BASIS OF PRESENTATION

12 Months Ended

Dec. 31, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

NOTE 1 - BASIS OF PRESENTATION

The accounting and reporting policies of Citizens Financial Group, Inc. conform to GAAP. The Company’s principal business activity is banking, conducted through its banking subsidiary Citizens Bank, National Association. The Company also provides M&A, capital raising and other financial advisory services to middle market companies across a focused set of industry verticals through its broker-dealer CCMI.

The Consolidated Financial Statements include the accounts of Citizens and subsidiaries in which Citizens has a controlling financial interest. All intercompany transactions and balances have been eliminated. The Company has evaluated its unconsolidated entities and does not believe that any entity in which it has an interest, but does not currently consolidate, meets the requirements to be consolidated as a variable interest entity.

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

Significant Accounting Policies

The following table identifies the Company’s significant accounting policies and the Note and Page where a detailed description of each policy can be found.



	Note	Page
Cash and Due From Banks	Note 2	102
Securities	Note 3	103
Loans and Leases	Note 4	107
Allowance for Credit Losses	Note 5	109
Premises, Equipment and Software	Note 6	120
Mortgage Servicing Rights	Note 7	121
Leases	Note 8	124
Goodwill	Note 9	125
Variable Interest Entities	Note 10	127
Derivative Instruments	Note 13	132
Employee Benefits	Note 14	135
Treasury Stock	Note 16	138
Employee Share-Based Compensation	Note 17	139
Fair Value Measurement	Note 19	142
Revenue Recognition	Note 20	148
Income Taxes	Note 22	150
Earnings Per Share	Note 23	153

Acquisitions

On January 1, 2019, the Company acquired Clarfeld Financial Advisors, LLC (“Clarfeld”), a Tarrytown, New York-based boutique wealth management and financial advisory firm, for total consideration of $110 million. As part of this transaction, the Company expanded its wealth management position with the addition of a robust client base. The Company recognized goodwill of $83 million and other intangibles of $21 million related to the transaction.

On March 1, 2019, the Company acquired certain assets and assumed certain liabilities of Bowstring Advisors, LLC (“Bowstring”), an Atlanta, Georgia-based mergers and acquisitions advisory and capital raising firm, for the consideration of $40 million. As part of this transaction, the Company expanded its mergers and acquisitions advisory position with the addition of a referral network and experienced staff. The Company recognized goodwill of $35 million and other intangibles of $6 million related to the transaction.

Accounting Pronouncements Adopted in 2019



Pronouncement	Summary of Guidance	Effects on Financial Statements
Derivatives and Hedging Issued August 2017	• Reduces the complexity and operational burdens of the current hedge accounting model and portrays more clearly the effects of hedge accounting in the financial statements. • Modifies current requirements to facilitate the application of hedge accounting to partial-term hedges, hedges of prepayable financial instruments, and other strategies. Adoption of these optional changes would occur on a prospective basis. • Requires the effects of fair value hedges to be classified in the same income statement line as the earnings effect of the hedged item. Adoption of this change will occur on a prospective basis. • Requires all effects of cash flow hedges to be deferred in other comprehensive income until the hedged cash flows affect earnings. Periodic hedge ineffectiveness will no longer be recognized in earnings. Adoption of this change will occur on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption.	• The Company adopted the new standard on January 1, 2019 under the modified retrospective method. • Adoption did not have a material impact on the Company’s Consolidated Financial Statements. • Required disclosures are included in Note 13.
Leases Issued February 2016	• Requires lessees to recognize a right-of-use asset and corresponding lease liability for all leases with a lease term of greater than one year. • Requires lessees and lessors to classify most leases using principles similar to existing lease accounting, but eliminates the “bright line” classification tests. • Requires that for finance leases, a lessee recognize interest expense on the lease liability separately from the amortization of the right-of-use asset in the Consolidated Statements of Operations, while for operating leases, such amounts should be recognized as a combined expense. • Requires expanded disclosures about the nature and terms of lease agreements. • Provides the option to adopt using either a modified cumulative-effect approach wherein the guidance is applied to all periods presented, or through a cumulative-effect adjustment beginning in the period of adoption. • Requires companies with land easements to assess whether the easement meets the definition of a lease before applying other accounting guidance.	• The Company adopted the new standard under the modified retrospective approach on January 1, 2019, which is applicable to both its leasing finance business as well as property and equipment leases in which Citizens is lessee. • Adoption resulted in a cumulative-effect adjustment of $12 million, net of taxes, to retained earnings related to leases in which Citizens is lessee. • Adoption resulted in the recognition of a right-of-use asset and corresponding lease liability of $734 million and $749 million, respectively in its Consolidated Balance Sheet for non-cancelable operating lease agreements. • Required lessor disclosures are included in Note 4 and required lessee disclosures are included in Note 8.
Implementation Costs Incurred in a Cloud Computing Arrangement Issued August 2018	• Requires implementation costs incurred in a cloud computing arrangement that is a service contract be deferred and recognized over the term of the arrangement if those costs would be capitalized in a software licensing arrangement. • Requires amortization expense be presented in the same income statement line item as the related hosting service arrangement expense. • Permits adoption prospectively for all implementation costs incurred after adoption or retrospectively through a cumulative-effect adjustment as of the beginning of the first period presented.	• The Company prospectively adopted the new standard on January 1, 2019. • Adoption did not have a material impact on the Company’s Consolidated Financial Statements.

Accounting Pronouncements Pending Adoption



Pronouncement	Summary of Guidance	Effects on Financial Statements
Financial Instruments - Credit Losses Issued June 2016	• Required effective date: January 1, 2020. • Replaces existing incurred loss impairment guidance and establishes a single allowance framework for financial assets carried at amortized cost (including securities HTM), which will reflect management’s estimate of credit losses over the full remaining expected life of the financial assets. • Amends existing impairment guidance for securities AFS to incorporate an allowance, which will allow for reversals of impairment losses in the event that the credit of an issuer improves. • Requires a cumulative-effect adjustment to retained earnings, net of taxes, as of the beginning of the reporting period of adoption. • Requires enhanced credit quality disclosures including disaggregation of credit quality indicators by vintage.	• The Company adopted the new standard on January 1, 2020, retrospectively for loans and leases and HTM securities and prospectively for AFS securities. • To estimate the ACL under CECL, Citizens uses models and other estimation techniques that are sensitive to changes in forecasted economic conditions. The Company applies qualitative factors related to idiosyncratic risk factors, changes in current economic conditions that may not be adequately reflected in quantitatively derived results, or other relevant factors to ensure the ACL reflects the Company’s best estimate of current expected credit losses. • The Company recognized an increase in the ACL upon adoption of approximately $450 million, based on a two-year reasonable and supportable forecast period, and a one-year reversion to long-term historical macroeconomic variables. The increase in ACL is primarily related to consumer loans, such as residential mortgage, unsecured and education, due to the requirement to estimate credit losses over the full remaining expected life of the asset. • Adoption of the new standard could produce higher volatility in the quarterly provision for credit losses than our current reserve process and could adversely impact the Company’s ongoing earnings. • The increase in ACL upon adoption reduced the Company’s CET1 capital ratio by 24 basis points on a fully-phased in basis. This capital impact will be phased in by 25% per year through January 1, 2023, which will impact 2020 by 6 basis points. • Based on the credit quality of our existing debt securities portfolio, the Company did not recognize an ACL for HTM and AFS debt securities upon adoption.