CITIZENS FINANCIAL GROUP, INC.  MANAGEMENT’S DISCUSSION AND ANALYSIS 96 ?
Repurchased 17.3 million shares of common stock at an average price of $24.81 per share, reducing regulatory capital by $430 million.
At December 31, 2016, all regulatory ratios remained well above their respective fully phased-in Basel III minimum, plus the capital conservation buffer for the risk-based ratios.
Fully phased-in regulatory capital ratios are Key Performance Metrics.
For more information on the computation of these Key Performance Metrics, see “—Principal Components of Operations and Key Performance Metrics Used By Management — Key Performance Metrics and Non-GAAP Financial Measures,” Banking Subsidiaries’ Capital The following table presents our banking subsidiaries’ capital ratios under Basel III Standardized Transitional rules as of December 31, 2016 and 2015:
## Table 0 ##
(1) “Common equity tier 1 capital ratio” is CET1 capital divided by total risk-weighted assets as defined under 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 riskweighted assets as defined under Basel III Standardized approach.
(3) “Total capital ratio” is total capital divided by total risk-weighted assets as defined under Basel III Standardized approach.
(4) “Tier 1 leverage ratio” is tier 1 capital divided by quarterly average total assets as defined under Basel III Standardized approach.
CBNA CET1 capital under Basel III Standardized Transitional rules totaled $11.2 billion at December 31, 2016, up $494 million from $10.8 billion at December 31, 2015 reflecting the impact of net income growth partially offset by dividend payments.
At December 31, 2016, CBNA held minimal additional tier 1 capital.
Total capital was $13.4 billion at December 31, 2016, an increase of $311 million from December 31, 2015, driven primarily by the increase in CET1 capital net of the redemption of subordinated debt.
CBNA risk-weighted assets based on Basel III Standardized Transitional rules at December 31, 2016 of $100.5 billion, increased $8.9 billion from December 31, 2015 driven by growth in commercial loans and commitments, commercial real estate, student, residential mortgage and unsecured retail loans.
As of December 31, 2016, CBNA’s tier 1 leverage ratio decreased approximately 43 basis points to 10.3% from 10.7% as of December 31, 2015, driven by a $9.0 billion increase in adjusted quarterly average total assets that drove a 90 basis point decline in the ratio, partially offset by a 47 basis point increase for higher CET1 capital described above.
CBPA CET1 capital under Basel III Standardized Transitional rules totaled $3.1 billion at December 31, 2016, and increased $77 million from $3.0 billion at December 31, 2015 as the impact of net income growth and amortization of deferred tax related to goodwill was partially offset by the impact of dividend payments.
At December 31, 2016, there was no additional tier 1 capital.
CBPA total capital of $3.3 billion at December 31, 2016 decreased $226 million from December 31, 2015 driven by the redemption of subordinated debt partially offset by an increase in CET1 capital.
CBPA risk-weighted assets based on Basel III Standardized Transitional rules at December 31, 2016 of $24.4 billion, increased $1.2 billion from December 31, 2015 largely reflecting the impact of growth in student, commercial, commercial real estate and mortgage backed securities partially offset by a reduction in residential mortgage and auto.
years.
Our cost of storm-related repairs as a result of 2005 hurricane activity in the Gulf of Mexico was not significant and our Gulf of Mexico production quickly returned to pre-storm levels.
In late September 2004, certain production platforms in the Gulf of Mexico were evacuated due to hurricane activity.
All facilities were back on line by October 1, 2004 with the exception of the Petronius platform which came back on line in March 2005.
As a result of the damage to the Petronius platform, we recorded expense of $11 million in 2004 representing repair costs incurred, partially offset by the net effects of the property damage insurance recoveries and the related retrospective insurance premiums.
We recorded income of $53 million in 2005 and $34 million in 2004 for business interruption insurance recoveries.
International E&P income increased $226 million in 2006 from 2005, reflecting an increase in pretax income of $1.639 billion and an increase in the effective tax rate from 34 percent in 2005 to 62 percent in 2006.
The revenue increase discussed above, primarily related to higher liquid hydrocarbon sales volumes and prices in Libya, had the most significant impact on pretax income.
Depreciation, depletion and amortization and other variable costs increased with increased production to partially offset the revenue increase.
Exploration expenses also increased $97 million in 2006 compared to 2005.
Exploration expense related to dry wells and other write-offs was $68 million in 2006 and $44 million in 2005.
Also included in 2006 exploration expense was $47 million for exiting the Cortland and Empire leases in Nova Scotia.
The increase in the effective income tax rate was primarily the result of the income taxes related to our Libyan operations, where the statutory income tax rate is in excess of 90 percent, and the 2006 increase in the U. K.  supplemental corporation tax rate from 10 percent to 20 percent.
International E&P income increased $488 million in 2005 from 2004, reflecting an increase in pretax income of $740 million and an effective income tax rate of 37 percent in both years.
The revenue increase discussed above had the most significant impact on pretax income.
Increases in production costs and depletion, depreciation and amortization related primarily to increased production partially offset the benefit of higher revenue.
Exploration expenses were also higher in 2005.
RM&T segment income increased $1.167 billion in 2006 from 2005 and $1.060 billion in 2005 from 2004.
Segment income in 2006 and 2005 benefited from the 38 percent minority interest in MPC that we acquired on June 30, 2005.
Pre-tax income increased by $1.802 billion in 2006 from 2005 and $1.766 billion in 2005 from 2004.
The pretax earnings reduction related to the minority interest was $376 million in 2005 and $539 million in 2004.
The key driver of the increase in RM&T pretax income in both years was our refining and wholesale marketing gross margin which averaged 22.88 cents per gallon in 2006 compared to 15.82 cents in 2005 and 8.77 cents in 2004.
The increase in the margin for 2006 reflected wider crack spreads, improved refined product sales realizations, the favorable effects of our ethanol blending program and increased refinery throughputs.
In 2005, the margin improved initially due to wider sweet/sour crude oil differentials and later due to the temporary impact that Hurricanes Katrina and Rita had on refined product prices and concerns about the adequacy of distillate supplies heading into that winter.
Included in the refining and wholesale marketing gross margin were pretax gains of $400 million in 2006 and pretax losses of $238 million in 2005 and $272 million in 2004 related to derivatives utilized primarily to manage price risk.
These derivative gains and losses are largely offset by gains and losses on the physical commodity transactions related to these derivative positions.
The change from derivative losses to derivative gains reflects both improvements in the realized effects of our derivatives programs as well as unrealized effects as a result of marking open derivatives positions to market.
See further discussion under ‘‘Item 7A.
Quantitative and Qualitative Disclosures about Market Risk.
’’ We averaged 980 mbpd of crude oil throughput in 2006, or 101 percent of system capacity.
We averaged 973 mbpd of crude oil throughput in 2005 and 939 mbpd in 2004, representing 102 percent and 99 percent of system capacity for those years.
Our capacity increased in 2005 as a result of the Detroit refinery expansion from 74 to 100 mbpd.
The following table includes certain key operating statistics for the RM&T segment for each of the last three years.
RM&T Operating Statistics
## Table 1 ##
(a) Sales revenue less cost of refinery inputs, purchased products and manufacturing expenses, including depreciation.
(b) Total average daily volumes of refined product sales to wholesale, branded and retail (SSA) customers.
(c) On April 1, 2006, we changed our accounting for matching buy/sell transactions as a result of a new accounting standard.
This change resulted in lower refined product sales volumes for the remainder of 2006 than would have been reported under the previous accounting practices.
See Note 2 to the consolidated financial statements.
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations.  ?
Telepizza will manage supply chain logistics for the entire master franchise territory and will become an authorized supplier of Pizza Hut branded restaurants ?
Across the regions covered by the master franchise agreement, Telepizza will target opening at least 1,300 new units over the next ten years and 2,550 units in total over 20 years As a result of the alliance we added 1,282 Telepizza units to our Pizza Hut Division unit count at December 31, 2018.
In total approximately 2,300 Pizza Hut and Telepizza units are subject to the master franchise agreement as of December 31, 2018.
Of these 2,300 units, we anticipate between 100 and 150 may close due to overlap in a particular trade area.
Based upon our ongoing and active maintenance of the Pizza Hut intellectual property as well as Telepizza’s active involvement in supply chain management and their role as a master franchisee, both parties are exposed to significant risks and rewards depending on the commercial success of the alliance.
As a result, the alliance has been identified as a collaborative arrangement and upon consummation of the alliance no amounts were recorded in our Consolidated Financial Statements (other than insignificant success fees that were paid to third-party advisors).
Subsequent to consummation of the deal, for all Pizza Hut restaurants that are part of the alliance, we will receive a continuing fee of 3.5% of restaurant sales.
Likewise, for most Telepizza restaurants that are part of the alliance we will receive an alliance fee of 3.5% of restaurant sales.
These fees will be recorded as Franchise and property revenues within our Consolidated Statement of Income when the related sales occur, consistent with our recognition of continuing fees for all other restaurants subject to our franchise agreements.
These fees will be reduced by a sales-based credit that decreases over time and, potentially, certain incentive payments if development or conversion targets are met.
Previously, the existing Pizza Hut restaurants that are now subject to the master franchise agreement with Telepizza generally paid a continuing fee of 6% of restaurant sales consistent with our standard International franchise agreement terms.
Adoption of Topic 606, “Revenue from Contracts with Customers” The Financial Accounting Standards Board (“FASB”) has issued standards to provide principles within a single framework for revenue recognition of transactions involving contracts with customers across all industries (“Topic 606”).
As a result, the Company has changed its accounting policy for revenue recognition as detailed in Note 2.
We adopted Topic 606 on January 1, 2018, using the modified retrospective method.
Therefore, the comparative information for fiscal 2017 and 2016 has not been adjusted and continues to be reported under our accounting polices related to revenue recognition prior to the adoption of Topic 606 (“Legacy GAAP”).
GAAP Operating Profit for the year ended December 31, 2018 was $14 million lower and Core Operating Profit was $41 million lower (2 percentage points) than what would have been recognized under Legacy GAAP.
## Table 2 ##
a) Reflects incentive payments made to or on behalf of franchisees during 2018 that under Legacy GAAP would have been recognized as expense in full in 2018.
Due to the size and nature of such payments, we historically would have included such amounts as Special Items and thus in the table above have not allocated their impact to our Divisional results.
Such amounts are now being capitalized with related amortization recognized as a reduction of Franchise and property revenues over the period of expected cash flows from the franchise agreements to which the payments relate.
Also reflects the recognition as Refranchising gain of deferred franchise fees upon the modification of existing franchise agreements when entering into master franchise agreements.
Topic 606 also impacted transactions that were not historically included in our revenues and expenses such as franchisee contributions to, and subsequent expenditures from, advertising cooperatives that we are required to consolidate, as well as receipts and expenditures for other services we provide to our franchisees.
Based on Legacy GAAP, these transactions were reported on a net basis in our Consolidated Statements of Income.
This change did not have a significant impact on Operating Profit, as the contributions that are now recorded in Franchise contributions for advertising and other services are largely offset by the expenditures recorded in Franchise advertising and other services expense.
Refer to Notes 2 and 5 for further details of the significant changes and quantitative impact of Topic 606.
Income Tax Matters The Tax Cuts and Jobs Act of 2017 (“Tax Act”) was enacted on December 22, 2017 (See Note 17 for discussion of the charge recorded as a result of the enactment).
The Tax Act significantly modified the U. S.  corporate income tax system by, among other things, reducing the federal income tax rate from 35% to 21% beginning in 2018, limiting certain deductions, including limiting the deductibility of interest expense to 30% of U. S.  Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”), imposing a mandatory one-time deemed repatriation tax on accumulated foreign earnings and creating a territorial tax system that changes the manner in which foreign earnings are now subject to U. S.  tax.

<table><tr><td></td><td colspan="4">Transitional Basel III December 31,</td></tr><tr><td></td><td colspan="2">2016</td><td colspan="2">2015</td></tr><tr><td>(dollars in millions)</td><td>Amount</td><td>Ratio</td><td>Amount</td><td>Ratio</td></tr><tr><td>Citizens Bank, N.A.</td><td></td><td></td><td></td><td></td></tr><tr><td>Common equity tier 1 capital<sup>-1</sup></td><td>$11,248</td><td>11.2%</td><td>$10,754</td><td>11.7%</td></tr><tr><td>Tier 1 capital<sup>-2</sup></td><td>11,248</td><td>11.2</td><td>10,754</td><td>11.7</td></tr><tr><td>Total capital<sup>-3</sup></td><td>13,443</td><td>13.4</td><td>13,132</td><td>14.3</td></tr><tr><td>Tier 1 leverage<sup>-4</sup></td><td>11,248</td><td>10.3</td><td>10,754</td><td>10.7</td></tr><tr><td>Risk-weighted assets</td><td>100,491</td><td></td><td>91,625</td><td></td></tr><tr><td>Quarterly adjusted average assets</td><td>109,530</td><td></td><td>100,504</td><td></td></tr><tr><td>Citizens Bank of Pennsylvania</td><td></td><td></td><td></td><td></td></tr><tr><td>Common equity tier 1 capital<sup>-1</sup></td><td>$3,094</td><td>12.7%</td><td>$3,017</td><td>13.0%</td></tr><tr><td>Tier 1 capital<sup>-2</sup></td><td>3,094</td><td>12.7</td><td>3,017</td><td>13.0</td></tr><tr><td>Total capital<sup>-3</sup></td><td>3,333</td><td>13.6</td><td>3,559</td><td>15.4</td></tr><tr><td>Tier 1 leverage<sup>-4</sup></td><td>3,094</td><td>8.8</td><td>3,017</td><td>9.1</td></tr><tr><td>Risk-weighted assets</td><td>24,426</td><td></td><td>23,179</td><td></td></tr><tr><td>Quarterly adjusted average assets</td><td>35,057</td><td></td><td>33,045</td><td></td></tr></table>
<table><tr><td> </td><td> 2006 </td><td>2005 </td><td>2004 </td></tr><tr><td> RM&T OPERATING STATISTICS</td><td></td><td></td><td></td></tr><tr><td>Refining and wholesale marketing gross margin ($per gallon)<sup>(a)</sup></td><td>$0.2288</td><td>$0.1582</td><td>$0.0877</td></tr><tr><td>Refined products sales volumes (mbpd)<sup>(b)(c)</sup></td><td>1,425</td><td>1,455</td><td>1,400</td></tr><tr><td>Matching buy/sell volumes included in refined products sales volumes (mbpd)<sup>(c)</sup></td><td>24</td><td>77</td><td>71</td></tr></table>
<table><tr><td></td><td colspan="5">2018</td></tr><tr><td>Increase (Decrease) vs. Legacy GAAP</td><td>KFC Division</td><td>Pizza Hut Division</td><td>Taco Bell Division</td><td>Unallocated<sup>(a)</sup></td><td>Total</td></tr><tr><td>Amortization of upfront fees</td><td>$40</td><td>$16</td><td>$10</td><td>$—</td><td>$66</td></tr><tr><td>Amortization of franchise incentive payments</td><td>-14</td><td>-5</td><td>-1</td><td>—</td><td>-20</td></tr><tr><td>Upfront fee cash received</td><td>-64</td><td>-15</td><td>-13</td><td>—</td><td>-92</td></tr><tr><td>Incentive payments made</td><td>1</td><td>2</td><td>1</td><td>18</td><td>22</td></tr><tr><td>Franchise and property revenues</td><td>-37</td><td>-2</td><td>-3</td><td>18</td><td>-24</td></tr><tr><td>Franchise and property expenses</td><td>1</td><td>—</td><td>—</td><td>5</td><td>6</td></tr><tr><td>Refranchising gain</td><td>—</td><td>—</td><td>—</td><td>4</td><td>4</td></tr><tr><td>Operating Profit</td><td>$-36</td><td>$-2</td><td>$-3</td><td>$27</td><td>$-14</td></tr></table>

Question: When does Total capital of Citizens Bank, N.A. reach the largest value?