REGULATORY MATTERS

3 Months Ended

Mar. 31, 2017

Banking and Thrift [Abstract]

REGULATORY MATTERS

REGULATORY MATTERS

As a bank holding company, the Company is subject to regulation and supervision by the FRB. The primary subsidiaries of the Company are its two insured depository institutions CBNA, a national banking association whose primary federal regulator is the OCC, and CBPA, a Pennsylvania-chartered savings bank regulated by the Department of Banking of the Commonwealth of Pennsylvania and supervised by the FDIC as its primary federal regulator. Under the U.S. Basel III capital framework, the Company and its banking subsidiaries must meet specific minimum requirements for the following ratios: common equity tier 1 capital; tier 1 capital; total capital; and tier 1 leverage. In addition, the Company must not be subject to a written agreement, order or capital directive with any of its regulators. Failure to meet minimum capital requirements can result in the initiation of certain actions that, if undertaken, could have a material effect on the Company’s Consolidated Financial Statements.

The following table presents the Company’s capital and capital ratios under U.S. Basel III Standardized Transitional rules as of March 31, 2017 and December 31, 2016. Certain Basel III requirements are subject to phase-in through 2019, and were applied to this report of actual regulatory ratios. In addition, the Company has declared itself as an “AOCI opt-out” institution, which means the Company is not required to recognize within regulatory capital the impacts of net unrealized gains and losses included within AOCI for available for sale securities, accumulated net gains and losses on cash-flow hedges, net gains and losses on certain defined benefit pension plan assets, and net unrealized gains and losses on securities held to maturity.

	Transitional Basel III
									FDIA Requirements
	Actual				Minimum Capital Adequacy				Classification as Well-capitalized(6)
(dollars in millions)	Amount		Ratio		Amount		Ratio (5)		Amount		Ratio
As of March 31, 2017
Common equity tier 1 capital (1)		$13,941	11.2	%		$7,181	5.750	%		$8,117	6.5	%
Tier 1 capital (2)	14,188		11.4		9,054		7.250		9,991		8.0
Total capital (3)	17,475		14.0		11,552		9.250		12,488		10.0
Tier 1 leverage (4)	14,188		9.9		5,737		4.000		7,172		5.0
As of December 31, 2016
Common equity tier 1 capital (1)		$13,822	11.2	%		$6,348	5.125	%		$8,051	6.5	%
Tier 1 capital (2)	14,069		11.4		8,206		6.625		9,909		8.0
Total capital (3)	17,347		14.0		10,683		8.625		12,386		10.0
Tier 1 leverage (4)	14,069		9.9		5,667		4.000		7,084		5.0

⁽¹⁾ “Common equity tier 1 capital ratio” represents CET1 capital divided by total risk-weighted assets as defined under U.S. Basel III Standardized approach.

⁽²⁾ “Tier 1 capital ratio” is tier 1 capital, which includes CET1 capital plus non-cumulative perpetual preferred equity that qualifies as additional tier 1 capital, divided by total risk-weighted assets as defined under U.S. Basel III Standardized approach.

⁽³⁾ “Total capital ratio” is total capital divided by total risk-weighted assets as defined under U.S. Basel III Standardized approach.

⁽⁴⁾ “Tier 1 leverage ratio” is tier 1 capital divided by quarterly average total assets as defined under U.S. Basel III Standardized approach.

⁽⁵⁾ “Minimum Capital ratio” includes capital conservation buffer of 1.250% for 2017 and 0.625% for 2016; N/A to Tier 1 leverage.

⁽⁶⁾ Presented for informational purposes. Prompt corrective action provisions apply only to the Company’s insured depository institutions-CBNA and CBPA.

Under the Capital Plan Rule, the Company may only make capital distributions, including payment of dividends, in accordance with a capital plan that has been reviewed by the FRB with no objection.

Per the submitted 2016 Capital Plan, which received a non-objection from the FRB, for the three months ended March 31, 2017, the Company paid common dividends of $0.14 per common share or $72 million, declared preferred dividends of $7 million and repurchased $130 million of its outstanding common shares. For the three months ended March 31, 2016, the Company paid common dividends of $0.10 per common share or $53 million and paid total preferred dividends of $7 million.

On April 5, 2017, the Company submitted its 2017 Capital Plan and the results of the annual company-run stress tests to the FRB as part of the 2017 CCAR cycle. All future capital distributions are also subject to consideration and approval by the Board of Directors prior to execution. The timing and exact amount of future dividends and share repurchases will depend on various factors, including capital position, financial performance and market conditions.

On January 30, 2017, the FRB published a final rule that modifies the CCAR Capital Plan and stress test rules. Under the final rule, the Company continues to be classified as a large non-complex firm, that is, a bank holding company with total consolidated assets of at least $50 billion but less than $250 billion, non-bank assets of less than $75 billion, and that is not classified as a global systemically important bank holding company under the FRB’s capital rules. As a result of the new final rule, the FRB may no longer object to the Company’s capital plans on qualitative grounds beginning with the 2017 CCAR and DFAST cycles. The FRB’s qualitative assessment of the Company’s capital planning processes is now incorporated into regular, ongoing supervisory activities, with targeted, horizontal assessments of particular aspects of capital planning. The Company remains subject to the FRB’s quantitative assessment of its ability to meet capital requirements under stress.

In accordance with federal and state banking regulations, dividends paid by the Company’s banking subsidiaries to the Company itself are generally limited to the retained earnings of the respective banking subsidiaries unless specifically approved by the appropriate bank regulator.

A financial subsidiary of a national bank is permitted to engage in a broader range of activities, similar to those of a financial holding company. CBNA has two financial subsidiaries, Citizens Securities, Inc., a registered broker-dealer, and RBS Citizens Insurance Agency, Inc., a dormant entity. On March 13, 2014, the OCC determined that CBNA no longer met the conditions to own a financial subsidiary — namely that CBNA must be both well capitalized and well managed. CBNA has entered into an agreement with the OCC pursuant to which it has developed and submitted to the OCC a remediation plan setting forth the specific actions it will take to bring itself back into compliance with the conditions to own a financial subsidiary. CBNA has completed its undertakings under the plan, which have been validated by the Company’s internal audit team and submitted to the OCC for review and validation. However, until the OCC has completed their validation efforts, CBNA will be subject to restrictions on its ability to acquire control or hold an interest in any new financial subsidiary and to commence new activities in any existing financial subsidiary without the prior consent of the OCC.