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GOODWILL AND INTANGIBLE ASSETS
 12 Months Ended
Dec. 31, 2022
Goodwill and Intangible Assets Disclosure [Abstract]  
GOODWILL AND INTANGIBLE ASSETS
NOTE 10 - GOODWILL AND INTANGIBLE ASSETS
Goodwill is the purchase premium associated with the acquisition of a business and is assigned to the Company’s reporting units at the acquisition date. A reporting unit is a business operating segment or a component of a business operating segment. Citizens has identified and assigned goodwill to two reporting units - Consumer Banking and Commercial Banking - based upon reviews of the structure of the Company’s executive team and supporting functions, resource allocations and financial reporting processes. Once goodwill has been assigned to reporting units, it no longer retains its association with a particular acquisition, and all of the activities within a reporting unit, whether acquired or organically grown, are available to support the value of the goodwill.
Goodwill is not amortized, but is subject to an annual impairment test. Citizens reviews goodwill for impairment annually as of October 31st and in interim periods when events or changes indicate the carrying value of one or more reporting units may not be recoverable. The Company has the option of performing a qualitative assessment of goodwill to determine whether it is more likely than not that the fair value of each reporting unit is less than the carrying value. If it is more likely than not that the fair value exceeds the carrying value, then no further testing is necessary; otherwise, Citizens must perform a quantitative assessment of goodwill.
Citizens may elect to bypass the qualitative assessment and perform a quantitative assessment. The quantitative assessment, used to identify potential impairment, involves comparing each reporting unit’s fair value to its carrying value, including goodwill. If the fair value of a reporting unit exceeds its carrying value inclusive of goodwill, applicable goodwill is deemed to be not impaired. If the carrying value of the reporting unit inclusive of goodwill exceeds fair value, an impairment charge is recorded for the excess. The impairment loss recognized cannot exceed the amount of goodwill assigned to the reporting unit, and the loss establishes a new basis in the goodwill. Subsequent reversal of goodwill impairment losses is not permitted.
Under the quantitative impairment assessment, the fair values of the Company’s reporting units are determined using a combination of income and market-based approaches. Citizens relies on the income approach (discounted cash flow method) for determining fair value. Market and transaction approaches are used as benchmarks to corroborate the value determined by the discounted cash flow method. Citizens relies on several assumptions when estimating the fair value of its reporting units using the discounted cash flow method. These assumptions include the discount rate, projected loan losses, income tax and capital retention rates.
For the year ended December 31, 2022, Citizens performed a quantitative analysis to determine whether the fair value of either of its reporting units was less than the respective reporting unit’s carrying value. Multi-year financial forecasts are developed for each reporting unit by considering several key business drivers such as new business initiatives, customer retention standards, market share changes, anticipated loan and deposit growth, forward interest rates, historical performance, and industry and economic trends, among other considerations. The long-term growth rate used in determining the terminal value of each reporting unit is based on management’s assessment of the minimum expected terminal growth rate of each reporting unit, as well as broader economic considerations such as GDP and inflation. As a result of this quantitative assessment, the Company determined that there was no impairment to the carrying value of the Company's goodwill as of December 31, 2022.
Changes in the carrying value of goodwill for the years ended December 31, 2022 and 2021 are presented below.
(in millions)Consumer BankingCommercial BankingTotal
Balance at December 31, 2020$2,258 $4,792 $7,050 
Business acquisitions— 66 66 
Balance at December 31, 2021$2,258 $4,858 $7,116 
Business acquisitions415 642 1,057 
Balance at December 31, 2022$2,673 $5,500 $8,173 
Goodwill increased during the year ended December 31, 2022 primarily as a result of the Investors and DH Capital acquisitions and the HSBC transaction. Goodwill for the Investors acquisition was allocated between the Consumer and Commercial segments and is preliminary and subject to change. Goodwill for the HSBC transaction was allocated to the Consumer segment, and goodwill for the DH Capital acquisition was allocated to the Commercial segment; both of which are considered final. For additional information regarding the Investors and DH Capital acquisitions and the HSBC transaction see Note 2.
Accumulated impairment losses related to the Consumer Banking reporting unit totaled $5.9 billion at December 31, 2022 and 2021. The accumulated impairment losses related to the Commercial Banking reporting unit totaled $50 million at December 31, 2022 and 2021. No impairment was recorded for the years ended December 31, 2022, 2021 or 2020.
Other Intangibles
Other intangible assets are recognized separately from goodwill if the asset arises as a result of contractual rights or if the asset is capable of being separated and sold, transferred or exchanged. These assets are amortized on a straight-line basis with the exception of core deposits, which are amortized using an accelerated methodology, and are subject to an annual impairment evaluation. Amortization expense is recorded in other operating expense in the Consolidated Statements of Operations.
A summary of the carrying value of intangible assets is presented below.
December 31, 2022December 31, 2021
(dollars in millions)Amortizable Lives (years)
Gross(1)
Accumulated AmortizationNetGrossAccumulated AmortizationNet
Core deposits
10
$144 $20 $124 $— $— $— 
Acquired technology
5 - 7
23 19 4 21 11 10 
Acquired relationships
2 - 15
54 21 33 53 14 39 
Naming Rights
5 - 10
33 7 26 10 3 7 
Other
2 - 7
17 7 10 13 5 8 
Total$271 $74 $197 $97 $33 $64 
(1) Includes $97 million and $47 million of core deposits from the Investors acquisition and the HSBC transaction, respectively, and $24 million of naming rights from the Investors acquisition.
As of December 31, 2022, all of the Company’s intangible assets were being amortized. Amortization expense recognized on intangible assets was $41 million for the year ended December 31, 2022, and $11 million for the years ended December 31, 2021 and 2020. The Company’s projection of amortization expense is based on balances as of December 31, 2022, including estimated amounts related to the Investors acquisition. Future amortization expense may vary from these projections.
Estimated intangible asset amortization expense for the next five years is as follows:
(in millions)Total
2023$41 
202434 
202531 
202628 
202724