Market Overview

Citizens Financial Group, Inc. Reports Third Quarter Net Income of $348 Million and Diluted EPS of $0.68

Share:

Third quarter 2017 net income up 17% and diluted EPS up 21% versus
year-ago quarter; up 25% and 31%, respectively, on an Adjusted basis*

ROTCE* of 10.1% with 6% positive operating leverage year-over-year,
7% on an Adjusted basis*

Net interest margin up 8 basis points from second quarter 2017 to
3.05%, efficiency ratio of 59%*

Citizens Financial Group, Inc. (NYSE:CFG) today reported
third quarter net income of $348 million, up 17% from $297 million in
third quarter 2016 with earnings per diluted common share of $0.68, up
21% from $0.56 per diluted common share in third quarter 2016. Third
quarter 2017 net income increased $30 million, or 9%, from second
quarter 2017 and earnings per diluted common share increased $0.05, or
8%, from $0.63. On an Adjusted basis,* third quarter 2017 net income
increased 25% and earnings per diluted common share increased 31%
compared to third quarter 2016. Adjusted results exclude the impact of a
third quarter 2016 net $19 million after-tax benefit from the sale of a
Troubled Debt Restructuring portfolio ("TDR Transaction"), partially
offset by other notable items largely associated with our efficiency and
balance sheet optimization initiatives.

Return on Average Tangible Common Equity ("ROTCE") of 10.1% in third
quarter 2017 compares with 9.6% in second quarter 2017 and 8.6% in third
quarter 2016, or 8.0% on an Adjusted basis.*

"We are pleased to report another quarter of strong results highlighted
by ROTCE reaching 10%, the medium-term target we set during our IPO,"
said Chairman and Chief Executive Officer Bruce Van Saun. "Our
leadership team has demonstrated a consistent ability to execute well
through varying market conditions, delivering improved shareholder
returns as we continue to run the bank better. Our commitment to
continuous improvement and investing for growth has regularly delivered
positive operating leverage. We will continue to focus on being a
trusted advisor to our customers and delivering a differentiated
customer experience, the key to building and sustaining long-term
franchise value."

Citizens also announced that its board of directors declared a fourth
quarter cash dividend of $0.18 per common share. The dividend is payable
on November 15, 2017 to shareholders of record at the close of business
on November 1, 2017.

*Please see important information on Key Performance Metrics and
Non-GAAP Financial Measures at the end of this release for an
explanation of our use of these metrics and non-GAAP financial measures
and their reconciliation to GAAP financial measures. "Adjusted" results
exclude restructuring charges, special items and/or notable items;
Underlying results, as applicable, exclude a 1Q17 $23 million benefit
related to the settlement of certain state tax matters and reclassify
2Q17 results for the pre-tax impact of $26 million of lease asset
impairments to reflect their credit-related impact. Where there is a
reference to "Adjusted", "Underlying" or "Adjusted/Underlying" results
in a paragraph, all measures that follow these references are on the
same basis when applicable.

Third Quarter 2017 vs. Second Quarter 2017

Key Highlights

  • ROTCE* reached 10.1%, and net interest margin was up eight basis
    points to 3.05%. Third quarter highlights include a 7% increase in net
    income to common stockholders, as revenue growth of 3% was led by
    strength in net interest income, with continued loan growth and an
    eight basis point improvement in net interest margin. Provision
    expense remained relatively stable.
  • Results also reflect continued expense discipline, with positive
    operating leverage of 4.1% and a 2.5% improvement in the efficiency
    ratio to 59.4%. On an Underlying basis, operating leverage was 1.5%
    and the efficiency ratio improved 1%.*
  • Tangible book value per common share of $27.05 increased by 2%. Fully
    diluted average common shares outstanding decreased by 5.3 million
    shares.
  • Underlying results* reflect the reclassification in second quarter
    2017 of a $26 million pre-tax impact related to impairments on
    aircraft lease assets from income and expense line items to
    credit-related costs. Adding this to provision expense of $70 million
    resulted in Underlying second quarter 2017 credit-related costs of $96
    million. The lease impairments, which largely related to a non-core
    runoff portfolio, reduced second quarter 2017 noninterest income by
    $11 million and increased noninterest expense by $15 million.

Results

  • Total revenue of $1.4 billion increased 3%, with a 4% increase in net
    interest income and a 3% increase in noninterest income from second
    quarter levels that included the impact of finance lease impairments
    recorded in other income.
    • Net interest income of $1.1 billion increased $36 million,
      reflecting the benefit of loan growth, day count and an eight
      basis point improvement in net interest margin to 3.05%.
    • Net interest margin increased eight basis points to 3.05%, driven
      by improved yields on interest-earning assets, including the
      benefit of higher short-term interest rates, partially offset by
      higher funding costs. The rise in net interest margin includes a
      two basis point benefit tied to higher-than-expected commercial
      loan interest recoveries.
    • Noninterest income of $381 million increased $11 million given the
      impact of the second quarter finance lease impairments.
      Noninterest income before the impact of the finance lease
      impairments was stable, reflecting another record quarter in
      capital markets fees and an increase in service charges and fees
      and other income, offset by modest declines across other fee
      categories.
  • Noninterest expense of $858 million decreased $6 million from second
    quarter levels that included $15 million of operating lease
    impairments recorded in other expense. Before the impact of the lease
    impairments, noninterest expense increased $9 million, or 1%, largely
    reflecting an increase in salaries and employee benefits tied to
    higher revenue-based incentives and an increase in outside services,
    which included costs associated with our strategic initiatives, and
    expense associated with legacy home equity operational items.
  • Provision for credit losses of $72 million remained relatively stable
    and included a reserve build of $7 million, driven by an increase tied
    to reserves associated with estimated hurricane exposure. Underlying*
    total credit-related costs decreased $24 million from second quarter,
    which included the $26 million impact of lease residual impairments.
  • Efficiency ratio improved to 59.4% compared with 61.9%, or 60.4%
    before the impact of second quarter lease impairments; ROTCE of 10.1%
    improved from 9.6% in second quarter 2017.*

Balance Sheet

  • Average interest-earning assets remained relatively stable as strength
    in retail loans was offset by a reduction in the investment portfolio
    and commercial loans. Average loans and loans held for sale increased
    0.4% with strength in retail and a slight decline in commercial given
    the impact of a second quarter sale of lower-return commercial loans
    and leases. Excluding the impact of the sale, average loans and loans
    held for sale increased 0.8%. Period-end loans and loans held for sale
    increased 1.5%.
  • Average deposits increased $2.2 billion, or 2%, driven by growth in
    term, money market and demand deposits.
  • Nonperforming loans and leases ("NPLs") to total loans and leases
    ratio of 0.85% improved from 0.94%, reflecting a reduction in
    commercial NPLs. Allowance coverage of NPLs increased to 131% from
    119%.
  • Net charge-offs of 24 basis points improved from 28 basis points,
    reflecting strong results in commercial and stable results in retail.
  • Robust capital strength with a common equity tier 1 ("CET1")
    risk-based capital ratio of 11.1%.
  • Repurchased 6.5 million shares of common stock in the quarter, and
    including common dividends, returned $315 million in capital to
    shareholders.

Third Quarter 2017 vs. Third Quarter 2016

Key Highlights

  • Third quarter results reflect an 18% increase in net income available
    to common stockholders, led by revenue growth of 5% with a 12%
    increase in net interest income given 5.4% growth in average loans and
    loans held for sale and a 21 basis point increase in net interest
    margin. Prior year results reflect a net $19 million after-tax benefit
    tied to the impact of the third quarter 2016 TDR Transaction gain and
    other notable items. On an Adjusted basis,* which excludes the impact
    of the TDR Transaction gain and other third quarter 2016 notable
    items, net income available to common stockholders increased 26%.
  • Continued strong focus on top-line growth and expense management
    helped drive positive operating leverage of 6%, a 3.5% improvement in
    the efficiency ratio and a 1.6% improvement in ROTCE.* On an Adjusted
    basis,* operating leverage was 7% with efficiency ratio improvement of
    3.9% and ROTCE improvement of 2.1%.
  • Fully diluted average common shares outstanding decreased by 19.0
    million shares.

Results

  • Total revenue of $1.4 billion increased $63 million, or 5%, reflecting
    strong net interest income growth. On an Adjusted basis,* total
    revenue increased $130 million, or 10%, driven by strength in net
    interest income and noninterest income.
    • Net interest income increased 12% given 5.4% growth in average
      loans and loans held for sale and a sizable improvement in net
      interest margin.
    • Net interest margin increased 21 basis points to 3.05%, which
      reflects improved loan yields, driven by balance sheet
      optimization initiatives and higher rates, and a two basis point
      benefit tied to higher-than-expected commercial loan interest
      recoveries, partially offset by an increase in funding costs.
    • Noninterest income decreased 12% from higher third quarter 2016
      levels that included a net $67 million TDR Transaction gain. On an
      Adjusted basis,* which excludes the TDR Transaction gain and other
      third quarter 2016 notable items, noninterest income increased 4%
      as strength in capital markets fees, card fees and letter of
      credit and loan fees was partially offset by lower mortgage
      banking fees, foreign exchange and interest rate products fees and
      service charges and fees.
  • Noninterest expense decreased 1%, from a higher third quarter 2016
    level that included $36 million of notable items. On an Adjusted
    basis,* which excludes the notable items, noninterest expense
    increased 3%, largely reflecting higher salaries and employee benefits
    expense and outside services expense, driven by the impact of
    strategic growth initiatives.
  • Provision for credit losses decreased $14 million, or 16%, reflecting
    strong overall portfolio credit quality and lower net charge-offs.
  • ROTCE* of 10.1% improved 1.6%, from 8.6%; 8.0% on an Adjusted basis.*

Balance Sheet

  • Average interest-earning assets increased $5.8 billion, or 4%, driven
    by growth in loans and loans held for sale with a 6% increase in
    commercial and 5% increase in retail.
  • Average deposits increased $6.3 billion, or 6%, on strength in term,
    checking with interest, savings and demand deposits.
  • NPLs to total loans and leases ratio of 0.85% improved from 1.05%,
    reflecting a decrease in retail driven by real estate secured
    portfolios, as well as a reduction in commercial, largely tied to
    commodities-related credits. Allowance coverage of NPLs of 131%
    improved from 112%.
  • Net charge-offs of 24 basis points of loans improved from 32 basis
    points in third quarter 2016, due to a decrease in core commercial, a
    modest increase in core retail and improvement in the non-core
    portfolio.

Update on Plan Execution

Consumer Banking

  • Performance paced by solid loan growth with continued traction in
    mortgage, education and unsecured retail, along with improved loan
    yields, reflecting improving mix and higher rates.
  • Wealth management business continues to build scale and add
    capabilities highlighted by the launch of SpeciFiSM, its
    new digital and investment advisory platform. Continued progress in
    migrating sales mix toward fee-based products, which represented 41%
    of investment sales in third quarter 2017 compared to 30% in third
    quarter 2016.
  • Repositioning mortgage business to refocus origination platform and
    drive enhanced conforming mortgage volume along with building out a
    direct-to-consumer product offering.

Commercial Banking

  • Strong year-over-year performance in fee income led by record results
    in Capital Markets with momentum in loan syndications, bond
    underwriting and M&A and advisory fees along with growth in card fees.
  • Continued balance sheet and customer growth, with 5% growth in average
    loans and loans held for sale from third quarter 2016, reflecting
    strength in Middle Market, Commercial Real Estate, Mid-corporate and
    Industry Verticals, Corporate Finance and Franchise Finance, as well
    as the benefit of geographic expansion initiatives.

Efficiency and balance sheet optimization
strategies

  • TOP IV Program, which includes both efficiency and revenue
    initiatives, is underway and on track to meet end of 2018 run-rate
    pre-tax benefit of $95-$110 million.
  • Initiatives to shift loan portfolio mix to higher-return categories
    continue to deliver benefits, estimated at approximately 10 basis
    points of net interest margin improvement year over year.
               
 
Earnings highlights 3Q17 change from
($s in millions, except per share data)   3Q17     2Q17     3Q16 2Q17 3Q16
Earnings $ % $ %
Net interest income $ 1,062 $ 1,026 $ 945 $ 36

4

%

$ 117

12

%

Noninterest income 381 370 435 11 3 (54 ) (12 )
Total revenue 1,443 1,396 1,380 47 3 63 5
Noninterest expense 858 864 867 (6 ) (1 ) (9 ) (1 )
Pre-provision profit 585 532 513 53 10 72 14
Provision for credit losses   72     70     86 2   3 (14 ) (16 )
Net income 348 318 297 30 9 51 17
Preferred dividends 7 7 7 NM
Net income available to common stockholders   $ 341     $ 318     $ 290 $ 23   7 $ 51   18
Average common shares outstanding
Basic (in millions) 500.9 506.4 519.5 (5.5 )

(1

)%

(18.6 )

(4

)%

Diluted (in millions) 502.2 507.4 521.1 (5.3 ) (1 ) (19.0 ) (4 )
Diluted earnings per share   $ 0.68     $ 0.63     $ 0.56 $ 0.05  

8

%

$ 0.12  

21

%

Key performance metrics*
Net interest margin 3.05 % 2.97 % 2.84 % 8

bps

 

21

bps

 

Effective income tax rate 32.2 31.1 30.5 105 172
Efficiency ratio 59 62 63 (253 ) (347 )
Return on average common equity 6.9 6.5 5.8 39 105
Return on average tangible common equity 10.1 9.6 8.6 56 155
Return on average total assets 0.92 0.85 0.82 7 10
Return on average total tangible assets   0.96 %   0.89 %   0.86 % 7

bps

 

10

bps

 

Capital adequacy(1,2)
Common equity tier 1 capital ratio 11.1 % 11.2 % 11.3 %
Total capital ratio 13.8 14.0 14.2
Tier 1 leverage ratio   9.9 %   9.9 %   10.1 %
Asset quality(2)
Total nonperforming loans and leases as a % of total loans and leases 0.85 % 0.94 % 1.05 % (9

)bps

 

(20

)bps

 

Allowance for loan and lease losses as a % of loans and leases 1.11 1.12 1.18 (1 ) (7 )
Allowance for loan and lease losses as a % of nonperforming loans
and leases
131 119 112 1,237 1,932
Net charge-offs as a % of average loans and leases   0.24 %   0.28 %   0.32 % (4

)bps

 

(8

)bps

 

1) Current reporting-period regulatory capital ratios are preliminary.
Basel III ratios assume that certain definitions impacting qualifying
Basel III capital will phase in through 2019.
2) Capital adequacy
and asset-quality ratios calculated on a period-end basis, except net
charge-offs.

Discussion of Results:

Third quarter 2017 net income available to common stockholders of $341
million increased $23 million, or 7%, from second quarter 2017 and
diluted EPS of $0.68 increased $0.05, or 8%. Third quarter 2017 EPS
reflects a 5.3 million reduction in fully diluted average common shares
outstanding from second quarter 2017.

Second quarter 2017 results included a $26 million pre-tax impact
related to impairments on aircraft lease assets. Underlying results
reflect the reclassification of these items from income and expense line
items to credit-related costs. Adding this to provision expense of $70
million resulted in Underlying second quarter 2017 credit-related costs
of $96 million. The lease impairments, which largely relate to a
non-core runoff portfolio, reduced noninterest income by $11 million and
increased noninterest expense by $15 million.

Third quarter 2016 results included a $72 million pre-tax gain on the
TDR Transaction which was partially offset by $8 million of home equity
systems and operational items identified as part of a broader review in
conjunction with the transaction. Additionally, the company utilized
approximately $33 million of the gain to fund costs associated with
efficiency and balance sheet optimization initiatives. Additional
information related to the impact of the second quarter 2017 impairments
and the third quarter 2016 TDR Transaction and related costs is detailed
in the table below.

                 
Adjusted and Underlying results*
2Q17 3Q16 3Q17
Lease change from
impairment Notable Underlying* Adjusted*
($s in millions)   Reported impact Underlying* Reported items Adjusted* 2Q17   3Q16
 
Net interest income $ 1,026 $ — $ 1,026 $ 945 $ — $ 945 4

%

 

12

%

 

Noninterest income   370   11   381   435   (67 ) 368     4  
Total revenue 1,396 11 1,407 1,380 (67 ) 1,313 3 10
Noninterest expense   $ 864   $ (15 ) $ 849   $ 867   $ (36 ) $ 831   1   3  
Pre-provision profit $ 532 $ 26 $ 558 $ 513 $ (31 ) $ 482 5 21
Provision for credit losses $ 70 $ — $ 70 $ 86 $ — $ 86 3 (16 )

 

Lease impairment credit-related costs     26   26         NM   NM  
Total credit-related costs*   $ 70   $ 26   $ 96   $ 86   $ —   $ 86   (25 ) (16 )
Net income available to common stockholders $ 318 $ — $ 318 $ 290 $ (19 ) $ 271 7

%

 

26

%

 

 
Key performance metrics*                  
Diluted EPS $ 0.63 $ — $ 0.63 $ 0.56 $ (0.04 ) $ 0.52 8

%

 

31

%

 

ROTCE 9.6 % 9.6 % 8.6 % (56) bps 8.0 % 56

bps

 

211

bps

 

Efficiency ratio 62 % (158) bps 60 % 63 % 43 bps 63 % (95

)bps

 

(390

)bps

 

Operating leverage                           1.5

%

 

6.7

%

 

On an Underlying basis,* excluding the impact of the second quarter 2017
lease impairments, third quarter results reflect solid revenue growth,
and continued expense discipline, which drove 1.5% positive operating
leverage, a 95 basis point improvement in the efficiency ratio and
ROTCE* improvement to 10.1%.

On a reported basis, compared with third quarter 2016 net income
available to common stockholders increased $51 million, or 18%, and
diluted EPS increased $0.12, or 21%. Third quarter 2017 EPS reflects a
19.0 million reduction in fully diluted average common shares
outstanding from third quarter 2016. Third quarter 2016 results included
the impact of a net $19 million after-tax benefit, or $0.04 per diluted
common share, of notable items related to the gain on sale of the TDR
Transaction, partially offset by other notable items largely associated
with our efficiency and balance sheet optimization initiatives. These
notable items increased noninterest income by a net $67 million and
increased noninterest expense by $36 million.

Compared to third quarter 2016 Adjusted results,* which exclude the
impact of the TDR Transaction and other notable items, net income
available to common stockholders increased $70 million, or 26%, and
diluted EPS increased $0.16, or 31%. Results reflect revenue growth of
$130 million, or 10%, driven by 12% net interest income growth and 4%
noninterest income growth, which coupled with prudent expense management
drove 6.7% operating leverage, a 3.9% improvement in the efficiency
ratio and 2.1% improvement in ROTCE.*

               
 
Net interest income 3Q17 change from
($s in millions)   3Q17     2Q17     3Q16 2Q17 3Q16
$ % $   %
Interest income:
Interest and fees on loans and leases and loans held for sale $ 1,104 $ 1,046 $ 931 $ 58 6 % $ 173 19 %
Investment securities 155 154 146 1 1 9 6
Interest-bearing deposits in banks   5     5     2 3   150
Total interest income   $ 1,264     $ 1,205     $ 1,079 $ 59 5 % $ 185   17 %
Interest expense:
Deposits 123 102 71 21 21 % 52 73 %
Federal funds purchased and securities sold under agreements to
repurchase
1 1 1

 

 

100
Other short-term borrowed funds 7 7 10 (3 ) (30 )
Long-term borrowed funds   71     70     52 1 1 19   37
Total interest expense $ 202 $ 179 $ 134 $ 23 13 % $ 68   51 %
Net interest income   $ 1,062     $ 1,026     $ 945 $ 36 4 % $ 117   12 %
Net interest margin   3.05 % 2.97 % 2.84 % 8 bps 21

bps

 

 

Net interest income of $1.1 billion increased $36 million, or 4%, from
second quarter 2017, reflecting the benefit of loan growth, day count
and an eight basis point improvement in net interest margin to 3.05%.
The improvement in net interest margin reflects higher interest-earning
asset yields, tied to higher short-term interest rates and improving
loan mix toward higher-return categories, partially offset by higher
deposit and funding costs. Third quarter 2017 net interest margin
reflects a two basis point benefit tied to higher-than-expected
commercial loan interest recoveries.

Compared to third quarter 2016, net interest income increased $117
million, or 12%, reflecting 5.4% growth in average loans and loans held
for sale and a 21 basis point improvement in net interest margin. The
improvement in net interest margin reflects higher commercial and retail
loan yields given balance sheet optimization initiatives and higher
rates, partially offset by higher deposit and funding costs.

               
 
Noninterest Income 3Q17 change from
($s in millions)   3Q17   2Q17   3Q16 2Q17 3Q16
$   % $   %
Service charges and fees $ 131 $ 129 $ 134 $ 2 2 % $ (3 ) (2

)%

Card fees 58 59 52 (1 ) (2 ) 6 12
Capital markets fees 53 51 36 2 4 17 47
Trust and investment services fees 38 39 37 (1 ) (3 ) 1 3
Letter of credit and loan fees 30 31 28 (1 ) (3 ) 2 7
Foreign exchange and interest rate products 24 26 28 (2 ) (8 ) (4 )

(14

)

Mortgage banking fees 27 30 33 (3 ) (10 ) (6 ) (18 )
Securities gains, net 2 3 (1 ) (33 ) 2 100
Other income(1)   18   2     87 16   NM (69 ) (79 )
Noninterest income   $ 381   $ 370     $ 435 $ 11   3 % $ (54 ) (12

)%

Lease impairments/notable items*   $ —   $ (11 )   $ 67 $ 11   100 $ (67 ) (100 )
Adjusted/Underlying noninterest income*   $ 381

 

$ 381  

 

$ 368

 

$ —   % $ 13   4 %

1) Other income includes bank-owned life insurance and other income.

Noninterest income of $381 million increased $11 million from second
quarter 2017, which included an $11 million impact related to finance
lease impairments recorded in other income. Compared to Underlying
second quarter 2017 results,* noninterest income remained stable as
growth in capital markets fees, service charges and fees and other
income was offset by modest declines across other fee categories.
Service charges and fees increased $2 million, largely reflecting
seasonality. Card fees were relatively stable as growth in commercial
was more than offset by an increase in rewards cost in retail. Capital
markets fees increased $2 million to a record $53 million as strength in
bond underwriting and advisory fees, reflecting active markets and our
broader capabilities, was partially offset by a decrease in loan
syndications fees that included the impact of seasonality. Trust and
investment services fees were relatively stable, as the business
continues to migrate towards a greater managed money mix, which is
adverse to near-term revenue though beneficial in the long term. Letter
of credit and loan fees were relatively stable. Foreign exchange and
interest rate products fees decreased $2 million, largely reflecting a
reduction in demand for variable rate loan hedges given the timing of
interest rate moves and seasonality. Mortgage banking fees decreased $3
million, due to lower loan sale gains and servicing fees, partially
offset by higher production fees. Other income increased $16 million
from lower second quarter levels that included the $11 million impact of
finance lease impairments and a $3 million
other-than-temporary-impairment ("OTTI") charge tied to a model update.
Securities gains were modest and relatively stable with second quarter
levels.

Noninterest income decreased $54 million, or 12%, from third quarter
2016 levels that included a net $67 million benefit from the TDR
Transaction. On an Adjusted basis,* noninterest income increased $13
million, or 4%, largely reflecting strength in capital markets fees and
card fees, partially offset by lower mortgage banking fees, foreign
exchange and interest rate products fees and service charges and fees.
Service charges and fees decreased $3 million, due to lower account and
statement fees. Card fees increased $6 million, reflecting the benefit
of revised contract terms for processing fees and an increase in
purchase volume. Capital markets fees increased $17 million, reflecting
strength in loan syndications, bond and equity underwriting fees and
advisory fees given stronger market volumes and the investments made to
broaden our capabilities. Trust and investment services fees were
relatively stable, reflecting a shift in sales mix. Letter of credit and
loan fees increased $2 million, while foreign exchange and interest rate
products fees declined by $4 million tied to a decline in variable rate
loan origination volume. Mortgage banking fees decreased $6 million,
driven by a decrease in loan sale gains and spreads, partially offset by
an increase in servicing fees.

               
 
Noninterest expense 3Q17 change from
($s in millions)   3Q17   2Q17   3Q16 2Q17 3Q16
$   % $   %
Salaries and employee benefits $ 436 $ 432 $ 432 $ 4 1 % $ 4 1 %
Outside services 99 96 102 3 3 (3 ) (3 )
Occupancy 78 79 78 (1 ) (1 )
Equipment expense 65 64 65 1 2
Amortization of software 45 45 46 (1 ) (2 )
Other operating expense   135   148   144 (13 ) (9 ) (9 ) (6 )
Noninterest expense   $ 858   $ 864   $ 867 $ (6 ) (1 ) % $ (9 ) (1

)%

 
Adjusted salaries and employee benefits* $ 436 $ 432 $ 421 $ 4 1 % $ 15 4 %
Adjusted outside services* 99 96 94 3 3 5 5
Occupancy 78 79 78 (1 ) (1 )
Equipment expense 65 64 65 1 2
Adjusted amortization of software* 45 45 43 2 5
Adjusted/underlying other operating expense*   135   133   130 2   2 5   4
Adjusted/underlying noninterest expense*   $ 858   $ 849   $ 831

$ 9

  1 %

$ 27

  3 %
 

Noninterest expense of $858 million decreased $6 million from second
quarter 2017 levels that included a $15 million impact related to
operating lease impairments included in other operating expense. On an
Underlying basis,* noninterest expense increased $9 million, reflecting
higher salaries and employee benefits and outside services expense, as
well as $4 million of expense associated with legacy home equity
operational items. Salaries and employee benefits expense increased $4
million, largely reflecting an increase in revenue-based incentives,
partially offset by seasonally lower payroll taxes. Outside services
expense increased $3 million, driven by an increase tied to consumer
strategic growth initiatives. Occupancy expense and equipment expense
remained relatively stable. Other expense decreased $13 million from
higher second quarter levels that included $15 million of operating
lease impairments. On an Underlying basis,* other expense was up
modestly, reflecting an increase in expense associated with legacy home
equity operational items and higher credit collection costs, partially
offset by lower advertising expense.

Compared with third quarter 2016, noninterest expense decreased $9
million, driven by a $36 million reduction tied to third quarter 2016
notable items. On an Adjusted basis,* noninterest expense increased $27
million, or 3%, primarily reflecting a $15 million increase in salaries
and employee benefits tied to the impact of hiring associated with
strategic growth initiatives and higher revenue-based incentives, and a
$5 million increase in outside services expense related to consumer
growth initiatives. Results also reflect stable occupancy and equipment
expense, and an increase in other expense, largely due to higher
advertising expense and legacy home equity operational items, partially
offset by lower credit collection costs.

The effective tax rate for third quarter 2017 was 32.2%. The second
quarter 2017 tax rate was 31.1%, which reflected an increase in historic
tax credits and a modest benefit from the early payoff of a sale-in and
lease-out ("SILO") transaction. The third quarter 2016 tax rate was
30.5%.

               
 
Consolidated balance sheet review(1) 3Q17 change from

($s in millions)

  3Q17   2Q17   3Q16 2Q17 3Q16
$   % $   %
Total assets $ 151,356 $ 151,407 $ 147,015 $ (51 ) % $ 4,341 3 %
Loans and leases and loans held for sale 111,375 109,753 105,993 1,622 1 5,382 5
Deposits 113,235 113,613 108,327 (378 ) 4,908 5
Average interest-earning assets (quarterly) 137,479 137,587 131,669 (108 ) 5,810 4
Stockholders' equity 20,109 20,064 20,181 45 (72 )
Stockholders' common equity 19,862 19,817 19,934 45 (72 )
Tangible common equity $ 13,512 $ 13,463 $ 13,576 $ 49 % $ (64 ) %
Loan-to-deposit ratio (period-end)(2) 98.4 % 96.6 % 97.9 % 176

bps

 

51

bps

 

Loans to deposits ratio (avg balances) (2) 97.6 99.1 98.1 (149

)bps

 

(47

)bps

 

Common equity tier 1 capital ratio(3) 11.1 11.2 11.3
Total capital ratio(3)   13.8 %   14.0 %   14.2 %              

1) Represents period end unless otherwise noted.
2) Includes loans
held for sale.
3) Current reporting period regulatory capital
ratios are preliminary. Basel III ratios assume that certain definitions
impacting qualifying Basel III capital will phase in through 2019.

Total assets of $151.4 billion remained relatively stable compared with
June 30, 2017 as a $1.6 billion, or 1.5%, increase in loans and leases
and loans held for sale was offset by a $1.4 billion, or 5%, reduction
in investments and interest-bearing deposits and a $230 million
reduction in other non-earning assets. Compared with September 30, 2016,
total assets increased $4.3 billion, or 3%, driven by a $5.4 billion
increase in loans and leases and loans held for sale, partially offset
by a $1.1 billion decrease in investments and interest-bearing deposits.

Average interest-earning assets of $137.5 billion in third quarter 2017
remained relatively stable compared with second quarter 2017 as a $648
million increase in retail loans and loans held for sale was more than
offset by a $562 million decrease in investments and interest-bearing
deposits and a $194 million decrease in commercial loans and leases and
loans held for sale, reflecting a $472 million decrease tied to the
second quarter sale of $596 million of commercial loans. Compared with
third quarter 2016, average interest-earning assets increased $5.8
billion, or 4%, given retail loans and loans held for sale growth of
$2.9 billion and commercial loan and loans held for sale growth of $2.8
billion.

               
 
Interest-earning assets 3Q17 change from
($s in millions)   3Q17   2Q17   3Q16 2Q17 3Q16
Period-end interest-earning assets $   % $   %
Investments and interest-bearing deposits $ 27,368 $ 28,811 $ 28,424 $ (1,443 ) (5

)%

$ (1,056 ) (4

)%

Commercial loans and leases 52,381 51,888 50,389 493 1 1,992 4
Retail loans 57,770 57,158 55,078 612 1 2,692 5
Total loans and leases 110,151 109,046 105,467 1,105 1 4,684 4
Loans held for sale, at fair value 500 520 526 (20 ) (4 ) (26 ) (5 )
Other loans held for sale 724 187 537 NM 724 100
Total loans and leases and loans held for sale   111,375   109,753   105,993 1,622   1 5,382   5
Total period-end interest-earning assets   $ 138,743   $ 138,564   $ 134,417 $ 179   % $ 4,326   3 %
Average interest-earning assets
Investments and interest-bearing deposits $ 27,258 $ 27,820 $ 27,090 $ (562 ) (2

)%

$ 168 1 %
Commercial loans and leases 52,151 52,489 49,704 (338 ) (1 ) 2,447 5
Retail loans 57,333 56,651 54,332 682 1 3,001 6
Total loans and leases 109,484 109,140 104,036 344 5,448 5
Loans held for sale, at fair value 503 465 474 38 8 29 6
Other loans held for sale 234 162 69 72 44 165 239
Total loans and leases and loans held for sale   110,221   109,767   104,579 454   5,642   5
Total average interest-earning assets   $ 137,479   $ 137,587   $ 131,669 $ (108 ) % $ 5,810   4 %
 

Period-end investments and interest-bearing deposits of $27.4 billion as
of September 30, 2017 decreased $1.4 billion, or 5%, compared with June
30, 2017, reflecting a $2.1 billion decrease in cash positions,
partially offset by a $627 million increase in securities. Compared with
September 30, 2016, investments and interest-bearing deposits decreased
$1.1 billion, or 4%, largely reflecting a $1.1 billion decrease in cash
positions. At the end of third quarter 2017, the average effective
duration of the securities portfolio decreased to 3.8 years compared
with 4.0 years at June 30, 2017, given lower long-term rates that drove
an increase in securities prepayment speeds. At September 30, 2016, the
securities portfolio duration was 2.7 years, reflecting significantly
lower long-term rates at that time, which increased securities
prepayment speeds.

Period-end loans and leases and loans held for sale of $111.4 billion at
September 30, 2017 increased $1.6 billion, or 1.5%, from $109.8 billion
at June 30, 2017, driven by a $612 million increase in retail loans, a
$493 million increase in commercial loans and leases, and a $537 million
increase in other loans held for sale. Compared to September 30, 2016,
period-end loans and leases and loans held for sale increased $5.4
billion, or 5.1 %, from $106.0 billion, reflecting a $2.7 billion
increase in retail loans, a $2.0 billion increase in commercial loans,
and leases and a $724 million increase in other loans held for sale.

Average loans and leases and loans held for sale increased $454 million,
or 0.4% from second quarter 2017 as a $682 million increase in retail
loans was partially offset by a $338 million decrease in commercial
loans and leases, driven by the $472 million average impact of a second
quarter 2017 sale of lower-return commercial loans. Retail loan growth
reflects strength in mortgage, education and other unsecured retail
loans, partially offset by lower home equity and auto balances.
Commercial loan results before the impact of the sale largely reflect
growth in Corporate Finance and Commercial Real Estate as well as the
benefit of our geographic expansion strategies, partially offset by a
reduction in Asset Finance and non-core.

Compared with third quarter 2016, average loans and leases and loans
held for sale increased $5.6 billion, or 5.4%, reflecting a $3.0 billion
increase in retail loans and a $2.4 billion increase in commercial
loans. Retail loan growth was driven by education, mortgage and other
unsecured retail, partially offset by lower home equity and auto
balances. Commercial loan and lease growth was driven by strength in
Middle Market, Commercial Real Estate, Corporate Finance, Franchise
Finance and Mid-corporate and Industry Verticals, partially offset by
lower Asset Finance balances.

               
 
Deposits 3Q17 change from
($s in millions)   3Q17   2Q17   3Q16 2Q17 3Q16
Period-end deposits $   % $   %
Demand deposits $ 28,643 $ 27,814 $ 27,292 $ 829 3 % $ 1,351 5 %
Checking with interest 21,756 22,497 20,573 (741 ) (3 ) 1,183 6
Savings 9,470 9,542 8,797 (72 ) (1 ) 673 8
Money market accounts 37,070 38,275 38,258 (1,205 ) (3 ) (1,188 ) (3 )
Term deposits   16,296   15,485   13,407 811   5 2,889   22
Total period-end deposits   $ 113,235   $ 113,613   $ 108,327 $ (378 ) % $ 4,908   5 %
Average deposits
Demand deposits $ 28,041 $ 27,521 $ 27,467 $ 520 2 % $ 574 2 %
Checking with interest 21,909 21,751 19,997 158 1 1,912 10
Savings 9,491 9,458 8,779 33 712 8
Money market accounts 37,535 36,912 37,597 623 2 (62 )
Term deposits   15,971   15,148   12,806 823   5 3,165   25
Total average deposits   $ 112,947   $ 110,790   $ 106,646 $ 2,157   2 % $ 6,301   6 %
 

Total period-end deposits of $113.2 billion at September 30, 2017
decreased modestly from June 30, 2017, reflecting a decrease in money
market accounts and checking with interest balances, partially offset by
growth in demand and term deposits. Compared with September 30, 2016,
period-end total deposits increased $4.9 billion, or 5%, driven by
strong growth in term deposits, demand deposits and checking with
interest as well as savings.

Third quarter 2017 average deposits of $112.9 billion increased $2.2
billion, or 2%, from second quarter 2017, reflecting strong growth in
term deposits, money market accounts and demand deposits. Compared with
third quarter 2016, average deposits increased $6.3 billion, or 6%,
reflecting strong growth in term deposits, checking with interest and
savings, as well as modest growth in demand deposits.

               
 
Borrowed funds 3Q17 change from
($s in millions)   3Q17   2Q17   3Q16 2Q17 3Q16
Period-end borrowed funds $   % $   %
Federal funds purchased and securities sold under agreements to
repurchase
$ 453 $ 429 $ 900 $ 24 6 % $ (447 ) (50

)%

Other short-term borrowed funds 1,505 2,004 2,512 (499 ) (25 ) (1,007 ) (40 )
Long-term borrowed funds   13,400   13,154   11,902 246   2 1,498   13
Total borrowed funds   $ 15,358   $ 15,587   $ 15,314 $ (229 ) (1

)%

$ 44   0 %
 
Average borrowed funds   $ 14,567   $ 16,730   $ 14,379 $ (2,163 ) (13

)%

$ 188   1 %
 

Total borrowed funds of $15.4 billion at September 30, 2017 decreased
$229 million from June 30, 2017, reflecting a $499 million decrease in
other short-term borrowings, primarily short-term Federal Home Loan Bank
("FHLB") advances, partially offset by a $246 million increase in
long-term borrowings, primarily FHLB advances. Compared with September
30, 2016, total borrowed funds increased modestly, reflecting a $1.5
billion net increase in long-term borrowings, offset by a $1.0 billion
decrease in other short-term borrowings, primarily short-term FHLB
advances, and a $447 million decrease in federal funds purchased and
securities sold under agreements to repurchase.

Average borrowed funds of $14.6 billion decreased $2.2 billion from
second quarter 2017, driven primarily by a $1.4 billion decrease in
long-term borrowed funds and a $651 million decrease in other short-term
borrowed funds. Compared with third quarter 2016, average borrowed funds
increased $188 million, as a $1.3 billion increase in long-term borrowed
funds was partially offset by a $940 million reduction in short-term
borrowed funds, largely FHLB advances and a $177 million reduction in
federal funds purchased and securities sold under agreements to
repurchase.

               
 
Capital 3Q17 change from

($s and shares in millions except per share data)

  3Q17   2Q17   3Q16

2Q17

3Q16
Period-end capital $   % $   %
Stockholders' equity $ 20,109 $ 20,064 $ 20,181 $ 45 % $ (72 ) %
Stockholders' common equity 19,862 19,817 19,934 45 (72 )
Tangible common equity 13,512 13,463 13,576 49 (64 )
Tangible book value per common share $ 27.05 $ 26.61 $ 26.20 $ 0.44 2 $ 0.85 3
Common shares - at end of period 499.5 505.9 518.1 (6.4 ) (1 ) (18.6 ) (4 )
Common shares - average (diluted) 502.2 507.4 521.1 (5.3 ) (1

)%

(19.0 ) (4

)%

Common equity tier 1 capital ratio(1,2) 11.1 % 11.2 % 11.3 %
Total capital ratio(1,2) 13.8 14.0 14.2
Tier 1 leverage ratio(1,2)   9.9 %   9.9 % 10.1 %            

1) Current reporting-period regulatory capital ratios are preliminary.
2)
Basel III ratios assume that certain definitions impacting qualifying
Basel III capital will phase in through 2019.

On September 30, 2017, our Basel III capital ratios on a transitional
basis remained well in excess of applicable regulatory requirements with
a CET1 capital ratio of 11.1% and a total capital ratio of
13.8%. Our capital ratios continue to reflect progress against our
objective of aligning our capital profile to be consistent with that of
peer regional banks, while maintaining a strong capital base to support
our growth aspirations, strategy and risk appetite. Tangible book value
per common share of $27.05 increased 2% versus second quarter 2017 and
3% versus third quarter 2016.

As part of CFG's 2017 Capital Plan (the "Plan"), during third quarter
2017 the company repurchased 6.5 million shares of common stock at a
weighted-average price of $34.83, and including common dividends,
returned $315 million to shareholders. The Plan also anticipates the
potential to raise quarterly dividends an additional 22%, to $0.22 per
share beginning in early 2018.

               
 
Credit quality review 3Q17 change from
($s in millions)   3Q17     2Q17   3Q16 2Q17 3Q16
$   % $   %
Nonperforming loans and leases $ 932 $ 1,025 $ 1,107 $ (93 ) (9

)%

$ (175 ) (16

)%

Net charge-offs 65 75 83 (10 ) (13 ) (18 ) (22 )
Provision for credit losses 72 70 86 2 3 (14 ) (16 )
Allowance for loan and lease losses $ 1,224 $ 1,219 $ 1,240 $ 5 % $ (16 ) (1

)%

Total nonperforming loans and leases
as a % of total loans and
leases
0.85 % 0.94 % 1.05 % (9

)bps

 

(20

)bps

 

Net charge-offs as % of total loans and leases 0.24 0.28 0.32 (4

)bps

 

(8

)bps

 

Allowance for loan and lease losses as a % of total loans and leases 1.11 % 1.12 % 1.18 % (1

)bps

 

(7

)bps

 

Allowance for loan and lease losses as a % of nonperforming loans
and leases
  131.35 %   118.98 %   112.03 % 1,237

bps

 

    1,932

bps

 

 
 

Overall credit quality remains strong, reflecting growth in
higher-quality, lower-risk retail loans and broadly stable risk appetite
in commercial categories. Nonperforming loans and leases of $932 million
decreased $93 million, or 9%, from June 30, 2017, primarily reflecting a
decrease in commercial, driven by paydowns and payoffs and a modest
improvement in retail. Compared to September 30, 2016, nonperforming
loans and leases decreased $175 million, or 16%, reflecting a $104
million decrease in retail, largely in real-estate secured categories,
and a $71 million decrease in commercial, driven by a reduction in
nonperforming commodities-related credits. The nonperforming loans and
leases to total loans and leases ratio of 0.85% at September 30, 2017
improved nine basis points from 0.94% at June 30, 2017 and improved 20
basis points from 1.05% at September 30, 2016.

Net charge-offs of $65 million decreased $10 million from second quarter
2017, driven by a $14 million reduction in commercial net charge-offs,
partially offset by a $4 million increase in retail net charge-offs.
Compared with third quarter 2016, net charge-offs decreased $18 million,
reflecting a $19 million decrease in commercial net charge-offs. Third
quarter 2017 net charge-offs of 24 basis points of average loans and
leases compares with 28 basis points in second quarter 2017 and 32 basis
points in third quarter 2016.

Allowance for loan and lease losses of $1.2 billion increased slightly
compared to second quarter 2017, primarily reflecting provision to cover
the estimated impact of hurricanes Harvey and Irma on retail and
commercial loans. Allowance for loan and lease losses decreased modestly
from third quarter 2016 levels, reflecting strong overall credit quality
that helped offset reserves to fund year-over-year loan growth.

The ratio of the allowance for loan and lease losses to total loans and
leases was 1.11% as of September 30, 2017, which was relatively stable
compared with 1.12% as of June 30, 2017 and down modestly from 1.18% as
of September 30, 2016. The allowance for loan and lease losses to
nonperforming loans and leases ratio of 131% as of September 30, 2017
compares to 119% as of June 30, 2017, and 112% as of September 30, 2016,
reflecting the decrease in nonperforming loans.

Additional Segment Detail:

               
 
Consumer Banking Segment 3Q17 change from
($s in millions)   3Q17     2Q17     3Q16 2Q17 3Q16
$   % $   %
Net interest income

$674

$ 657 $ 621 $ 17 3

%

$ 53 9 %
Noninterest income   227     229     229 (2 ) (1 ) (2 ) (1 )
Total revenue 901 886 850 15 2 51 6
Noninterest expense   648     644     650 4   1 (2 )
Pre-provision profit 253 242 200 11 5 53 27
Provision for credit losses   65     60     57 5   8 8   14
Income before income tax expense 188 182 143 6 3 45 31
Income tax expense   66     64     51 2   3 15   29
Net income   $ 122     $ 118     $ 92 $ 4   3 % $ 30   33 %
 
Average balances                    
Total loans and leases (1) $ 58,679 $ 57,922 $ 55,376 $ 757 1 % $ 3,303 6 %
Total deposits   $ 75,085     $ 75,107     $ 72,141 $ (22 ) % $ 2,944   4 %
 
Key performance metrics*            
ROTCE (2) 8.7 % 8.6 % 7.0 % 15

bps

 

168

bps

 

Efficiency ratio 72 % 73 % 76 % (76

)bps

 

(458

)bps

 

Loan-to-deposit ratio (period-end)(1)   78.6 % 77.2 % 77.2 % 143

bps

 

137

bps

 

1) Includes held for sale.
2) Operating segments are allocated
capital on a risk-adjusted basis considering economic and regulatory
capital requirements. We approximate that regulatory capital is
equivalent to a sustainable target level of common equity tier 1 and
then allocate that approximation to the segments based on economic
capital.

Consumer Banking net income of $122 million in third quarter 2017
increased $4 million, or 3%, from second quarter 2017 as solid revenue
growth was partially offset by an increase in noninterest expense and
provision for credit losses. Net interest income increased $17 million,
or 3%, compared with second quarter 2017 as the benefit of improved loan
yields and growth in mortgage, education and unsecured retail loan
balances, as well as an increase in day count, were partially offset by
an increase in deposit costs. Noninterest income remained relatively
stable as lower mortgage fees, card fees and trust and investment
services fees were offset by seasonally higher service charges and fees.

Noninterest expense increased $4 million from second quarter 2017,
reflecting an increase in outside services, which included costs tied to
growth initiatives, as well as an increase in equipment expense and
salaries and benefits and other operating expenses, largely expense
associated with legacy home equity operational items and credit
collection costs, partially offset by lower occupancy costs.

Provision for credit losses increased $5 million from second quarter
2017, largely driven by an increase in auto net charge-offs.

Compared with third quarter 2016, net income increased $30 million, or
33%, reflecting a $51 million increase in total revenue and a $2 million
decrease in noninterest expense. Net interest income increased $53
million, or 9%, as the benefit of a $3.3 billion increase in average
loans, driven by growth in mortgage, education and unsecured retail loan
balances, and higher rates and mix shift were partially offset by an
increase in deposit costs. Noninterest income was relatively stable with
third quarter 2016, largely reflecting growth in card fees and a
reduction in mortgage banking fees and service charges and fees.

Compared to third quarter 2016, noninterest expense remained relatively
stable as lower software amortization and lower other operating
expenses, largely notable items including home equity systems and
operational costs, were partially offset by higher FDIC expense,
salaries and benefits and advertising expense.

Provision for credit losses increased $8 million from third quarter
2016, primarily driven by higher net charge-offs in auto, consumer
unsecured, home equity and education.

               
 
Commercial Banking Segment 3Q17 change from
($s in millions)   3Q17   2Q17     3Q16 2Q17 3Q16
$   % $   %
Net interest income $ 354 $ 344 $ 327 $ 10 3 % $ 27 8 %
Noninterest income   136     130     123 6   5 13   11
Total revenue 490 474 450 16 3 40 9
Noninterest expense   195     192     181 3   2 14   8
Pre-provision profit 295 282 269 13 5 26 10
Provision for credit losses       1     19 (1 ) (100 ) (19 ) (100 )
Income before income tax expense 295 281 250 14 5 45 18
Income tax expense   94     94     88   6   7
Net income   $ 201     $ 187     $ 162

$14

  7 % $ 39   24 %
 
Average balances                  
Total loans and leases (1) $ 48,746 $ 48,772 $ 46,611

$ (26

) % $ 2,135 5 %
Total deposits   $ 30,751     $ 28,744     $ 27,847 $ 2,007   7 % $ 2,904   10 %
 
Key performance metrics*            
ROTCE (2) 14.1 % 13.4 % 12.5 % 69

bps

 

156

bps

 

Efficiency ratio 39 % 40 % 40 % (109

)bps

 

(82

)bps

 

Loan-to-deposit ratio (period-end)(1)   160.5 % 158.4 % 161.5 % 206

bps

 

(100

)bps

 

1) Includes held for sale.
2) Operating segments are allocated
capital on a risk-adjusted basis considering economic and regulatory
capital requirements. We approximate that regulatory capital is
equivalent to a sustainable target level for common equity tier 1 and
then allocate that approximation to the segments based on economic
capital.

Commercial Banking net income of $201 million in third quarter 2017
increased $14 million, or 7%, from second quarter 2017, driven by growth
in net interest income and noninterest income from lower second quarter
levels that included a $4 million reduction tied to finance lease
impairments.

Compared to second quarter 2017, net interest income of $354 million
increased $10 million, or 3%, as the benefit of higher loan yields and
mix and an increase in interest income recoveries was partially offset
by an increase in deposit costs. Average loans and leases were stable
versus second quarter 2017 despite a $390 million decrease tied to the
second quarter 2017 sale of $512 million of lower-return loans and
leases related to balance sheet optimization efforts. Excluding the
impact of the second quarter 2017 loan sale, average loans and leases
increased 0.7%, driven by growth in Corporate Finance, Commercial Real
Estate and the benefit of our geographic expansion initiatives.

Noninterest income increased $6 million from lower second quarter 2017
levels that included the impact of the finance lease impairment. Results
also reflect a $2 million increase in capital markets fees. Noninterest
expense remained relatively stable as higher salary and benefit expense
was offset by lower equipment and outside services expense. Provision
for credit losses remained stable.

Compared with third quarter 2016, net income increased $39 million, or
24%, driven by a $40 million increase in total revenue and a $19 million
reduction in provision expense, partially offset by a $14 million
increase in noninterest expense. Net interest income increased $27
million, or 8%, as the benefit of 5% average loan growth and improved
loan yields was partially offset by higher deposit costs. Average loans
and leases increased $2.1 billion, driven by growth in Middle Market,
Commercial Real Estate, Corporate Finance, Franchise Finance and
Mid-corporate with good momentum from geographic expansion initiatives,
partially offset by the impact of the third quarter 2016 transfer of
$1.2 billion of loans and leases to non-core.

Noninterest income increased $13 million from lower levels in third
quarter 2016 that included a $4 million reduction tied to lease
impairments, reflecting strength in capital markets, letter of credit
and loan fees and card fees. Noninterest expense increased $14 million,
reflecting higher salaries and benefits, amortization of software,
credit costs and outside services expense, partially offset by lower
depreciation expense tied to the third quarter 2016 transfer of the
aircraft portfolio to the non-core portfolio. Provision for credit
losses decreased $19 million from higher third quarter levels that
reflected higher net charge-offs in the energy portfolio.

               
 
Other(1) 3Q17 change from
($s in millions)   3Q17   2Q17   3Q16 2Q17 3Q16
$   % $   %
Net interest income $ 34 $ 25 $ (3 ) $ 9 36 % $ 37 NM
Noninterest income   18   11     83   7   64 (65 ) (78 )
Total revenue 52 36 80 16 44 (28 ) (35 )
Noninterest expense   15   28     36   (13 ) (46 ) (21 ) (58 )
Pre-provision profit (loss) 37 8 44 29 NM (7 ) (16 )
Provision for credit losses   7   9     10   (2 ) (22 ) (3 ) (30 )
Income (loss) before income tax expense (benefit) 30 (1 ) 34 31 NM (4 ) (12 )
Income tax expense (benefit)   5   (14 )   (9 ) 19   136 14   156
Net income (loss)   $ 25   $ 13     $ 43   $ 12   92 % $ (18 ) (42

)%

 
Average balances                
Total loans and leases (2) $ 2,796 $ 3,073 $ 2,592 $ (277 ) (9

)%

$ 204 8 %
Total deposits   $ 7,111   $ 6,939     $ 6,658   $ 172   2 % $ 453   7 %

1) Includes the financial impact of non-core, liquidating loan
portfolios and other non-core assets, our treasury activities, wholesale
funding activities, securities portfolio, community development assets
and other unallocated assets, liabilities, capital, revenues, provision
for credit losses and expenses not attributed to our Consumer Banking or
Commercial Banking segments.
2) Includes held for sale.

Other net income of $25 million in third quarter 2017 increased $12
million from second quarter 2017. Net interest income increased $9
million, driven by higher residual funds transfer pricing, partially
offset by higher funding costs.

Third quarter 2017 noninterest income of $18 million increased $7
million, reflecting the impact of finance lease impairments recorded in
second quarter 2017. Noninterest expense of $15 million decreased $13
million, given the $15 million of operating lease impairments recorded
in second quarter, partially offset by legacy home equity operational
expense. Provision for credit losses of $7 million decreased $2 million,
as lower non-core net charge-offs were largely offset by a third quarter
reserve build compared to a second quarter reserve release. Third
quarter 2017 income taxes include a lower benefit of historical tax
credits than in second quarter 2017, which also included a modest tax
benefit from the early payoff of a sale-in and lease-out ("SILO")
transaction.

Other net income in third quarter 2017 decreased $18 million from third
quarter 2016. Net interest income increased $37 million, driven by
higher residual funds transfer pricing and higher investment portfolio
income, partially offset by higher funding costs. Noninterest income
decreased $65 million, reflecting the net impact of $67 million of
notable items recorded in third quarter 2016. Excluding these notable
items, noninterest income increased $2 million, reflecting higher
securities gains and lower securities impairment losses. Noninterest
expense decreased $21 million as third quarter 2016 reflected the impact
of other notable items, partially offset by higher legacy home equity
operational expense. Provision decreased $3 million, reflecting lower
non-core net charge-offs that were partially offset by a higher reserve
build versus third quarter 2016. Third quarter 2017 income taxes include
the benefit of historical tax credits, compared to third quarter 2016,
which included larger overall tax benefits, including certain federal
and state tax credits.

Corresponding Financial Tables and Information

Investors are encouraged to review the foregoing summary and discussion
of Citizens' earnings and financial condition in conjunction with the
detailed financial tables and other information available on the
Investor Relations portion of the company's website at www.citizensbank.com/about-us.

Conference Call

CFG management will host a live conference call today with details as
follows:

   
Time: 9:00 am ET
 
Dial-in: (800) 230-1085, conference ID 427661
 
Webcast/Presentation:

The live webcast will be available at http://investor.citizensbank.com
under Events & Presentations.

 

Replay Information: A replay of the conference call will be available
beginning at 11:00 am ET on October 20 through November 20, 2017. Please
dial (800) 475-6701 and enter access code 416825. The webcast replay
will be available at http://investor.citizensbank.com
under Events & Presentations.

About Citizens Financial Group, Inc.

Citizens Financial Group, Inc. is one of the nation's oldest and largest
financial institutions, with $151.4 billion in assets as of September
30, 2017. Headquartered in Providence, Rhode Island, Citizens offers a
broad range of retail and commercial banking products and services to
individuals, small businesses, middle-market companies, large
corporations and institutions. Citizens helps its customers reach their
potential by listening to them and by understanding their needs in order
to offer tailored advice, ideas and solutions. In Consumer Banking,
Citizens provides an integrated experience that includes mobile and
online banking, a 24/7 customer contact center and the convenience of
approximately 3,200 ATMs and approximately 1,200 branches in 11 states
in the New England, Mid-Atlantic and Midwest regions. Consumer Banking
products and services include a full range of banking, lending, savings,
wealth management and small business offerings. In Commercial Banking,
Citizens offers corporate, institutional and not-for-profit clients a
full range of wholesale banking products and services, including lending
and deposits, capital markets, treasury services, foreign exchange and
interest rate products, and asset finance. More information is available
at www.citizensbank.com
or visit us on Twitter,
LinkedIn
or Facebook.

Key Performance Metrics and Non-GAAP Financial
Measures and Reconciliations

(in millions, except share, per-share and ratio data)

Key Performance Metrics:

Our management team uses key performance metrics (KPMs) to gauge our
performance and progress over time in achieving our strategic and
operational goals and also in comparing our performance against our
peers. We have established the following financial targets, in addition
to others, as KPMs, which are utilized by our management in measuring
our progress against financial goals and as a tool in helping assess
performance for compensation purposes. These KPMs can largely be found
in our periodic reports which are filed with the Securities and Exchange
Commission, and are supplemented from time to time with additional
information in connection with our quarterly earnings releases.

Our key performance metrics include:

Return on average tangible common equity (ROTCE);

Return on average total tangible assets (ROTA);

Efficiency ratio;

Operating leverage; and

Common equity tier 1 capital ratio (U.S. Basel III Standardized fully
phased-in basis).

In establishing goals for these KPMs, we determined that they would be
measured on a management-reporting basis, or an operating basis, which
we refer to externally as "Adjusted" or "Underlying" results. We believe
that these "Adjusted" or "Underlying" results provide the best
representation of our financial progress toward these goals as they
exclude items that our management does not consider indicative of our
ongoing financial performance. KPMs that contain "Adjusted" or
"Underlying" results are considered non-GAAP financial measures.

Non-GAAP Financial Measures:

This document contains non-GAAP financial measures. The following tables
present reconciliations of our non-GAAP measures. These reconciliations
exclude "Adjusted" or "Underlying" items, which are included, where
applicable, in the financial results presented in accordance with GAAP.
"Adjusted" or "Underlying" results, which are non-GAAP measures, exclude
certain items, as applicable, that may occur in a reporting period which
management does not consider indicative of on-going financial
performance.

The non-GAAP measures presented in the following tables include
reconciliations to the most directly comparable GAAP measures and are:
"noninterest income", "total revenue", " noninterest expense",
"pre-provision profit", "total credit-related costs", "income before
income tax expense", "income tax expense", "effective income tax rate",
"net income", "net income available to common stockholders", "other
income", "salaries and employee benefits", "outside services",
"amortization of software expense", "other operating expense", "net
income per average common share", "return on average common equity" and
"return on average total assets".

We believe these non-GAAP measures provide useful information to
investors because these are among the measures used by our management
team to evaluate our operating performance and make day-to-day operating
decisions. In addition, we believe our "Adjusted" or "Underlying"
results in any period do not reflect our operational performance in that
period and, accordingly, it is useful to consider our GAAP results and
our "Adjusted" or "Underlying" results together. We believe this
presentation also increases comparability of period-to-period results.

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

 
 

Key performance metrics, non-GAAP financial measures and
reconciliations

(in millions, except share, per-share and
ratio data)

             
QUARTERLY TRENDS
    3Q17 Change
3Q17   2Q17   1Q17   4Q16   3Q16 2Q17 3Q16
$ % $ %
Noninterest income, Adjusted:
Noninterest income (GAAP) $381 $370 $379 $377 $435 $11 3 % ($54 ) (12 %)
Less: Notable items 67     (67 ) (100 )
Noninterest income, Adjusted (non-GAAP) $381 $370 $379 $377 $368   $11   3 % $13   4 %
Total revenue, Adjusted:
Total revenue (GAAP) A $1,443 $1,396 $1,384 $1,363 $1,380 $47 3 % $63 5 %
Less: Notable items 67     (67 ) (100 )
Total revenue, Adjusted (non-GAAP) B $1,443 $1,396 $1,384 $1,363 $1,313   $47   3 % $130   10 %
Noninterest expense, Adjusted:
Noninterest expense (GAAP) C $858 $864 $854 $847 $867 ($6 ) (1 )% ($9 ) (1 )%
Less: Notable items 36     (36 ) (100 )
Noninterest expense, Adjusted (non-GAAP) D $858 $864 $854 $847 $831   ($6 ) (1 )% $27   3 %
Pre-provision profit:
Total revenue (GAAP) A $1,443 $1,396 $1,384 $1,363 $1,380 $47 3 % $63 5 %
Less: Noninterest expense (GAAP) C 858 864 854 847 867   (6 ) (1 ) (9 ) (1 )
Pre-provision profit (GAAP) $585 $532 $530 $516 $513   $53   10 % $72   14 %
Pre-provision profit, Adjusted:
Total revenue, Adjusted (non-GAAP) B $1,443 $1,396 $1,384 $1,363 $1,313 $47 3 % $130 10 %
Less: Noninterest expense, Adjusted (non-GAAP) D 858 864 854 847 831   (6 ) (1 ) 27   3
Pre-provision profit, Adjusted (non-GAAP) $585 $532 $530 $516 $482   $53   10 % $103   21 %
Income before income tax expense, Adjusted:
Income before income tax expense (GAAP) $513 $462 $434 $414 $427 $51 11 % $86 20 %
Less: Income before income tax expense (benefit) related to notable
items
31     (31 ) (100 )
Income before income tax expense, Adjusted (non-GAAP) $513 $462 $434 $414 $396   $51   11 % $117   30 %
Income tax expense, Adjusted:
Income tax expense (GAAP) $165 $144 $114 $132 $130 $21 15 % $35 27 %
Less: Income tax expense (benefit) related to notable items 12     (12 ) (100 )
Income tax expense, Adjusted (non-GAAP) $165 $144 $114 $132 $118   $21   15 % $47   40 %
Net income, Adjusted:
Net income (GAAP) E $348 $318 $320 $282 $297 $30 9 % $51 17 %
Add: Notable items, net of income tax expense (benefit) (19 )   19   100
Net income, Adjusted (non-GAAP) F $348 $318 $320 $282 $278   $30   9 % $70   25 %
Net income available to common stockholders, Adjusted:
Net income available to common stockholders (GAAP) G $341 $318 $313 $282 $290 $23 7 % $51 18 %
Add: Notable items, net of income tax expense (benefit) (19 )   19   100
Net income available to common stockholders, Adjusted (non-GAAP) H $341 $318 $313 $282 $271   $23   7 % $70   26 %
   
 

Key performance metrics, non-GAAP financial measures and
reconciliations (continued)

(in millions, except share,
per-share and ratio data)

           
QUARTERLY TRENDS
    3Q17 Change
3Q17   2Q17   1Q17   4Q16   3Q16 2Q17 3Q16
$/bps % $/bps %
Operating leverage:
Total revenue (GAAP) A $1,443 $1,396 $1,384 $1,363 $1,380 $47 3.37 % $63 4.57 %
Less: Noninterest expense (GAAP) C 858 864 854 847 867 (6 ) (0.69 ) (9 ) (1.04 )
Operating leverage 4.06 % 5.61 %
Operating leverage, Adjusted:
Total revenue, Adjusted (non-GAAP) B $1,443 $1,396 $1,384 $1,363 $1,313 $47 3.37 % $130 9.90 %
Less: Noninterest expense, Adjusted (non-GAAP) D 858 864 854 847 831 (6 ) (0.69 ) 27 3.25  
Operating leverage, Adjusted (non-GAAP) 4.06 % 6.65 %
Efficiency ratio and efficiency ratio, Adjusted:
Efficiency ratio C/A 59.41 % 61.94 % 61.68 % 62.18 % 62.88 % (253 ) bps (347

)bps

 

Efficiency ratio, Adjusted (non-GAAP) D/B 59.41 61.94 61.68 62.18 63.31 (253 ) bps (390

)bps

 

Return on average common equity and return on average common
equity, Adjusted:
Average common equity (GAAP) I $19,728 $19,659 $19,460 $19,645 $19,810 $69 % ($82 ) %
Return on average common equity G/I 6.87 % 6.48 % 6.52 % 5.70 % 5.82 % 39 bps 105

bps

 

Return on average common equity, Adjusted (non-GAAP) H/I 6.87 6.48 6.52 5.70 5.44 39 bps 143

bps

 

Return on average tangible common equity and return on average
tangible common equity, Adjusted:
Average common equity (GAAP) I $19,728 $19,659 $19,460 $19,645 $19,810 $69 % ($82 ) %
Less: Average goodwill (GAAP) 6,887 6,882 6,876 6,876 6,876 5 11
Less: Average other intangibles (GAAP) 2 2 1 1 1 100
Add: Average deferred tax liabilities related to goodwill (GAAP) 537   534   531   523   509   3   1 28   6
Average tangible common equity J $13,376   $13,309   $13,115   $13,291   $13,442   $67   1 % ($66 ) %
Return on average tangible common equity G/J 10.13 % 9.57 % 9.68 % 8.43 % 8.58 % 56 bps 155

bps

 

Return on average tangible common equity, Adjusted (non-GAAP) H/J 10.13 9.57 9.68 8.43 8.02 56 bps 211

bps

 

Return on average total assets and return on average total
assets, Adjusted:
Average total assets (GAAP) K $150,012 $149,878 $148,786 $147,315 $144,399 $134 % $5,613 4 %
Return on average total assets E/K 0.92 % 0.85 % 0.87 % 0.76 % 0.82 % 7 bps 10

bps

 

Return on average total assets, Adjusted (non-GAAP) F/K 0.92 0.85 0.87 0.76 0.77 7 bps 15

bps

 

Return on average total tangible assets and return on average
total tangible assets, Adjusted:
Average total assets (GAAP) K $150,012 $149,878 $148,786 $147,315 $144,399 $134 % $5,613 4 %
Less: Average goodwill (GAAP) 6,887 6,882 6,876 6,876 6,876 5 11
Less: Average other intangibles (GAAP) 2 2 1 1 1 100
Add: Average deferred tax liabilities related to goodwill (GAAP) 537   534   531   523   509   3   1 28   6
Average tangible assets L $143,660   $143,528   $142,441   $140,961   $138,031   $132   % $5,629   4 %
Return on average total tangible assets E/L 0.96 % 0.89 % 0.91 % 0.79 % 0.86 % 7 bps 10

bps

 

Return on average total tangible assets, Adjusted (non-GAAP) F/L 0.96 0.89 0.91 0.79 0.80 7 bps 16

bps

 

   
 

Key performance metrics, non-GAAP financial measures and
reconciliations (continued)

(in millions, except share,
per-share and ratio data)

           
QUARTERLY TRENDS
    3Q17 Change
3Q17 2Q17 1Q17 4Q16 3Q16 2Q17 3Q16
$/bps % $/bps %
Tangible book value per common share:
Common shares - at end of period (GAAP) M 499,505,285 505,880,851 509,515,646 511,954,871 518,148,345 (6,375,566 ) (1 %) (18,643,060 ) (4 %)
Common stockholders' equity (GAAP) $19,862 $19,817 $19,600 $19,499 $19,934 $45 ($72 )
Less: Goodwill (GAAP) 6,887 6,887 6,876 6,876 6,876 11
Less: Other intangible assets (GAAP) 2 2 1 1 1 100
Add: Deferred tax liabilities related to goodwill (GAAP) 539   535   534   532   519   4   1 20   4
Tangible common equity N $13,512   $13,463   $13,258   $13,154   $13,576   $49   % ($64 ) %
Tangible book value per common share N/M $27.05 $26.61 $26.02 $25.69 $26.20 $0.44 2 % $0.85 3 %
Net income per average common share - basic and diluted, Adjusted:
Average common shares outstanding - basic (GAAP) O 500,861,076 506,371,846 509,451,450 512,015,920 519,458,976 (5,510,770 ) (1 %) (18,597,900 ) (4 %)
Average common shares outstanding - diluted (GAAP) P 502,157,384 507,414,122 511,348,200 513,897,085 521,122,466 (5,256,738 ) (1 ) (18,965,082 ) (4 )
Net income available to common stockholders (GAAP) G $341 $318 $313 $282 $290 $23 7 $51 18
Net income per average common share - basic (GAAP) G/O 0.68 0.63 0.61 0.55 0.56 0.05 8 0.12 21
Net income per average common share - diluted (GAAP) G/P 0.68 0.63 0.61 0.55 0.56 0.05 8 0.12 21
Net income available to common stockholders, Adjusted (non-GAAP) H 341 318 313 282 271 23 7 70 26
Net income per average common share - basic, Adjusted (non-GAAP) H/O 0.68 0.63 0.61 0.55 0.52 0.05 8 0.16 31
Net income per average common share - diluted, Adjusted (non-GAAP) H/P 0.68 0.63 0.61 0.55 0.52 0.05 8 0.16 31
Pro forma U.S. Basel III fully phased-in common equity tier 1
capital ratio
1:
Common equity tier 1 capital (regulatory) $14,093 $14,057 $13,941 $13,822 $13,763
Less: Change in DTA and other threshold deductions (GAAP)          
Pro forma Basel III fully phased-in common equity tier 1 capital Q $14,093   $14,057   $13,941   $13,822   $13,763  
Risk-weighted assets (regulatory general risk weight approach) $127,203 $125,774 $124,881 $123,857 $121,612
Add: Net change in credit and other risk-weighted assets (regulatory) 251   249   247   244   228  
Pro forma Basel III standardized approach risk-weighted assets R $127,454   $126,023   $125,128   $124,101   $121,840  
Pro forma Basel III fully phased-in common equity tier 1 capital
ratio1
Q/R 11.1 % 11.2 % 11.1 % 11.1 % 11.3 %

1) U.S. Basel III ratios assume certain definitions impacting qualifying
U.S. Basel III capital, which otherwise will phase in through 2019, are
fully phased-in. Ratios also reflect the required US Standardized
methodology for calculating RWAs, effective January 1, 2015.

 
 

Key performance metrics, non-GAAP financial measures and
reconciliations (continued)

(in millions, except share,
per-share and ratio data)

             
QUARTERLY TRENDS
    3Q17 Change
3Q17   2Q17   1Q17   4Q16   3Q16 2Q17 3Q16
$ % $ %
Other income, Adjusted
Other income (GAAP) $18 $2 $24 $25 $87 $16 NM ($69 ) (79 %)
Less: Notable items 67   (67 ) (100 )
Other income, Adjusted (non-GAAP) $18 $2 $24 $25 $20 $16   NM ($2 ) (10 %)
Salaries and employee benefits, Adjusted:
Salaries and employee benefits (GAAP) $436 $432 $444 $420 $432 $4 1 % $4 1 %
Less: Notable items 11   (11 ) (100 )
Salaries and employee benefits, Adjusted (non-GAAP) $436 $432 $444 $420 $421 $4   1 % $15   4 %
Outside services, Adjusted:
Outside services (GAAP) $99 $96 $91 $98 $102 $3 3 % ($3 ) (3 %)
Less: Notable items 8   (8 ) (100 )
Outside services, Adjusted (non-GAAP) $99 $96 $91 $98 $94 $3   3 % $5   5 %
Occupancy, Adjusted:
Occupancy (GAAP) $78 $79 $82 $77 $78 ($1 ) (1 %) $— %
Less: Notable items    
Occupancy, Adjusted (non-GAAP) $78 $79 $82 $77 $78 ($1 ) (1 %) $—   %
Equipment expense, Adjusted:
Equipment expense (GAAP) $65 $64 $67 $69 $65 $1 2 % $— %
Less: Notable items    
Equipment expense, Adjusted (non-GAAP) $65 $64 $67 $69 $65 $1   2 % $—   %
Amortization of software, Adjusted:
Amortization of software (GAAP) $45 $45 $44 $44 $46 $— % ($1 ) (2 %)
Less: Notable items 3   (3 ) (100 )
Amortization of software, Adjusted (non-GAAP) $45 $45 $44 $44 $43 $—   % $2   5 %
Other operating expense, Adjusted:
Other operating expense (GAAP) $135 $148 $126 $139 $144 ($13 ) (9 %) ($9 ) (6 %)
Less: Notable items 14   (14 ) (100 )
Other operating expense, Adjusted (non-GAAP) $135 $148 $126 $139 $130 ($13 ) (9 %) $5   4 %
 
 

Key performance metrics, non-GAAP financial measures and
reconciliations - Segments

(in millions, except share,
per-share and ratio data)

             
THIRD QUARTER 2017 SECOND QUARTER 2017

Consumer
Banking

Commercial
Banking

Other Consolidated

Consumer
Banking

Commercial
Banking

Other Consolidated
Net income available to common stockholders:
Net income (GAAP) A $122 $201 $25 $348 $118 $187 $13 $318
Less: Preferred stock dividends     7   7        
Net income available to common stockholders B $122   $201   $18   $341   $118   $187   $13 $318  
Return on average tangible common equity:
Average common equity (GAAP) $5,565 $5,685 $8,478 $19,728 $5,519 $5,617 $8,523 $19,659
Less: Average goodwill (GAAP)

 

6,887 6,887 6,882 6,882
Average other intangibles (GAAP) 2 2 2 2
Add: Average deferred tax liabilities related to goodwill (GAAP)     537   537       534 534  
Average tangible common equity C $5,565   $5,685   $2,126   $13,376   $5,519   $5,617   $2,173 $13,309  
Return on average tangible common equity B/C 8.72 % 14.06 % NM 10.13 % 8.57 % 13.37 % NM 9.57 %
Return on average total tangible assets:
Average total assets (GAAP) $60,012 $49,833 $40,167 $150,012 $59,244 $49,731 $40,903 $149,878
Less: Average goodwill (GAAP) 6,887 6,887 6,882 6,882
Average other intangibles (GAAP) 2 2 2 2
Add: Average deferred tax liabilities related to goodwill (GAAP)     537   537         534 534  
Average tangible assets D $60,012   $49,833   $33,815   $143,660     $59,244   $49,731   $34,553 $143,528  
Return on average total tangible assets A/D 0.81 % 1.60 % NM 0.96 % 0.80 % 1.51 % NM 0.89 %
Efficiency ratio:
Noninterest expense (GAAP) E $648 $195 $15 $858 $644 $192 $28 $864
Net interest income (GAAP) 674 354 34 1,062 657 344 25 1,026
Noninterest income (GAAP) 227   136   18   381   229   130   11 370  
Total revenue (GAAP) F $901   $490   $52   $1,443   $886   $474   $36 $1,396  
Efficiency ratio E/F 71.88 % 39.39 % NM 59.41 % 72.64 % 40.48 % NM 61.94 %
 
FIRST QUARTER 2017 FOURTH QUARTER 2016

Consumer
Banking

Commercial
Banking

Other Consolidated

Consumer
Banking

Commercial
Banking

Other Consolidated
Net income available to common stockholders:
Net income (GAAP) A $95 $180 $45 $320 $92 $172 $18 $282
Less: Preferred stock dividends     7   7        
Net income available to common stockholders B $95   $180   $38   $313   $92   $172   $18 $282  
Return on average tangible common equity:
Average common equity (GAAP) $5,460 $5,528 $8,472 $19,460 $5,275 $5,278 $9,092 $19,645
Less: Average goodwill (GAAP) 6,876 6,876 6,876 6,876
Average other intangibles (GAAP) 1 1
Add: Average deferred tax liabilities related to goodwill (GAAP)     531   531       523 523  
Average tangible common equity C $5,460   $5,528   $2,127   $13,115   $5,275   $5,278   $2,738 $13,291  
Return on average tangible common equity B/C 7.06 % 13.18 % NM 9.68 % 6.97 % 12.94 % NM 8.43 %
Return on average total tangible assets:
Average total assets (GAAP) $58,660 $49,243 $40,883 $148,786 $58,066 $48,024 $41,225 $147,315
Less: Average goodwill (GAAP) 6,876 6,876 6,876 6,876
Average other intangibles (GAAP) 1 1
Add: Average deferred tax liabilities related to goodwill (GAAP)     531   531         523 523  
Average tangible assets D $58,660   $49,243   $34,538   $142,441     $58,066   $48,024   $34,871 $140,961  
Return on average total tangible assets A/D 0.66 % 1.48 % NM 0.91 % 0.63 % 1.42 % NM 0.79 %
Efficiency ratio:
Noninterest expense (GAAP) E $647 $190 $17 $854 $649 $187 $11 $847
Net interest income (GAAP) 638 346 21 1,005 639 347 986
Noninterest income (GAAP) 220   134   25   379   227   122   28 377  
Total revenue (GAAP) F $858   $480   $46   $1,384   $866   $469   $28 $1,363  
Efficiency ratio E/F 75.41 % 39.80 % NM 61.68 % 74.90 % 39.83 % NM 62.18 %
 
THIRD QUARTER 2016

Consumer
Banking

Commercial
Banking

  Other Consolidated
Net income available to common stockholders:
Net income (GAAP) A $92 $162 $43 $297
Less: Preferred stock dividends     7   7  
Net income available to common stockholders B $92   $162   $36   $290  
Return on average tangible common equity: