Company: CFG-PE
Filing Date: 2025-02-13
Form Type: 10-K
Source: 0000759944-25-000013
Chunk: 631

Company: CITIZENS FINANCIAL GROUP INC/RI
Filing Date: 2025-02-13
Form: 10-K
Item: Item 3
Chunk 631
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 date.

(2) Includes floating-rate commercial loans hedged to fixed rate to manage our exposure to the variability in interest cash flows. See “Market Risk” for additional information regarding our use of interest rate derivatives to hedge our loan portfolio.

Citizens Financial Group, Inc. | 49

Credit Quality

See Note 1 for a description of changes made to the Company’s loans and leases presentation during 2024.

The ACL is comprised of the ALLL and the allowance for unfunded lending commitments. As described in Note 6, the ACL is maintained at a level the Company believes to be appropriate to absorb expected lifetime credit losses over the contractual life of a loan or lease and on unfunded lending commitments, inclusive of recoveries. We consider extensive historical loss experience, including the impact of loss mitigation and restructuring programs that we offer to borrowers experiencing financial difficulty, as well as projected loss severity as a result of loan default. 

Management evaluates the appropriateness of the ACL on a quarterly basis. The evaluation of both quantitative and qualitative information is performed by assessing groups of assets that share similar risk characteristics as well as certain individual loans and leases that do not share similar risk characteristics with the collective group. Loans are generally grouped by product type and are assessed for credit losses using econometric models.

The quantitative evaluation of the adequacy of the ACL utilizes a single economic forecast as its foundation and is primarily based on econometric models that use known or estimated data as of the balance sheet date and forecasted data over the reasonable and supportable period. Known and estimated data include current PD, LGD and EAD for commercial loans, timing and amount of expected draws for unfunded lending commitments, and FICO, LTV, and term for retail loans. The mix and level of loan balances, delinquency levels, assigned risk ratings, previous loss experience, current business conditions, amount and timing of expected future cash flows, and factors specific to commercial credits such as competition, business and management performance are also considered. Forward-looking economic assumptions include real GDP, unemployment rate, interest rate curve, and changes in collateral values. Historical information, such as financial statements for commercial customers or consumer credit ratings, may not be as relevant in estimating future expected losses as forecasted inputs to the models during volatile economic time periods.

Management additionally considers qualitative factors in determining the adequacy of the ACL. Qualitative adjustments are used to capture characteristics in the loan and lease portfolio that impact expected credit losses which are not fully reflected within our expected credit loss models. These factors include,