fair value	676	—	676	—
Mortgage servicing rights	1,552	—	—	1,552
Derivative assets:
Interest rate contracts	464	—	464	—
Foreign exchange contracts	434	—	434	—
Commodities contracts	685	—	685	—
TBA contracts	3	—	3	—
Other contracts	7	—	—	7
Total derivative assets	1,593	—	1,586	7
Equity securities, at fair value(1)	115	115	—	—

Total assets	$33,713	$4,495	$27,659	$1,559
Derivative liabilities:
Interest rate contracts	$1,149	$—	$1,149	$—
Foreign exchange contracts	378	—	378	—
Commodities contracts	640	—	640	—
TBA contracts	16	—	16	—
Other contracts	—	—	—	—
Total derivative liabilities	2,183	—	2,183	—

Total liabilities	$2,183	$—	$2,183	$—

(1) Excludes investments of $58 million included in other assets in the Consolidated Balance Sheets that are measured at fair value using the net asset value per share (or its equivalent) practical expedient. These investments include capital contributions to private investment funds and have unfunded capital commitments of $28 million at December 31, 2023, 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.

Citizens Financial Group, Inc. | 70

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


	Three Months Ended March 31, 2024
(dollars in millions)	Mortgage Servicing Rights	Other Derivative Contracts
Beginning balance	$1,552	$7
Issuances	18	13

Settlements(1)	(46)	(10)
Changes in fair value during the period recognized in earnings(2)	40	(2)
Ending balance	$1,564	$8


	Three Months Ended March 31, 2023
(dollars in millions)	Mortgage Servicing Rights	Other Derivative Contracts
Beginning balance	$1,530	$1



Issuances	21	15

Settlements(1)	(41)	(5)
Changes in fair value during the period recognized in earnings(2)	(14)	2
Ending balance	$1,496	$13

(1) For MSRs, 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. For other derivative contracts, represents the closeout of interest rate lock commitments.

(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 following table presents quantitative information about significant unobservable inputs utilized to measure the fair value of Level 3 assets and liabilities.


			As of March 31, 2024	As of December 31, 2023
Financial Instrument	Valuation Technique	Unobservable Input	Range (Weighted Average)	Range (Weighted Average)
Mortgage servicing rights	Discounted Cash Flow	Constant prepayment rate	5.76-17.58% CPR (6.96% CPR)	6.70-14.55% CPR (7.23% CPR)
Option adjusted spread	398-1,058 bps (632 bps)		398-1,058 bps (630 bps)
Other derivative contracts	Internal Model	Pull through rate	24.12-100.00% (76.07%)	24.90-99.70% (80.34%)
MSR value	7.20-153.60 bps (100.58 bps)		(8.90)-141.24 bps (88.04 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 fair value on a nonrecurring basis, see Note 20 in the Company’s 2023 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 March 31,
(dollars in millions)	2024	2023
Collateral-dependent loans	($56)	($4)

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


	March 31, 2024				December 31, 2023
(dollars in millions)	Total	Level 1	Level 2	Level 3	Total	Level 1	Level 2	Level 3
Collateral-dependent loans	$881	$—	$881	$—	$789	$—	$789	$—

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Fair Value of Financial Instruments

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


	March 31, 2024
	Total		Level 1		Level 2		Level 3
(dollars 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	$9,054	$8,132	$—	$—	$8,587	$7,682	$467	$450
Other loans held for sale	50	50	—	—	—	—	50	50
Net loans and leases	141,102	137,760	—	—	881	881	140,221	136,879
Other assets	791	791	—	—	768	768	23	23
Financial liabilities:
Deposits	176,428	176,162	—	—	176,428	176,162	—	—
Short-term borrowed funds	9	9	—	—	9	9	—	—
Long-term borrowed funds	13,804	13,421	—	—	13,804	13,421	—	—


	December 31, 2023
	Total		Level 1		Level 2		Level 3
(dollars 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	$9,184	$8,350	$—	$—	$8,696	$7,887	$488	$463
Other loans held for sale	103	103	—	—	—	—	103	103
Net loans and leases	143,861	140,504	—	—	789	789	143,072	139,715
Other assets	869	869	—	—	851	851	18	18
Financial liabilities:
Deposits	177,342	177,096	—	—	177,342	177,096	—	—
Short-term borrowed funds	505	505	—	—	505	505	—	—
Long-term borrowed funds	13,467	13,012	—	—	13,467	13,012	—	—

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NOTE 13 - 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 March 31, 2024
(dollars in millions)	Consumer Banking	Commercial Banking	Non-Core	Other	Consolidated
Service charges and fees	$63	$33	$—	$—	$96
Card fees	66	15	—	3	84
Capital markets fees	—	116	—	—	116
Trust and investment services fees	68	—	—	—	68
Other banking fees	1	2	—	—	3
Total revenue from contracts with customers	$198	$166	$—	$3	$367
Total revenue from other sources(1)	60	61	—	29	150
Total noninterest income	$258	$227	$—	$32	$517


	Three Months Ended March 31, 2023
(dollars in millions)	Consumer Banking	Commercial Banking	Non-Core	Other	Consolidated
Service charges and fees	$67	$32	$—	$—	$99
Card fees	59	12	—	—	71
Capital markets fees	—	71	—	—	71
Trust and investment services fees	63	—	—	—	63
Other banking fees	1	4	—	—	5
Total revenue from contracts with customers	$190	$119	$—	$—	$309
Total revenue from other sources(1)	66	82	—	28	176
Total noninterest income	$256	$201	$—	$28	$485

(1) Includes bank-owned life insurance income of $24 million and $23 million for the three months ended March 31, 2024 and 2023, respectively.

The Company recognized trailing commissions of $4 million for the three months ended March 31, 2024 and 2023, related to ongoing commissions from previous investment sales.

NOTE 14 - OTHER OPERATING EXPENSE

The following table presents the details of other operating expense:


	Three Months Ended March 31,
(dollars in millions)	2024	2023
Marketing	$35	$38
Deposit insurance	76	36
Other	92	95
Other operating expense	$203	$169

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NOTE 15 - EARNINGS PER SHARE


	Three Months Ended March 31,
(dollars in millions, except per share data)		2024	2023
Numerator (basic and diluted):
Net income		$334	$511
Less: Preferred stock dividends		30	23
Net income available to common stockholders		$304	$488
Denominator:
Weighted-average common shares outstanding - basic		461,358,681	485,444,313
Dilutive common shares: share-based awards		2,439,283	2,267,833
Weighted-average common shares outstanding - diluted		463,797,964	487,712,146
Earnings per common share:
Basic		$0.66	$1.00
Diluted(1)		0.65	1.00

(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 1,305,850 and 1,278,383 for the three months ended March 31, 2024 and 2023, respectively.

NOTE 16 - BUSINESS OPERATING SEGMENTS

Citizens is managed by its Chief Executive Officer on a segment basis. The Company’s three business operating segments are Consumer Banking, Commercial Banking, and Non-Core. The business operating segments are determined based on the products and services provided, or the type of customer served. Each business operating segment has a segment head that reports directly to the Chief Executive Officer, who has final authority over resource allocation decisions and performance assessment. The business operating segments reflect this management structure and the manner in which financial information is currently evaluated by the Chief Executive Officer.

Developing and applying methodologies used to allocate items among the business operating segments is a dynamic process. Accordingly, financial results may be revised periodically as management systems are enhanced, methods of evaluating performance or product lines are updated, or organizational structure changes occur.

See Note 1 for a description of segment changes made during the third quarter of 2023. For more information on the Company’s business operating segments, as well as Other non-segment operations, see Note 26 in the Company’s 2023 Form 10-K.


	Three Months Ended March 31, 2024
(dollars in millions)	Consumer Banking	Commercial Banking	Non-Core	Other	Consolidated
Net interest income	$1,093	$514	($37)	($128)	$1,442
Noninterest income	258	227	—	32	517
Total revenue	1,351	741	(37)	(96)	1,959
Noninterest expense	903	317	25	113	1,358
Profit (loss) before provision (benefit) for credit losses	448	424	(62)	(209)	601
Provision (benefit) for credit losses	81	81	19	(10)	171
Income (loss) before income tax expense (benefit)	367	343	(81)	(199)	430
Income tax expense (benefit)	95	84	(21)	(62)	96
Net income (loss)	$272	$259	($60)	($137)	$334
Total average assets	$73,833	$70,100	$10,554	$66,283	$220,770

Citizens Financial Group, Inc. | 74


	Three Months Ended March 31, 2023
(dollars in millions)	Consumer Banking	Commercial Banking	Non-Core	Other	Consolidated
Net interest income	$1,011	$597	($15)	$50	$1,643
Noninterest income	256	201	—	28	485
Total revenue	1,267	798	(15)	78	2,128
Noninterest expense	857	331	32	76	1,296
Profit (loss) before provision (benefit) for credit losses	410	467	(47)	2	832
Provision (benefit) for credit losses	63	47	21	37	168
Income (loss) before income tax expense (benefit)	347	420	(68)	(35)	664
Income tax expense (benefit)	90	101	(18)	(20)	153
Net income (loss)	$257	$319	($50)	($15)	$511
Total average assets	$71,872	$78,891	$15,686	$56,262	$222,711

Previous: Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS · Next: Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK