BUSINESS OPERATING SEGMENTS

12 Months Ended

Dec. 31, 2023

Segment Reporting [Abstract]

BUSINESS OPERATING SEGMENTS

NOTE 26 - BUSINESS OPERATING SEGMENTS

Citizens is managed by its Chief Executive Officer on a segment basis. The Company’s three business operating segments are Consumer Banking, Commercial Banking, and Non-Core. The business operating segments are determined based on the products and services provided, or the type of customer served. Each business operating segment has a segment head who reports directly to the Chief Executive Officer, who has final authority over resource allocation decisions and performance assessment. The business operating segments reflect this management structure and the manner in which financial information is currently evaluated by the Chief Executive Officer.

Developing and applying methodologies used to allocate items among the business operating segments is a dynamic process. Accordingly, financial results may be revised periodically as management systems are enhanced, methods of evaluating performance or product lines are updated, or our organizational structure changes.

See Note 1 for a description of segment changes made during 2023.

Reportable Segments

Segment results are determined based upon the Company’s organizational and management structure, with balance sheet and statement of operations items assigned to each of the business segments. The results are not necessarily comparable with similar information reported by other financial institutions. A description of each reportable business operating segment is presented below:

Consumer Banking

The Consumer Banking segment serves consumer customers and small businesses with annual revenues of up to $25 million. It offers traditional banking products and services including deposits, mortgage and home equity lending, credit cards, business loans, education loans, point-of-sale finance loans, and wealth management and investment services. Citizens Private Bank, launched during 2023, integrates wealth management and banking services to serve high net-worth individuals and families, as well as businesses.

The segment’s distribution channels include a branch network, ATMs and a workforce of experienced specialists covering lending, savings and investment needs as well as a broad range of small business products and services. The Company’s Consumer Banking value proposition is based on providing simple, easy to understand product offerings and a convenient banking experience with a more personalized approach.

Commercial Banking

The Commercial Banking segment primarily serves companies and institutions with annual revenues of $25 million to more than $3.0 billion and strives to be a trusted advisor to its clients and preferred provider for their banking needs. A broad complement of financial products and solutions are offered, including lending and leasing, deposit and treasury management services, foreign exchange, interest rate and commodity risk management solutions, as well as syndicated loans, corporate finance, mergers and acquisitions, and debt and equity capital markets capabilities.

The segment focuses on middle-market companies, large corporations and institutions and has dedicated teams with industry and product expertise in Aerospace, Defense and Government Services, Communications, Transportation and Logistics, Food and Restaurants, Human Capital Management, and Gaming. While the segment’s business development efforts are predominantly focused in the Company’s footprint, some of its specialized industry businesses also operate on a national basis. A key component of Commercial Banking’s growth strategy is to present clients with ideas that help their businesses thrive and, in doing so, expand the breadth and depth of our banking relationship with them.

Non-Core

The Non-Core segment includes the Company’s indirect auto and certain purchased consumer loan portfolios that were transferred from the Consumer Banking segment into this newly created segment during 2023. This new segment reflects the manner in which management is currently assessing performance and allocating resources and aligns with the Company’s recently announced balance sheet optimization strategy to discontinue the origination of certain non-strategic lending portfolios.

Non-segment Operations

Other

Non-segment operations are classified as Other and include assets, liabilities, capital, revenues, provision (benefit) for credit losses, expenses and income tax expense not attributed to the Company’s Consumer Banking, Commercial Banking, or Non-Core segments as well as treasury and community development.

Management accounting practices utilized by the Company to measure the performance and produce the results of its segments include the following:

Funds Transfer Pricing

The Company’s FTP, a component of net interest income, ensures consistent business segment pricing behavior by removing interest rate risk from business performance. This risk is centrally managed within the Treasury function and reported in Other non-segment operations. Business operating segments are provided an interest credit for funding it generates and an interest charge for assets it holds. The sum of interest income/expense and FTP charges/credits for each business operating segment is its designated net interest income. The offset to FTP charges and credits is recorded in Other non-segment operations.

The Company employs a matched maturity FTP methodology for the Consumer Banking and Commercial Banking business operating segments with rates based on a product’s repricing frequency and interest sensitivity, as well as other factors. The FTP charge for the Non-Core business operating segment is based on an implied reference pool of high-cost funding sources. This method applies a waterfall marginal funding approach referencing the Company’s secured borrowings collateralized by auto loans, FHLB advances, and various other higher-cost deposit sources required to fully debt-fund the assets.

Provision for credit losses

The provision for credit losses for each business operating segment is based on actual net charge-offs recognized by the business operating segment. The difference between the consolidated provision for credit losses and total net charge-offs for all business operating segments is reflected in Other non-segment operations.

Income taxes

Income taxes are assessed to each business operating segment at a standard tax rate with the residual tax expense or benefit to arrive at the consolidated effective tax rate included in Other non-segment operations.

Expenses

Noninterest expenses incurred by centrally-managed operations or business lines that directly support the operations of another business line are charged to the applicable business line based on its utilization of those services.

Goodwill

Goodwill is allocated to the Consumer Banking and Commercial Banking business operating segments for impairment testing purposes.

Substantially all revenues generated and long-lived assets held by the Company’s business operating segments are derived from customers that reside in the United States. No business operating segment earns revenue from a single external customer that represents ten percent or more of the Company’s total revenues.

	Year Ended December 31, 2023
(dollars in millions)	Consumer Banking	Commercial Banking	Non-Core	Other	Consolidated
Net interest income	$4,187	$2,292	($129)	($109)	$6,241
Noninterest income	1,067	784	—	132	1,983
Total revenue	5,254	3,076	(129)	23	8,224
Noninterest expense	3,542	1,295	123	547	5,507
Profit (loss) before provision (benefit) for credit losses	1,712	1,781	(252)	(524)	2,717
Provision (benefit) for credit losses	280	250	78	79	687
Income (loss) before income tax expense (benefit)	1,432	1,531	(330)	(603)	2,030
Income tax expense (benefit)	373	378	(86)	(243)	422
Net income (loss)	$1,059	$1,153	($244)	($360)	$1,608
Total average assets	$72,693	$76,028	$13,745	$59,755	$222,221

	Year Ended December 31, 2022
(dollars in millions)	Consumer Banking	Commercial Banking	Non-Core	Other	Consolidated
Net interest income	$3,649	$2,103	$378	($118)	$6,012
Noninterest income	1,063	845	—	101	2,009
Total revenue	4,712	2,948	378	(17)	8,021
Noninterest expense	3,255	1,223	136	278	4,892
Profit (loss) before provision (benefit) for credit losses	1,457	1,725	242	(295)	3,129
Provision (benefit) for credit losses	174	46	52	202	474
Income (loss) before income tax expense (benefit)	1,283	1,679	190	(497)	2,655
Income tax expense (benefit)	328	375	48	(169)	582
Net income (loss)	$955	$1,304	$142	($328)	$2,073
Total average assets	$68,027	$74,919	$18,121	$53,994	$215,061

	Year Ended December 31, 2021
(dollars in millions)	Consumer Banking	Commercial Banking	Non-Core	Other	Consolidated
Net interest income	$2,943	$1,706	$594	($731)	$4,512
Noninterest income	1,223	809	—	103	2,135
Total revenue	4,166	2,515	594	(628)	6,647
Noninterest expense	2,857	973	130	121	4,081
Profit (loss) before provision (benefit) for credit losses	1,309	1,542	464	(749)	2,566
Provision (benefit) for credit losses	162	156	23	(752)	(411)
Income (loss) before income tax expense (benefit)	1,147	1,386	441	3	2,977
Income tax expense (benefit)	292	300	112	(46)	658
Net income (loss)	$855	$1,086	$329	$49	$2,319
Total average assets	$57,916	$57,617	$17,592	$51,981	$185,106