Market Overview

Citizens Financial Group, Inc. Reports Second Quarter Net Income of $425 Million and Diluted EPS of $0.88

Share:

Second quarter 2018 net income up 34% and diluted EPS up 40% year
over year

Results reflect year-over-year revenue growth of 8% with positive
operating leverage of 4% on an Underlying basis*

ROTCE of 12.9%, up 3.4% year over year*

Citizens Financial Group, Inc. (NYSE:CFG) today reports
second quarter net income of $425 million, up 34% from $318 million in
second quarter 2017 with earnings per diluted common share of $0.88, up
40% from $0.63 in second quarter 2017. Second quarter 2018 net income
increased $37 million, or 10%, from first quarter 2018 and diluted
earnings per common share improved $0.10, or 13%. Second quarter 2018
Return on Average Tangible Common Equity* ("ROTCE") of 12.9% improved
from 9.6% in second quarter 2017 and 11.7% in first quarter 2018.

Year-over-year revenue growth in the second quarter was 8%, driven by
strength in net interest income, while expense growth was 1%, for
positive operating leverage of 7%. On an Underlying basis, revenue
growth was 7% and expense growth was 3% for operating leverage of 4%.*

"We are pleased to report another quarter of strong earnings growth and
meaningful improvement in return on tangible common equity," said
Chairman and Chief Executive Officer Bruce Van Saun. "We continue to
execute well, with strong balance sheet management and smart investments
in fee-based product capabilities, as well as in technology
applications, digital channels and data. We are well-positioned to
continue our momentum in the second half, as we work hard towards
building a great bank that delivers well for its stakeholders."

Citizens today announces the launch of the next phase of its Tapping Our
Potential ("TOP") efficiency program, which is designed to drive
continuous improvement in the overall efficiency and effectiveness of
the organization while self-funding investments to drive future growth.
The new TOP V program is expected to deliver pre-tax expense and revenue
enhancements of approximately $90 to $100 million by the end of 2019.

Citizens also announces today that its board of directors declared a
third quarter 2018 cash dividend of $0.27 per common share, an increase
of $0.05 per share, or 23%. The dividend is payable on August 15, 2018
to shareholders of record at the close of business on August 1, 2018.

*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. Additional
information on notable items may be found in the "Discussion of Results"
portion of this document. Comparison to second quarter 2017 Underlying
results are before a pre-tax $26 million impact related to impairments
on aircraft lease assets which, reduced noninterest income by $11
million and increased noninterest expense by $15 million and, in
addition to provision expense of $70 million, resulted in total
credit-related costs of $96 million. Where there is a reference to an
"Underlying" result in a paragraph, all measures that follow these
references are on the same basis, when applicable. Throughout this
release, references to consolidated and/or commercial loans and loan
growth include leases. Loans held for sale also referred to as LHFS.
Current reporting-period regulatory capital ratios are preliminary.
Certain totals may not foot due to rounding.

Second Quarter 2018 vs. First Quarter 2018

Key Highlights

  • Second quarter highlights include 3% growth in net interest income and
    5% growth in noninterest income, driven by strength in capital markets
    and foreign exchange and interest rate products. Results also reflect
    two basis points of net interest margin expansion.
  • Continued expense discipline helped deliver an efficiency ratio of
    58%, with operating leverage of 4%.*
  • ROTCE of 12.9% improved by 1.2%.*
  • Tangible book value per common share of $27.67 increased 2%. Fully
    diluted average common shares outstanding decreased 3.1 million shares.

Results

  • Total revenue of $1.5 billion increased 3%, reflecting strength in
    both net interest income and noninterest income.
    • Net interest income of $1.1 billion increased $30 million, driven
      by 2% average loan growth, a two basis point improvement in net
      interest margin to 3.18%, and day count.
    • Noninterest income of $388 million increased $17 million, or 5%,
      reflecting growth in capital markets fees, foreign exchange and
      interest rate products, trust and investment services fees and
      service charges.
  • Noninterest expense of $875 million decreased $8 million, or 1%,
    driven by a seasonal reduction in salaries and benefits expense and a
    reduction in equipment and occupancy expense, partially offset by
    higher outside services and other operating expense.
  • Provision for credit losses of $85 million increased $7 million, or
    9%, from lower first quarter 2018 levels, which included the benefit
    of higher recoveries on prior-period charge-offs; results also reflect
    a $9 million reserve build.

Balance Sheet

  • Average interest-earning assets increased 1%, driven by loan growth of
    2% with particular strength in commercial.
  • Average deposits grew 2% with strength in term, checking with interest
    and demand deposits.
  • Nonperforming loans and leases ("NPLs") to total loans and leases
    ratio of 0.75% improved from 0.78% and the allowance coverage of NPLs
    ratio improved to 148% from 144%.
  • The net charge-off ratio remained relatively stable at 27 basis points.
  • Capital strength remains robust, with a common equity tier 1 ("CET1")
    risk-based capital ratio of 11.2%.*
  • Repurchased $150 million of common stock at a weighted-average price
    of $41.68, and including common dividends, returned $257 million to
    shareholders.
  • Received a non-objection to the 2018 CCAR Capital Plan, which includes
    up to $1.02 billion in share repurchases and the ability to increase
    the quarterly dividend an additional 19% to $0.32 per share in first
    quarter 2019.

Second Quarter 2018 vs. Second Quarter 2017

Key Highlights

  • Second quarter results reflect a 34% increase in net income available
    to common shareholders, led by 8% revenue growth, with 9% growth in
    net interest income and noninterest income growth of 5%, and a 14%
    reduction in income tax expense largely related to December 2017 Tax
    Legislation. Excluding the impact of second quarter 2017 lease
    impairments, revenue increased 7%, with 2% growth in noninterest
    income.*
  • Strong focus on top-line growth and expense management helped drive
    positive operating leverage of 7%, or 4% on an Underlying basis, and a
    4.0% improvement in the efficiency ratio, or 2.4% on an Underlying
    basis.*
  • ROTCE of 12.9% improved 3.4% from 9.6%.*
  • Tangible book value per common share improved 4% to $27.67. Fully
    diluted average common shares outstanding decreased 4%, or 21.3
    million shares.

Results

  • Total revenue of $1.5 billion increased $113 million, or 8%, driven by
    strength in both net interest income and noninterest income. On an
    Underlying basis, total revenue increased 7%.*
    • Net interest income increased $95 million, or 9%, driven by a 21
      basis point improvement in net interest margin and 3% average loan
      growth.
    • Net interest margin of 3.18% reflects higher interest-earning
      asset yields tied to higher short-term interest rates and
      improving loan mix towards higher-return categories, partially
      offset by higher deposit and funding costs.
    • Noninterest income of $388 million increased $18 million, or 5%.
      On an Underlying basis, noninterest income increased $7 million,
      or 2%, driven by higher foreign exchange and interest rate
      products income and trust and investment services fees.*
  • Noninterest expense increased $11 million, or 1%, reflecting the $15
    million impact of second quarter 2017 lease impairments. On an
    Underlying basis, noninterest expense increased 3%, driven by higher
    salaries and employee benefits costs and outside services expense,
    largely tied to continuing investment to drive top-line growth.*
  • Provision for credit losses of $85 million increased $15 million, or
    21%, from unusually low second quarter 2017 levels. Compared with
    Underlying second quarter 2017 total credit-related costs of $96
    million, which incorporate $26 million of aircraft lease impairments,
    second quarter 2018 provision results improved $11 million.*

Balance Sheet

  • Average interest-earning assets increased $2.9 billion, or 2%, driven
    by 3% loan growth with a 4% increase in commercial and a 3% increase
    in retail. This was partially offset by a 3% decrease in the
    investment portfolio.
  • Average deposits increased $4.4 billion, or 4%, on strength in term,
    checking with interest, savings and demand deposits.
  • NPLs to total loans and leases ratio of 0.75% improved from 0.94%,
    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 148%
    improved from 119%.
  • Net charge-offs of 27 basis points remained relatively stable.

Year-Over-Year Update on Plan Execution

Consumer Banking segment

  • Continued balance sheet momentum, with 3% average loan growth
    highlighted by improving mix towards more attractive risk-adjusted
    return categories and 3% average deposit growth; launched Citizens
    Access, a nationwide direct-to-consumer digital bank.
  • Announced Franklin American Mortgage Company transaction which will
    add immediate scale in servicing and correspondent and wholesale
    origination capabilities, along with expanded distribution. Expected
    to close in third quarter 2018.
  • Continued progress in Wealth business with 10% revenue growth,
    including managed money revenue up 26%. Financial advisors up 5% and
    total assets under management up 16%.

Commercial Banking segment

  • Strong balance sheet performance with average loans and leases up 5%,
    driven by growth in mid-corporate and middle market given the benefit
    of our geographic expansion strategies and our focus on Industry
    Verticals, Commercial Real Estate and Private Equity. Average deposits
    up 5%.
  • Continue to benefit from investments to drive fee income with
    noninterest income up 8%, highlighted by a 33% increase in foreign
    exchange and interest rate products and a 17% increase in Commercial
    card fees. Capital markets' pipeline remains robust.

Efficiency and balance sheet optimization initiatives

  • TOP IV, which includes efficiency and revenue initiatives, continues
    to deliver benefits and is now on track to deliver approximately $100
    to $110 million in pre-tax revenue and expense benefits by the end of
    2018.
  • TOP V initiatives are expected to deliver approximately $90 to $100
    million of pre-tax revenue and expense benefits by the end of 2019 and
    help drive continued positive operating leverage and fund investments
    for future growth.
  • Continued progress on balance sheet optimization strategies ("BSO")
    designed to improve the loan portfolio mix towards higher-return
    categories and help manage deposit costs. Sold $353 million of
    lower-return commercial loans in late June 2018. BSO delivered an
    estimated 7 basis points of the 21 basis point net interest margin
    improvement.
                     
Earnings highlights 2Q18 change from
($s in millions, except per share data)           2Q18       1Q18       2Q17 1Q18       2Q17
Earnings $       % $       %
Net interest income $ 1,121 $ 1,091 $ 1,026 $ 30 3 % $ 95 9 %
Noninterest income 388 371 370 17 5 18 5
Total revenue 1,509 1,462 1,396 47 3 113 8
Noninterest expense 875 883 864 (8 ) (1 ) 11 1
Pre-provision profit 634 579 532 55 9 102 19
Provision for credit losses             85         78         70   7   9   15   21
Pre-tax net income 549 501 462 48 10 87 19
Net income 425 388 318 37 10 107 34
Preferred dividends 7 (7 ) (100 ) NM
Net income available to common stockholders           $ 425       $ 381       $ 318 $ 44   12 $ 107   34
Average common shares outstanding
Basic (in millions) 484.7 487.5 506.4 (2.8 ) (1

)%

(21.6 ) (4

)%

Diluted (in millions) 486.1 489.3 507.4 (3.1 ) (1 ) (21.3 ) (4 )
Diluted earnings per share           $ 0.88       $ 0.78       $ 0.63 $ 0.10   13 % $ 0.25   40 %
Key performance metrics*
Net interest margin 3.18 % 3.16 % 2.97 % 2 bps 21 bps
Effective income tax rate 22.6 22.5 31.1 6 (855 )
Efficiency ratio 58 60 62 (248 ) (399 )
Underlying efficiency ratio* 58 60 60 (248 ) (241 )
Return on average common equity 8.7 7.8 6.5 82 217
Return on average tangible common equity 12.9 11.7 9.6 122 336
Underlying return on average tangible common equity* 12.9 11.7 9.6 122 336
Return on average total assets 1.11 1.04 0.85 7 26
Underlying return on average total tangible assets*             1.16 %       1.08 %       0.89 % 8 bps 27 bps
Capital adequacy(1,2)
Common equity tier 1 capital ratio 11.2 % 11.2 % 11.2 %
Total capital ratio 13.8 13.9 14.0
Tier 1 leverage ratio             10.2 %       10.0 %       9.9 %
Asset quality(2)
Total nonperforming loans and leases as a % of total loans and leases 0.75 % 0.78 % 0.94 % (3 ) bps (19 ) bps
Allowance for loan and lease losses as a % of loans and leases 1.10 1.12 1.12 (2 ) (2 )
Allowance for loan and lease losses as a % of nonperforming loans
and leases
148 144 119 460 NM
Net charge-offs as a % of average loans and leases             0.27 %       0.26 %       0.28 % 1 bps (1 ) bps
1) Current reporting-period regulatory capital ratios are
preliminary.
2) Capital adequacy and asset-quality ratios calculated on a
period-end basis, except net charge-offs.
 

Discussion of Results:

Second quarter 2018 net income available to common stockholders of $425
million increased $44 million, or 12%, and fully diluted earnings per
common share increased $0.10, or 13%, compared to first quarter 2018
results, reflecting strong revenue growth and expense management. Second
quarter 2018 EPS reflects a 3.1 million reduction in fully diluted
average common shares outstanding compared to first quarter 2018.

Compared with second quarter 2017, net income available to common
shareholders increased $107 million, or 34%, and fully diluted earnings
per common share increased $0.25, or 40%.

Second and first quarter 2018 results included no notable items. Second
quarter 2017 results included a $26 million pre-tax impact related to
impairments on aircraft lease assets, which reduced second quarter
noninterest income by $11 million and increased noninterest expense by
$15 million, and in addition to provision expense of $70 million,
resulted in total credit-related costs of $96 million, detailed in the
table below.

                             
Lease 2Q18 change from
Notable items* 2Q17 impairment 2Q17 Reported Underlying*
($s in millions, except per share data)           2Q18 Reported impact Underlying* 2Q17 2Q17
 
Net interest income $ 1,121 $ 1,026 $ - $ 1,026 9 % 9 %
Noninterest income             388   370   11   381 5 2
Total revenue 1,509 1,396 11 1,407 8 7
Noninterest expense           $ 875 $ 864 $ (15) $ 849 1 3
Pre-provision profit $ 634 $ 532 $ 26 $ 558 19 14
 
Provision for credit losses $ 85 $ 70 $ - $ 70 21 21
Lease impairment credit-related costs             -   -   26   26 - NM
Total credit-related costs*           $ 85 $ 70 $ 26 $ 96 21 (11)
Net income $ 425 $ 318 $ - $ 318 34 % 34 %
 
Key performance metrics*                      
Diluted EPS $ 0.88 $ 0.63 $ - $ 0.63 40 % 40 %
Efficiency ratio 58 % 62 % (158) bps 60 % (399) bps (241) bps
Operating leverage                                           7.0 % 4.3 %
 

Compared to second quarter 2017, on an Underlying basis,* which excludes
the impact of notable items, second quarter 2018 results reflect strong
revenue growth of 7% and continued expense management that generated
positive operating leverage of 4.3% and drove a 14% increase in
pre-provision profit. Second quarter 2018 EPS reflects a 21.3 million
reduction in fully diluted average common shares outstanding compared to
second quarter 2017.

                                   
Net interest income 2Q18 change from
($s in millions)           2Q18       1Q18       2Q17 1Q18 2Q17
$       % $     %
Interest income:
Interest and fees on loans and leases and loans held for sale $ 1,238 $ 1,154 $ 1,046 $ 84 7 % $ 192 18 %
Investment securities 165 168 154 (3 ) (2 ) 11 7
Interest-bearing deposits in banks             8         6         5   2   33   3 60
Total interest income           $ 1,411       $ 1,328       $ 1,205 $ 83   6 % $ 206 17 %
Interest expense:
Deposits $ 181 $ 145 $ 102 $ 36 25 % $ 79 77 %
Federal funds purchased and securities sold under agreements to
repurchase
1 1

 

 

1 100
Other short-term borrowed funds 14 9 7 5 56 7 100
Long-term borrowed funds             94         82         70   12   15   24 34
Total interest expense           $ 290       $ 237       $ 179 $ 53   22 % $ 111 62 %
Net interest income           $ 1,121       $ 1,091       $ 1,026 $ 30   3 % $ 95 9 %
Net interest margin             3.18 %       3.16 %       2.97 %   2  

bps

 

  21

 

bps

 

Second quarter 2018 net interest income of $1.1 billion increased $30
million, or 3%, from first quarter 2018, given a 2% increase in average
loans, a two basis point improvement in net interest margin to 3.18% and
the benefit of day count. The improvement in net interest margin
reflects higher loan yields tied to higher interest rates and improved
loan mix, partially offset by increased deposit and funding costs and
the impact of an increase in investment portfolio cash positions.

Compared with second quarter 2017, net interest income increased $95
million, or 9%, driven by 3% average loan growth and a 21 basis point
improvement in net interest margin. The improvement in net interest
margin reflects higher interest-earning asset yields given higher
interest rates and continued mix shift towards higher-yielding assets,
partially offset by higher deposit and funding costs.

                           
Noninterest Income 2Q18 change from
($s in millions)           2Q18       1Q18       2Q17 1Q18       2Q17
$       % $       %
Service charges and fees $ 127 $ 124 $ 129 $ 3       2 % $ (2 )       (2

)%

Card fees 60 61 59 (1 ) (2 ) 1 2
Capital markets fees 48 39 51 9 23 (3 ) (6 )
Trust and investment services fees 43 40 39 3 8 4 10
Letter of credit and loan fees 32 30 31 2 7 1 3
Foreign exchange and interest rate products 34 27 26 7 26 8 31
Mortgage banking fees 27 25 30 2 8 (3 ) (10 )
Securities gains, net 2 8 3 (6 ) (75 ) (1 ) (33 )
Other income(1)             15         17         2     (2 ) (12 )   13   NM
Noninterest income           $ 388       $ 371       $ 370   $ 17   5 % $ 18   5 %
Notable items*           $       $       $ (11 ) $   $ 11   100
Underlying noninterest income*           $ 388       $ 371       $ 381   $ 17   5 % $ 7   2 %
1) Other income includes bank owned life insurance and other income.
 

Noninterest income of $388 million increased $17 million, or 5%, from
first quarter 2018, as growth in capital markets fees, foreign exchange
and interest rate products, trust and investment services fees, letters
of credit and loan fees and seasonally higher service charges and fees
was partially offset by lower securities gains and other income.
Mortgage banking fees improved modestly, reflecting higher production
volumes, including higher conforming originations, and higher production
margins, partially offset by a reduction in servicing fees. Card fees
remained relatively stable as the impact of seasonally higher volumes
offset an increase in card transaction expense from lower first quarter
2018 levels. Securities gains decreased $6 million from higher first
quarter 2018 levels that reflected actions to streamline the portfolio.

Compared with second quarter 2017 noninterest income increased $18
million, or 5%, driven by an increase in other income, reflecting the
$11 million impact of second quarter 2017 lease impairments. On an
Underlying basis,* noninterest income growth of 2% reflects growth in
foreign exchange and interest rate product fees, trust and investment
services fees, as well as higher card fees and other income, partially
offset by lower mortgage banking fees, driven by a reduction in loan
sale gains, as well as a reduction in service charges and fees and
capital markets fees.

                           
Noninterest expense 2Q18 change from
($s in millions)           2Q18       1Q18       2Q17 1Q18       2Q17
$       % $       %
Salaries and employee benefits $ 453 $ 470 $ 432 $ (17 )       (4

)%

$ 21       5 %
Outside services 106 99 96 7 7 10 10
Occupancy 79 81 79 (2 ) (2 )
Equipment expense 64 67 64 (3 ) (4 )
Amortization of software 46 46 45 1 2
Other operating expense             127         120         148   7   6   (21 ) (14 )
Noninterest expense           $ 875       $ 883       $ 864 $ (8 ) (1

)%

$ 11   1 %
Notable items                             15       (15 ) (100 )
Underlying noninterest expense*           $ 875       $ 883       $ 849 $ (8 ) (1

)%

$ 26   3 %
 

Noninterest expense of $875 million decreased $8 million, or 1%, from
first quarter 2018, reflecting a $17 million reduction in salaries and
employee benefits tied to seasonally lower payroll taxes and 401(k)
benefits costs and lower equipment expense, partially offset by an
increase in outside services tied to strategic growth initiatives and
costs to enhance efficiency and effectiveness. Results also reflect
higher other expense, driven by an increase in advertising and
charitable contributions as well as seasonally higher travel and
training, partially offset by lower insurance and credit-collection
costs. Outside services and other expense include $3 million of costs
related to the Franklin American Mortgage Company transaction.

Compared with second quarter 2017, noninterest expense of $875 million
increased $11 million, or 1%. On an Underlying basis,* noninterest
expense increased $26 million, or 3%, from second quarter 2017, driven
by higher salaries and employee benefits expense and higher outside
services expense largely tied to continuing investments to drive growth
and efficiency.

The second quarter 2018 effective tax rate of 22.6% remained relatively
stable with first quarter 2018 and decreased from 31.1% in second
quarter 2017, reflecting the impact of December 2017 Tax Legislation.

                     
Consolidated balance sheet review(1) 2Q18 change from
($s in millions)           2Q18       1Q18       2Q17 1Q18       2Q17
$       % $       %
Total assets $ 155,431 $ 153,453 $ 151,407 $ 1,978       1 % $ 4,024       3 %
Loans and leases and loans held for sale 114,117 112,225 109,753 1,892 2 4,364 4
Deposits 117,073 115,730 113,613 1,343 1 3,460 3
Average interest-earning assets 140,525 138,671 137,587 1,854 1 2,938 2
Stockholders' equity 20,467 20,059 20,064 408 2 403 2
Stockholders' common equity 19,924 19,812 19,817 112 1 107 1
Tangible common equity $ 13,394 $ 13,280 $ 13,463 $ 114 1 % $ (69 ) (1

)%

Loan-to-deposit ratio (period-end)(2) 97.5 % 97.0 % 96.6 % 50

 

bps

87 bps
Loans to deposits ratio (avg balances)(2) 98.6 98.6 99.1 3

 

bps

(49 ) bps
Common equity tier 1 capital ratio(3) 11.2 11.2 11.2
Total capital ratio(3)             13.8 %       13.9 %       14.0 %                            
1) Represents period end unless otherwise noted.
2) Includes loans held for sale.
3) Current reporting-period regulatory capital ratios are
preliminary.
 

Total assets of $155.4 billion as of June 30, 2018 increased $2.0
billion, or 1%, from March 31, 2018, given a $1.9 billion increase in
loans and leases and loans held for sale. Compared with June 30, 2017,
total assets increased $4.0 billion, or 3%, as a $4.4 billion increase
in loans and leases was partially offset by a $316 million decline in
investments and interest-bearing deposits, reflecting a decline in the
value of securities due to an increase in market interest rates.

Average interest-earning assets of $140.5 billion increased $1.9
billion, or 1%, from first quarter 2018, driven by a $1.7 billion
increase in loans and leases. Compared with second quarter 2017, average
interest-earning assets increased $2.9 billion, or 2%, as a $3.7 billion
increase in loans and leases was partially offset by an $816 million
decrease in the investment portfolio, reflecting a decline in the value
of securities due to an increase in market interest rates.

                           
Interest-earning assets 2Q18 change from
($s in millions)           2Q18       1Q18       2Q17 1Q18       2Q17
Period-end interest-earning assets $       % $       %
Investments and interest-bearing deposits $ 28,495 $ 28,262 $ 28,811 $ 233   1 % $ (316 )   (1

)%

Commercial loans and leases 54,888 53,144 51,888 1,744 3 3,000 6
Retail loans 58,519 58,281 57,158 238 1,361 2
Total loans and leases 113,407 111,425 109,046 1,982 2 4,361 4
Loans held for sale, at fair value 521 478 520 43 9 1
Other loans held for sale 189 322 187 (133 ) (41 ) 2 1
Total loans and leases and loans held for sale             114,117         112,225         109,753   1,892   2   4,364   4
Total period-end interest-earning assets           $ 142,612       $ 140,487       $ 138,564 $ 2,125   2 % $ 4,048   3 %
Average interest-earning assets
Investments and interest-bearing deposits $ 27,004 $ 26,881 $ 27,820 $ 123 % $ (816 ) (3

)%

Commercial loans and leases 54,543 52,623 52,489 1,920 4 2,054 4
Retail loans 58,313 58,492 56,651 (179 ) 1,662 3
Total loans and leases 112,856 111,115 109,140 1,741 2 3,716 3
Loans held for sale, at fair value 470 420 465 50 12 5 1
Other loans held for sale 195 255 162 (60 ) (24 ) 33 20
Total loans and leases and loans held for sale             113,521         111,790         109,767   1,731   2   3,754   3
Total average interest-earning assets           $ 140,525       $ 138,671       $ 137,587 $ 1,854   1 % $ 2,938   2 %
 

Period-end investments and interest-bearing deposits of $28.5 billion as
of June 30, 2018 increased $233 million from March 31, 2018, largely
reflecting an increase in cash positions and securities, partially
offset by a decline in the value of securities due to an increase in
market interest rates. Compared with June 30, 2017, period-end
investments and interest-bearing deposits decreased $316 million, or 1%,
largely reflecting a decline in the value of securities and lower cash
positions, partially offset by an increase in securities investments. At
the end of second quarter 2018, the average effective duration of the
securities portfolio increased to 4.5 years compared with 4.4 years at
March 31, 2018, given higher long-term rates that drove a decrease in
expected securities prepayment speeds. At June 30, 2017 the securities
portfolio average effective duration was 4.0 years.

Period-end loans and leases of $113.4 billion as of June 30, 2018
increased $2.0 billion, or 2%, from $111.4 billion as of March 31, 2018,
reflecting a $1.7 billion increase in commercial loans and leases as
well as a $238 million increase in retail loans. Compared to June 30,
2017, period-end loans and leases increased $4.4 billion, or 4%, driven
by a $3.0 billion increase in commercial loans and leases as well as a
$1.4 billion increase in retail loans. Second quarter 2018 results
include the impact of the late-June 2018 sale of $353 million of
lower-return commercial loans associated with the company's balance
sheet optimization initiatives.

Second quarter 2018 average loans and leases increased $1.7 billion, or
2%, from first quarter 2018, reflecting a $1.9 billion increase in
commercial loans and leases, partially offset by a $179 million decrease
in retail loans. Commercial loan growth largely reflects growth in
mid-corporate and middle market given the impact of geographic expansion
strategies as well as strength in Industry Verticals, Commercial Real
Estate and Private Equity, partially offset by a planned reduction in
the Asset Finance portfolio. The decrease in retail loans reflects
strength in residential mortgage, education and other unsecured loans,
which was more than offset by a planned reduction in auto as well as
lower home equity balances.

Compared with second quarter 2017, average loans and leases increased
$3.7 billion, or 3%, reflecting a $2.1 billion increase in commercial
loans and leases and a $1.7 billion increase in retail loans. Commercial
loan and lease growth was driven by growth in mid-corporate and middle
market given the impact of geographic expansion strategies, as well as
strength in Industry Verticals, Commercial Real Estate and Private
Equity, partially offset by a planned reduction in the Asset Finance
portfolio. Retail loan growth was driven by strength in mortgage,
unsecured and education, partially offset by a planned reduction in auto
and lower home equity balances.

Deposits                             2Q18 change from
($s in millions)           2Q18       1Q18       2Q17 1Q18       2Q17
Period-end deposits $       % $       %
Demand deposits $ 29,439 $ 28,437 $ 27,814 $ 1,002       4 % $ 1,625       6 %
Checking with interest 22,775 21,767 22,497 1,008 5 278 1
Savings 9,902 9,896 9,542 6 360 4
Money market accounts 36,139 38,880 38,275 (2,741 ) (7 ) (2,136 ) (6 )
Term deposits             18,818         16,750         15,485   2,068   12   3,333   22
Total period-end deposits           $ 117,073       $ 115,730       $ 113,613 $ 1,343   1 % $ 3,460   3 %
Average deposits
Demand deposits $ 28,834 $ 28,544 $ 27,521 $ 290 1 % $ 1,313 5 %
Checking with interest 22,185 21,665 21,751 520 2 434 2
Savings 9,889 9,627 9,458 262 3 431 5
Money market accounts 36,396 37,084 36,912 (688 ) (2 ) (516 ) (1 )
Term deposits             17,838         16,503         15,148   1,335   8   2,690   18
Total average deposits           $ 115,142       $ 113,423       $ 110,790 $ 1,719   2 % $ 4,352   4 %
 

Total period-end deposits of $117.1 billion at June 30, 2018 increased
$1.3 billion, or 1%, from March 31, 2018, reflecting growth in term
deposits, checking with interest and demand deposits, partially offset
by a decrease in money market accounts. Compared with June 30, 2017,
period-end deposits increased $3.5 billion, or 3%, driven by growth in
term deposits, demand deposits, savings and checking with interest,
partially offset by lower money market accounts.

Second quarter 2018 average deposits of $115.1 billion increased $1.7
billion, or 2%, from first quarter 2018 as growth in term deposits,
checking with interest, savings and demand deposits more than offset a
decrease in money market accounts. Compared with second quarter 2017,
average deposits increased $4.4 billion, or 4%, reflecting strength in
term, demand, checking with interest and savings, partially offset by a
decrease in money market accounts.

                           
Borrowed funds 2Q18 change from
($s in millions)           2Q18       1Q18       2Q17 1Q18       2Q17
Period-end borrowed funds $       % $       %
Federal funds purchased and securities sold under agreements to
repurchase
$ 326 $ 315 $ 429 $ 11       3 % $ (103 )       (24

)%

Other short-term borrowed funds 1,499 1,494 2,004 5 (505 ) (25 )
Long-term Borrowed funds
FHLB advances 6,010 5,511 5,112 499 9 898 18
Senior debt 5,981 5,990 6,048 (9 ) (67 ) (1 )
Subordinated debt and other debt             1,650         1,985         1,994   (335 ) (17 )   (344 ) (17 )
Total borrowed funds           $ 15,466       $ 15,295       $ 15,587 $ 171   1 % $ (121 ) (1

)%

 
Average borrowed funds           $ 15,575       $ 15,675       $ 16,730 $ (100 ) (1

)%

$ (1,155 ) (7

)%

 

Total period-end borrowed funds of $15.5 billion at June 30, 2018
increased $171 million, or 1%, from March 31, 2018, reflecting a $155
million increase in long-term borrowings, driven by an increase in
long-term Federal Home Loan Bank ("FHLB") borrowings, partially offset
by a reduction in subordinated debt.

Compared with June 30, 2017, total period-end borrowed funds decreased
$121 million, or 1%, reflecting a $505 million decrease in other
short-term borrowed funds, primarily reflecting a reduction of $1.3
billion in short-term FHLB borrowings, partially offset by an increase
in senior debt maturing in less than a year, and a $487 million increase
in long-term borrowed funds, reflecting an increase in long-term FHLB
borrowings, partially offset by a reduction in subordinated debt.
Compared with June 30, 2017, long-term senior debt was relatively stable
as issuances of $1.5 billion were offset by maturities and a shift to
short-term borrowed funds.

                     
Capital 2Q18 change from

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

          2Q18       1Q18       2Q17 1Q18       2Q17
Period-end capital $       % $       %
Stockholders' equity $ 20,467 $ 20,059 $ 20,064 $ 408   2 % $ 403   2 %
Stockholders' common equity 19,924 19,812 19,817 112 1 107 1
Tangible common equity 13,394 13,280 13,463 114 1 (69 ) (1 )
Tangible book value per common share $ 27.67 $ 27.24 $ 26.61 $ 0.43 2 $ 1.06 4
Common shares - at end of period 484.1 487.6 505.9 (3.5 ) (1 ) (21.8 ) (4 )
Common shares - average (diluted) 486.1 489.3 507.4 (3.1 ) (1

)%

(21.3 ) (4

)%

Common equity tier 1 capital ratio(1) 11.2 % 11.2 % 11.2 %
Total capital ratio(1) 13.8 13.9 14.0
Tier 1 leverage ratio(1)             10.2 %       10.0 %       9.9 %                    
1) Current reporting-period regulatory capital ratios are
preliminary.
 

As of June 30, 2018, our Basel III capital ratios remained well in
excess of applicable regulatory requirements. Our CET1 capital ratio of
11.2% at June 30, 2018 was stable with March 31, 2018 and
June 30, 2017. Tangible book value per common share of $27.67 increased
2% compared with first quarter 2018 and increased 4% compared with
second quarter 2017. During second quarter 2018, the company issued $300
million of preferred stock and redeemed $333 million of subordinated
notes.

As part of CFG's 2017 Capital Plan (the "2017 Plan"), during the second
quarter 2018, the company repurchased 3.6 million shares of common stock
for $150 million, and including common dividends returned $257 million
to shareholders. These results compared with $283 million returned to
shareholders in first quarter 2018 and $201 million returned to
shareholders in second quarter 2017. During the 2017 Plan period, CFG
repurchased 22.7 million common shares at a weighted-average price per
share of $38.95. In accordance with the 2017 Plan, the company paid
quarterly dividends of $0.18 per common share in the third and fourth
quarters of 2017 and $0.22 per common share in the first and second
quarters of 2018. During the 2017 Plan period, CFG returned $1.3 billion
to common shareholders, including $885 million in common share
repurchases and $394 million in common dividends.

CFG's 2018 Capital Plan, beginning in third quarter 2018 and ending in
second quarter 2019, includes the ability to repurchase up to $1.02
billion of Citizens' outstanding common stock, a 20% increase compared
to the $850 million under the original 2017 Capital Plan, and proposed
quarterly dividends of $0.27 per share beginning in third quarter 2018,
a 23% increase compared to second quarter 2018. CFG's 2018 Capital Plan
also anticipates the potential to raise quarterly dividends an
additional 19%, to $0.32 per share beginning in first quarter 2019.
Future capital actions are subject to consideration and approval by
CFG's Board of Directors.

                     
Credit quality review 2Q18 change from
($s in millions)           2Q18       1Q18       2Q17 1Q18       2Q17
$       % $       %
Nonperforming loans and leases $ 845 $ 868 $ 1,025 $ (23 )       (3

)%

$ (180 )       (18

)%

Net charge-offs 76 70 75 6 9 1 1
Provision for credit losses 85 78 70 7 9 15 21
Allowance for loan and lease losses $ 1,253 $ 1,246 $ 1,219 $ 7 1 % $ 34 3 %
Total nonperforming loans and leases

as a % of total loans and leases

0.75 % 0.78 % 0.94 % (3 ) bps (19 ) bps
Net charge-offs as % of total loans and leases 0.27 0.26 0.28 1 bps (1 ) bps
Allowance for loan and lease losses as a % of total loans and leases 1.10 % 1.12 % 1.12 % (2 ) bps (2 ) bps
Allowance for loan and lease losses as a % of nonperforming loans
and leases
            148.2 %       143.6 %       119.0 %   460   bps     NM          
 

Overall credit quality remains strong, reflecting the benefit of
continued growth in higher quality retail loans and a broadly stable
risk profile in commercial portfolios. As of June 30, 2018,
nonperforming loans and leases ("NPLs") of $845 million decreased $23
million, or 3%, from March 31, 2018, largely reflecting a decrease in
retail. Compared to June 30, 2017, NPLs decreased $180 million, or 18%,
reflecting a $134 million decrease in commercial driven by a reduction
in nonperforming commodities-related credits, and a $46 million decrease
in retail largely in real-estate secured categories. The nonperforming
loans and leases to total loans and leases ratio of 0.75% at June 30,
2018, was relatively stable with March 31, 2018 and improved 19 basis
points from 0.94% at June 30, 2017.

Second quarter 2018 net charge-offs of $76 million increased $6 million,
or 9%, from first quarter 2018, largely reflecting a $15 million
increase in commercial, driven by higher gross charge-offs and lower
recoveries, partially offset by a $9 million decrease in retail largely
reflecting a seasonal reduction in auto. Compared with second quarter
2017, net charge-offs remained relatively stable reflecting a modest
increase in retail given expected portfolio seasoning in growth
categories, partially offset by a modest reduction in commercial. Second
quarter 2018 net charge-offs of 27 basis points of average loans and
leases was relatively stable compared with 26 basis points in first
quarter 2018 and 28 basis points in second quarter 2017.

The second quarter 2018 allowance for loan and lease losses of $1.3
billion increased $7 million compared to first quarter 2018 and
increased $34 million compared to second quarter 2017.

The allowance for loan and lease losses to total loans and leases ratio
of 1.10% as of June 30, 2018 remained relatively stable with March 31,
2018 and June 30, 2017 levels. The allowance for loan and lease losses
to nonperforming loans and leases ratio of 148% as of June 30, 2018
improved from 144% as of March 31, 2018 and 119% as of June 30, 2017.

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) 230-1059, conference ID 443612

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 July 20 through

August 20, 2018. Please dial (800) 475-6701 and enter access code
443612. 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 $155.4 billion in assets as of June 30,
2018. 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 1,150 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.

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 "Underlying" results. We believe that these
"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 "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 "Underlying" items, which are included, where applicable, in the
financial results presented in accordance with GAAP. "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 "Underlying" results in any
period reflect our operational performance in that period and,
accordingly, it is useful to consider our GAAP results and our
"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 FOR THE SIX MONTHS ENDED JUNE 30,
        2Q18 Change     2018 Change
2Q18 1Q18 4Q17 3Q17 2Q17 1Q18 2Q17 2018 2017 2017
$ % $ % $ %
Noninterest income, Underlying:
Noninterest income (GAAP) $ 388 $ 371 $ 404 $ 381 $ 370 $ 17 5 % $ 18 5 % $ 759 $ 749 $ 10 1 %
Less: Notable items       17       (11 )       11   100     (11 )   11   100
Noninterest income, Underlying (non-GAAP) $ 388 $ 371 $ 387   $ 381 $ 381   $ 17   5 % $ 7   2 % $ 759 $ 760     ($1 ) %
Total revenue, Underlying:
Total revenue (GAAP) A $ 1,509 $ 1,462 $ 1,484 $ 1,443 $ 1,396 $ 47 3 % $ 113 8 % $ 2,971 $ 2,780 $ 191 7 %
Less: Notable items       17       (11 )       11   100     (11 )   11   100
Total revenue, Underlying (non-GAAP) B $ 1,509 $ 1,462 $ 1,467   $ 1,443 $ 1,407   $ 47   3 % $ 102   7 % $ 2,971 $ 2,791   $ 180   6 %
Noninterest expense, Underlying:
Noninterest expense (GAAP) C $ 875 $ 883 $ 898 $ 858 $ 864 ($8 ) (1 %) $ 11 1 % $ 1,758 $ 1,718 $ 40 2 %
Less: Notable items       40       15         (15 ) (100 )     15     (15 ) (100 )
Noninterest expense, Underlying (non-GAAP) D $ 875 $ 883 $ 858   $ 858 $ 849     ($8 ) (1 %) $ 26   3 % $ 1,758 $ 1,703   $ 55   3 %
Pre-provision profit:
Total revenue (GAAP) A $ 1,509 $ 1,462 $ 1,484 $ 1,443 $ 1,396 $ 47 3 % $ 113 8 % $ 2,971 $ 2,780 $ 191 7 %
Less: Noninterest expense (GAAP) C   875   883   898     858   864     (8 ) (1 )   11   1   1,758   1,718     40   2
Pre-provision profit (GAAP) $ 634 $ 579 $ 586   $ 585 $ 532   $ 55   9 % $ 102   19 % $ 1,213 $ 1,062   $ 151   14 %
Pre-provision profit, Underlying:
Total revenue, Underlying (non-GAAP) B $ 1,509 $ 1,462 $ 1,467 $ 1,443 $ 1,407 $ 47 3 % $ 102 7 % $ 2,971 $ 2,791 $ 180 6 %
Less: Noninterest expense, Underlying (non-GAAP) D   875   883   858     858   849     (8 ) (1 )   26   3   1,758   1,703     55   3
Pre-provision profit, Underlying (non-GAAP) $ 634 $ 579 $ 609   $ 585 $ 558   $ 55   9 % $ 76   14 % $ 1,213 $ 1,088   $ 125   11 %
Total credit-related costs, Underlying:
Provision for credit losses (GAAP) $ 85 $ 78 $ 83 $ 72 $ 70 $ 7 9 % $ 15 21 % $ 163 $ 166 ($3 ) (2 %)
Add: Lease impairment credit-related costs             26         (26 ) (100 )     26     (26 ) (100 )
Total credit-related costs, Underlying (non-GAAP) $ 85 $ 78 $ 83   $ 72 $ 96   $ 7   9 %   ($11 ) (11 %) $ 163 $ 192     ($29 ) (15 %)
Income before income tax expense, Underlying:
Income before income tax expense (GAAP) E $ 549 $ 501 $ 503 $ 513 $ 462 $ 48 10 % $ 87 19 % $ 1,050 $ 896 $ 154 17 %
Less: Income before income tax expense (benefit) related to notable
items
      (23 )                        
Income before income tax expense, Underlying (non-GAAP) F $ 549 $ 501 $ 526   $ 513 $ 462   $ 48   10 % $ 87   19 % $ 1,050 $ 896   $ 154   17 %
Income tax expense, Underlying:
Income tax expense (benefit) (GAAP) G $ 124 $ 113 ($163 ) $ 165 $ 144 $ 11 10 % ($20 ) (14 %) $ 237 $ 258 ($21 ) (8 %)
Less: Income tax expense (benefit) related to notable items       (340 )                   (23 )   23   100
Income tax expense, Underlying (non-GAAP) H $ 124 $ 113 $ 177   $ 165 $ 144   $ 11   10 %   ($20 ) (14 %) $ 237 $ 281     ($44 ) (16 %)
Net income, Underlying:
Net income (GAAP) I $ 425 $ 388 $ 666 $ 348 $ 318 $ 37 10 % $ 107 34 % $ 813 $ 638 $ 175 27 %
Add: Notable items, net of income tax expense (benefit)       (317 )                   (23 )   23   100
Net income, Underlying (non-GAAP) J $ 425 $ 388 $ 349   $ 348 $ 318   $ 37   10 % $ 107   34 % $ 813 $ 615   $ 198   32 %
Net income available to common stockholders, Underlying:
Net income available to common stockholders (GAAP) K $ 425 $ 381 $ 666 $ 341 $ 318 $ 44 12 % $ 107 34 % $ 806 $ 631 $ 175 28 %
Add: Notable items, net of income tax expense (benefit)       (317 )                   (23 )   23   100
Net income available to common stockholders, Underlying (non-GAAP) L $ 425 $ 381 $ 349   $ 341 $ 318   $ 44   12 % $ 107   34 % $ 806 $ 608   $ 198   33 %
 
 

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

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

                                 
QUARTERLY TRENDS FOR THE SIX MONTHS ENDED JUNE 30,
        2Q18 Change         2018 Change
2Q18 1Q18 4Q17 3Q17 2Q17 1Q18 2Q17 2018 2017 2017
$/bps % $/bps % $/bps %
Operating leverage:
Total revenue (GAAP) A $ 1,509 $ 1,462 $ 1,484 $ 1,443 $ 1,396 $ 47 3.33 % $ 113 8.15 % $ 2,971 $ 2,780 $ 191 6.86 %
Less: Noninterest expense (GAAP) C 875 883 898 858 864 (8 ) (0.91 ) 11 1.19   1,758 1,718 40 2.30  
Operating leverage 4.24 % 6.96 % 4.56 %
Operating leverage, Underlying:
Total revenue, Underlying (non-GAAP) B $ 1,509 $ 1,462 $ 1,467 $ 1,443 $ 1,407 $ 47 3.33 % $ 102 7.29 % $ 2,971 $ 2,791 $ 180 6.43 %
Less: Noninterest expense, Underlying (non-GAAP) D 875 883 858 858 849 (8 ) (0.91 ) 26 3.01   1,758 1,703 55 3.22  
Operating leverage, Underlying (non-GAAP) 4.24 % 4.28 % 3.21 %
Efficiency ratio and efficiency ratio, Underlying:
Efficiency ratio C/A 57.95 % 60.43 % 60.52 % 59.41 % 61.94 % (248 )

bps

 

(399 )

bps

 

59.17 % 61.81 % (264 )

bps

 

Efficiency ratio, Underlying (non-GAAP) D/B 57.95 60.43 58.50 59.41 60.36 (248 )

bps

 

(241 )

bps

 

59.17 61.02 (185 )

bps

 

Effective income tax rate and effective income tax rate,
Underlying:
Effective income tax rate G/E 22.58 % 22.52 % (32.40 %) 32.18 % 31.13 % 6

bps

 

(855 )

bps

 

22.55 % 28.82 % (627 )

bps

 

Effective income tax rate, Underlying H/F 22.58 22.52 33.68 32.18 31.13 6

bps

 

(855 )

bps

 

22.55 31.34 (879 )

bps

 

Return on average common equity and return on average common
equity, Underlying:
Average common equity (GAAP) M $ 19,732 $ 19,732 $ 19,624 $ 19,728 $ 19,659 $ % $ 73 % $ 19,732 $ 19,560 $ 172 1 %
Return on average common equity K/M 8.65 % 7.83 % 13.46 % 6.87 % 6.48 % 82

bps

 

217

bps

 

8.24 % 6.50 % 174

bps

 

Return on average common equity, Underlying (non-GAAP) L/M 8.65 7.83 7.05 6.87 6.48 82

bps

 

217

bps

 

8.24 6.27 197

bps

 

Return on average tangible common equity and return on average
tangible common equity, Underlying:

Average common equity (GAAP) M $ 19,732 $ 19,732 $ 19,624 $ 19,728 $ 19,659 $ % $ 73 % $ 19,732 $ 19,560 $ 172 1 %
Less: Average goodwill (GAAP) 6,887 6,887 6,887 6,887 6,882 5 6,887 6,879 8
Less: Average other intangibles (GAAP) 2 2 2 2 2 2 1 1 100

Add: Average deferred tax liabilities related to goodwill (GAAP)

  357     355     531     537     534     2   1   (177 ) (33 )   356       533     (177 ) (33 )
Average tangible common equity N $ 13,200   $ 13,198   $ 13,266   $ 13,376   $ 13,309   $ 2   %   ($109 ) (1 %) $ 13,199   $ 13,213     ($14 ) %
Return on average tangible common equity K/N 12.93 % 11.71 % 19.92 % 10.13 % 9.57 % 122

bps

 

336

bps

 

12.32 % 9.62 % 270

bps

 

Return on average tangible common equity, Underlying (non-GAAP)

L/N 12.93 11.71 10.43 10.13 9.57 122

bps

 

336

bps

 

12.32 9.28 304

bps

 

Return on average total assets and return on average total
assets, Underlying:
Average total assets (GAAP) O $ 153,253 $ 151,523 $ 151,111 $ 150,012 $ 149,878 $ 1,730 1 % $ 3,375 2 % $ 152,393 $ 149,335 $ 3,058 2 %
Return on average total assets I/O 1.11 % 1.04 % 1.75 % 0.92 % 0.85 % 7

bps

 

26

bps

 

1.08 % 0.86 % 22

bps

 

Return on average total assets, Underlying (non-GAAP) J/O 1.11 1.04 0.92 0.92 0.85 7

bps

 

26

bps

 

1.08 0.83 25

bps

 

Return on average total tangible assets and return on average
total tangible assets, Underlying:

Average total assets (GAAP) O $ 153,253 $ 151,523 $ 151,111 $ 150,012 $ 149,878 $ 1,730 1 % $ 3,375 2 % $ 152,393 $ 149,335 $ 3,058 2 %
Less: Average goodwill (GAAP) 6,887 6,887 6,887 6,887 6,882 5 6,887 6,879 8
Less: Average other intangibles (GAAP) 2 2 2 2 2 2 1 1 100
Add: Average deferred tax liabilities related to goodwill (GAAP)   357     355     531     537     534     2   1   (177 ) (33 )   356     533     (177 ) (33 )
Average tangible assets P $ 146,721   $ 144,989   $ 144,753   $ 143,660   $ 143,528   $ 1,732   1 % $ 3,193   2 % $ 145,860   $ 142,988   $ 2,872   2 %
Return on average total tangible assets I/P 1.16 % 1.08 % 1.83 % 0.96 % 0.89 % 8

bps

 

27

bps

 

1.12 % 0.90 % 22

bps

 

Return on average total tangible assets, Underlying (non-GAAP) J/P 1.16 1.08 0.96 0.96 0.89 8

bps

 

27

bps

 

1.12 0.87 25

bps