4Q21 and 2021 Financial Results January 19, 2022 Forward-looking statements and use of non-GAAP financial measures This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements regarding potential future share repurchases and future dividends as well as the potential effects of the COVID-19 disruption on our business, operations, financial performance and prospects, are forward-looking statements. Also, any statement that does not de ...

Part I. Financial Information [Financial Statements](index=50&type=section&id=Item%201.%20Financial%20Statements) This section presents the company's unaudited interim consolidated financial statements for the period ended September 30, 2021, including core financial statements and detailed notes [Notes to the Consolidated Financial Statements](index=57&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements%20%28unaudited%29) The notes detail accounting policies and financial data, highlighting strategic acquisitions and key financial methodologies - The company announced several strategic acquisitions in 2021: - **HSBC Branches:** Agreement to acquire 80 East Coast branches and the national online deposit business from HSBC, expected to close in Q1 2022[172](index=172&type=chunk) - **Investors Bancorp, Inc.:** Definitive agreement to acquire Investors in a stock and cash deal, expected to close in early Q2 2022[172](index=172&type=chunk) - **JMP Group LLC:** Definitive agreement for an all-cash acquisition to strengthen corporate finance capabilities, targeted to close in mid-Q4 2021[172](index=172&type=chunk) - **Willamette Management Associates:** Completed the acquisition on September 1, 2021, adding an estimated **$15 million** to goodwill[171](index=171&type=chunk) - The Allowance for Credit Losses (ACL) decreased from **$2.7 billion** at year-end 2020 to **$2.0 billion** as of September 30, 2021. This was driven by a credit provision benefit of **$386 million** and net charge-offs of **$280 million**, reflecting strong credit performance and an improved macroeconomic outlook[186](index=186&type=chunk) - During the nine months ended September 30, 2021, the company repurchased **$95 million** of its common stock and completed several capital actions, including issuing **$300 million** of Series G Preferred Stock and redeeming all outstanding Series A Preferred Stock[231](index=231&type=chunk)[232](index=232&type=chunk)[237](index=237&type=chunk) Key Financial Position Data (as of Sept 30, 2021 vs. Dec 31, 2020) | Metric | Sept 30, 2021 (in millions) | Dec 31, 2020 (in millions) | | :--- | :--- | :--- | | **Total Assets** | $187,007 | $183,349 | | Net Loans and Leases | $121,463 | $120,647 | | Total Deposits | $152,221 | $147,164 | | **Total Liabilities** | $163,584 | $160,676 | | **Total Stockholders' Equity** | $23,423 | $22,673 | Key Operating Results (Nine Months Ended Sept 30, 2021 vs. 2020) | Metric | Nine Months 2021 (in millions) | Nine Months 2020 (in millions) | | :--- | :--- | :--- | | Net Interest Income | $3,386 | $3,457 | | Provision for Credit Losses | ($386) | $1,492 | | Total Noninterest Income | $1,541 | $1,741 | | **Net Income** | **$1.8B** | **$601M** | | **Diluted EPS** | **$3.99** | **$1.23** | [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=6&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management analyzes the company's financial performance and condition for Q3 and the first nine months of 2021, including income, balance sheet, and strategic developments [Introduction](index=8&type=section&id=Introduction) Citizens Financial Group, a major U.S. financial institution with $187.0 billion in assets, is expanding its footprint and capabilities through strategic acquisitions - As of September 30, 2021, Citizens Financial Group, Inc. had total assets of **$187.0 billion**[16](index=16&type=chunk) - The company announced four key strategic transactions in 2021: - **HSBC Branches:** Acquisition of 80 East Coast branches and the national online deposit business, expected to add approximately **$8.4 billion** in deposits and **$1.9 billion** in loans[16](index=16&type=chunk) - **Investors Bancorp, Inc.:** Acquisition of Investors, which will add **$27.3 billion** in assets and 154 branches in the greater New York City and Philadelphia metro areas[16](index=16&type=chunk) - **Willamette Management Associates:** Acquisition completed on September 1, 2021, strengthening corporate financial advisory capabilities[17](index=17&type=chunk) - **JMP Group LLC:** All-cash acquisition to further bolster corporate finance and strategic advisory capabilities, valued at approximately **$149 million**[17](index=17&type=chunk) [Financial Performance](index=10&type=section&id=Financial%20Performance) Q3 2021 net income significantly increased due to a credit provision benefit, reflecting improved financial performance over the prior year Q3 2021 vs. Q3 2020 Performance | Metric | Q3 2021 | Q3 2020 | | :--- | :--- | :--- | | Net Income | $530M | $314M | | Diluted EPS | $1.18 | $0.68 | | Underlying Net Income (Non-GAAP) | $546M | $338M | | Underlying EPS (Non-GAAP) | $1.22 | $0.73 | | ROTCE | 13.7% | 8.3% | | Underlying ROTCE (Non-GAAP) | 14.2% | 9.0% | - The significant increase in Q3 2021 net income was primarily driven by a credit provision benefit of **$33 million**, compared to a **$428 million** provision expense in Q3 2020, reflecting improved credit performance and a better macroeconomic outlook[27](index=27&type=chunk) Nine Months 2021 vs. Nine Months 2020 Performance | Metric | Nine Months 2021 | Nine Months 2020 | | :--- | :--- | :--- | | Net Income | $1.8B | $601M | | Diluted EPS | $3.99 | $1.23 | | ROTCE | 16.1% | 5.1% | | Tangible Book Value per Share | $34.44 | $32.24 (as of 9/30/20) | [Results of Operations](index=15&type=section&id=Results%20of%20Operations) Q3 2021 saw a slight increase in net interest income, a decline in noninterest income, stable expenses, and a significant credit provision benefit [Net Interest Income](index=15&type=section&id=Net%20Interest%20Income) Q3 2021 net interest income increased slightly year-over-year, though net interest margin declined due to elevated cash and lower rates Net Interest Income and Margin (FTE) - Quarterly Trend | Quarter | Net Interest Income (in millions) | Net Interest Margin (FTE) | | :--- | :--- | :--- | | 3Q20 | $1,137 | 2.83% | | 4Q20 | $1,117 | 2.75% | | 1Q21 | $1,124 | 2.76% | | 2Q21 | $1,129 | 2.72% | | 3Q21 | $1,145 | 2.72% | - Average deposits increased by **$10.5 billion** (**7%**) YoY, driven by growth in demand deposits, money market accounts, and savings, while term deposits decreased[44](index=44&type=chunk) - Average loans and leases decreased by **$2.3 billion** (**2%**) YoY, driven by a **$5.2 billion** decrease in commercial loans (including a **$1.9 billion** decrease in PPP loans), partially offset by a **$2.9 billion** increase in retail loans[24](index=24&type=chunk) [Noninterest Income](index=19&type=section&id=Noninterest%20Income) Noninterest income in Q3 2021 decreased significantly, primarily due to lower mortgage banking fees, partially offset by other fee income growth Noninterest Income Breakdown (Q3 2021 vs Q3 2020) | Category | Q3 2021 (in millions) | Q3 2020 (in millions) | Change (%) | | :--- | :--- | :--- | :--- | | Mortgage banking fees | $108 | $287 | (62%) | | Service charges and fees | $110 | $97 | 13% | | Capital markets fees | $72 | $58 | 24% | | Card fees | $66 | $57 | 16% | | Trust and investment services fees | $61 | $53 | 15% | | **Total Noninterest Income** | **$514** | **$654** | **(21%)** | - The decrease in mortgage banking fees was driven by lower gain-on-sale margins and production volumes[49](index=49&type=chunk) - Capital markets fees increased due to higher loan syndication and M&A advisory fees[49](index=49&type=chunk) [Noninterest Expense](index=20&type=section&id=Noninterest%20Expense) Noninterest expense in Q3 2021 saw a slight increase, driven by higher salaries and operating costs Noninterest Expense Breakdown (Q3 2021 vs Q3 2020) | Category | Q3 2021 (in millions) | Q3 2020 (in millions) | Change (%) | | :--- | :--- | :--- | :--- | | Salaries and employee benefits | $509 | $524 | (3%) | | Equipment and software | $157 | $149 | 5% | | Outside services | $144 | $139 | 4% | | Other operating expense | $124 | $95 | 31% | | **Total Noninterest Expense** | **$1,011** | **$988** | **2%** | - On an Underlying (non-GAAP) basis, noninterest expense increased **3%** YoY, driven by higher salaries (revenue-based compensation and merit), outside services (growth initiatives), and other operating expenses (travel and advertising)[52](index=52&type=chunk)[54](index=54&type=chunk) [Provision for Credit Losses](index=21&type=section&id=Provision%20for%20Credit%20Losses) A credit provision benefit was recorded in Q3 2021, a significant reversal from the prior year, reflecting improved credit performance and outlook Provision for Credit Losses | Period | Provision for Credit Losses (in millions) | | :--- | :--- | | Q3 2021 | ($33) | | Q3 2020 | $428 | | Nine Months 2021 | ($386) | | Nine Months 2020 | $1,492 | - The provision benefit in 2021 is attributed to strong credit performance and an improving macroeconomic outlook, whereas the 2020 expense was driven by the adverse impacts of the COVID-19 pandemic[56](index=56&type=chunk) [Business Operating Segments](index=22&type=section&id=Business%20Operating%20Segments) Consumer Banking's net income decreased in Q3 2021, while Commercial Banking's net income grew significantly due to reduced net charge-offs Consumer Banking Selected Financials (Q3 2021 vs Q3 2020) | Metric (in millions) | Q3 2021 | Q3 2020 | | :--- | :--- | :--- | | Net Interest Income | $919 | $845 | | Noninterest Income | $315 | $495 | | Net Charge-offs | $35 | $55 | | **Net Income** | **$336** | **$407** | Commercial Banking Selected Financials (Q3 2021 vs Q3 2020) | Metric (in millions) | Q3 2021 | Q3 2020 | | :--- | :--- | :--- | | Net Interest Income | $428 | $421 | | Noninterest Income | $168 | $144 | | Net Charge-offs | $15 | $161 | | **Net Income** | **$274** | **$153** | - Commercial Banking net charge-offs decreased by **$146 million** YoY, reflecting stabilization from the effects of the COVID-19 pandemic[61](index=61&type=chunk) [Analysis of Financial Condition](index=25&type=section&id=Analysis%20of%20Financial%20Condition) As of September 30, 2021, total assets were $187.0 billion, with stable loans, improved asset quality, growing deposits, and strong capital [Loans and Leases](index=26&type=section&id=Loans%20and%20Leases) Total loans and leases remained stable, with retail growth offsetting a commercial decline driven by payoffs and reduced PPP loans Composition of Loans and Leases (in millions) | Portfolio | Sept 30, 2021 | Dec 31, 2020 | Change | | :--- | :--- | :--- | :--- | | Total Commercial | $57,955 | $60,793 | ($2,838) | | Total Retail | $65,363 | $62,297 | $3,066 | | **Total Loans and Leases** | **$123,318** | **$123,090** | **$228** | - The commercial loan decrease was driven by payoffs and a reduction in PPP loans from **$4.2 billion** to **$1.9 billion**[69](index=69&type=chunk) - The retail loan increase was driven by growth in residential mortgages (**+10%**), automobile (**+11%**), and education (**+6%**)[69](index=69&type=chunk) [Allowance for Credit Losses and Nonaccrual Loans and Leases](index=26&type=section&id=Allowance%20for%20Credit%20Losses%20and%20Nonaccrual%20Loans%20and%20Leases) Asset quality significantly improved, with the Allowance for Credit Losses decreasing and nonaccrual loans falling due to strong credit performance ACL and NPL Ratios | Metric | Sept 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Allowance for Credit Losses (ACL) | $2,004M | $2,670M | | ACL to Loans and Leases | 1.63% | 2.17% | | Nonaccrual Loans and Leases (NPLs) | $747M | $1,019M | | NPLs to Loans and Leases | 0.61% | 0.83% | Net Charge-offs (NCOs) | Period | Total NCOs (in millions) | NCO Ratio (annualized) | | :--- | :--- | :--- | | Q3 2021 | $44 | 0.14% | | Q3 2020 | $219 | 0.70% | | Nine Months 2021 | $280 | 0.30% | | Nine Months 2020 | $503 | 0.54% | - Total commercial criticized balances decreased by **$565 million** to **$4.1 billion** from year-end 2020[78](index=78&type=chunk) [Capital and Regulatory Matters](index=33&type=section&id=Capital%20and%20Regulatory%20Matters) The company maintained strong capital ratios well above regulatory minimums, with the CET1 ratio increasing due to strong earnings Regulatory Capital Ratios | Ratio | Sept 30, 2021 | Dec 31, 2020 | Required Minimum + SCB | | :--- | :--- | :--- | :--- | | CET1 Capital Ratio | 10.3% | 10.0% | 7.9% | | Tier 1 Capital Ratio | 11.6% | 11.3% | 9.4% | | Total Capital Ratio | 13.4% | 13.4% | 11.4% | | Tier 1 Leverage Ratio | 9.7% | 9.4% | 4.0% | - The company's Stress Capital Buffer (SCB) was unchanged at **3.4%** for the period from October 1, 2021, through September 30, 2022[94](index=94&type=chunk) - The company temporarily suspended share repurchases due to the pending acquisition of Investors but is poised to resume them after the shareholder vote. **$655 million** remains available under the current repurchase authorization[95](index=95&type=chunk) [Liquidity](index=37&type=section&id=Liquidity) The company maintains a robust liquidity position, primarily funded by stable deposits, with significant available liquidity - Total available liquidity was approximately **$76.1 billion** as of September 30, 2021[121](index=121&type=chunk) - Key liquidity metrics as of September 30, 2021: - Loan-to-deposit ratio: **81.0%** - Cash at Federal Reserve: **$12.5 billion** - Contingent liquidity: **$48.7 billion** - Available discount window capacity: **$27.4 billion**[121](index=121&type=chunk) Credit Ratings (as of Sept 30, 2021) | Entity | Moody's (Long-term) | S&P (Long-term) | Fitch (Long-term) | | :--- | :--- | :--- | :--- | | Citizens Financial Group, Inc. | NR | BBB+ | BBB+ | | Citizens Bank, N.A. | Baa1 | A- | BBB+ | [Critical Accounting Estimates](index=41&type=section&id=Critical%20Accounting%20Estimates) The Allowance for Credit Losses (ACL) is a critical accounting estimate, determined using an economic forecast reflecting an improved outlook - The ACL determination for Q3 2021 used an economic forecast with **~5.8%** real GDP growth and an unemployment rate between **5.3%** and **6.3%** for 2021[123](index=123&type=chunk) - A sensitivity analysis under a more pessimistic scenario (slower recovery, higher unemployment) would result in a quantitative lifetime loss estimate approximately **1.2x** the modeled period-end ACL, an increase of about **$230 million**, before qualitative adjustments[123](index=123&type=chunk) - Management continues to apply qualitative judgment to adjust reserves, particularly for commercial sectors most impacted by the pandemic, such as CRE retail, office, hospitality, and casual dining[123](index=123&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=89&type=page&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company is primarily exposed to non-trading interest rate risk, with an asset-sensitive balance sheet, and actively manages this risk using derivatives Sensitivity of Net Interest Income to Interest Rate Changes | Rate Change Scenario (Instantaneous) | Estimated % Change in NII (over 12 months) | | :--- | :--- | | +200 bps | 20.8% | | +100 bps | 10.9% | | -25 bps | (2.4%) | - The company is actively managing the transition away from LIBOR, with plans to stop entering new U.S. Dollar LIBOR contracts by the end of 2021 and remediate legacy contracts by mid-2023[135](index=135&type=chunk) - Market risk from MSRs is economically hedged using freestanding derivatives. As of September 30, 2021, the fair value of MSRs was **$978 million**, with related derivative hedges having a notional amount of **$15.4 billion**[137](index=137&type=chunk) [Controls and Procedures](index=89&type=page&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2021, ensuring timely and accurate SEC reporting - The Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of the end of the period covered by the report[265](index=265&type=chunk) Part II. Other Information [Legal Proceedings](index=90&type=page&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal and regulatory proceedings, with no material adverse effect on financial statements expected - The company is involved in legal proceedings and regulatory matters typical for its business. Based on current information and established reserves, management does not expect a materially adverse effect on its financial condition[245](index=245&type=chunk)[268](index=268&type=chunk) [Risk Factors](index=90&type=page&id=Item%201A.%20Risk%20Factors) No new risk factors are disclosed in this report, with reference made to previously described risks in prior SEC filings - The report directs readers to consider the risks described in the Company's 2020 Form 10-K and the Q2 2021 Form 10-Q[269](index=269&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=90&type=page&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the period - None[270](index=270&type=chunk) [Exhibits](index=90&type=page&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including key agreements and required certifications - Key exhibits filed include the merger agreement with Investors Bancorp, Inc., and CEO/CFO certifications pursuant to Sarbanes-Oxley Sections 302 and 906[271](index=271&type=chunk)

3Q21 Financial Results October 20, 2021 Forward-looking statements and use of non-GAAP financial measures This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements regarding potential future share repurchases and future dividends as well as the potential effects of the COVID-19 pandemic and associated lockdowns on our business, operations, financial performance and prospects, are forward-looking statements. Also, any statement th ...

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Introduction to JMP Group LLC July 2021 Disclosures Forward-Looking Statements This presentation, as well as any accompanying comments by JMP Group representatives, contains forward-looking statements that reflect JMP Group's current views with respect to, among other things, the company's operations and financial performance, as well as potential increases in dividends and retained earnings as a result of the proposed reorganization transaction discussed herein. You can identify these forward-looking state ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended June 30, 2021 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From (Not Applicable) Commission File Number 001-36636 (Exact name of the registrant as specified in its charter) | --- | --- | --- | --- | |------------------------------------- ...

Citizens Financial Group, Inc. (NYSE:CFG) Q2 2021 Earnings Conference Call July 20, 2021 9:00 AM ET Company Participants Kristin Silberberg - EVP, IR Bruce Van Saun - Chairman and CEO John Woods - Vice Chairman and CFO Brendan Coughlin - Head, Consumer Banking Don McCree - Head, Commercial Banking Conference Call Participants Ken Zerbe - Morgan Stanley Matt O'Connor - Deutsche Bank Ken Usdin - Jefferies David George - Baird John Pancari - Evercore ISI Peter Winter - Wedbush Securities Gerard Cassidy - RBC D ...

[Part I. Financial Information](index=6&type=section&id=Part%20I.%20Financial%20Information) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=6&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Net income surged due to a negative credit provision, while stable revenue reflected higher noninterest income offsetting lower net interest income [Financial Performance](index=9&type=section&id=Financial%20Performance) Net income rose to $611 million from $34 million year-over-year, driven by a significant reversal in the provision for credit losses Key Performance Metrics | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Net Income | $611 million | $34 million | | Diluted EPS | $1.37 | $0.03 | | ROTCE | 17.2% | 0.4% | - Total revenue of **$1.7 billion** was stable year-over-year, supported by a **9% increase in noninterest income** which was partially offset by a **4% decrease in net interest income**[18](index=18&type=chunk) - Net interest margin (NIM) decreased by **34 basis points to 2.75%** from 3.09% in Q1 2020, primarily due to the lower interest rate environment and elevated cash balances[18](index=18&type=chunk) - A **negative provision for credit losses of $140 million** was recorded, compared to a **$600 million provision** in Q1 2020, reflecting improved macroeconomic outlook and strong credit performance[22](index=22&type=chunk) [Selected Consolidated Financial Data](index=11&type=section&id=Selected%20Consolidated%20Financial%20Data) Key data shows total assets at $187.2 billion, total deposits at $151.3 billion, and a CET1 capital ratio of 10.1% as of March 31, 2021 Operating Data (in millions) | Operating Data (in millions) | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net interest income | $1,117 | $1,160 | | Noninterest income | $542 | $497 | | Total revenue | $1,659 | $1,657 | | Provision for credit losses | ($140) | $600 | | Net income | $611 | $34 | Balance Sheet Data (in millions) | Balance Sheet Data (in millions) | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Total assets | $187,217 | $183,349 | | Loans and leases | $122,195 | $123,090 | | Total deposits | $151,349 | $147,164 | | Total stockholders' equity | $22,653 | $22,673 | [Results of Operations](index=13&type=section&id=Results%20of%20Operations) A 9% rise in noninterest income offset a 4% decline in net interest income, while a significant negative credit provision drove higher net income [Net Interest Income](index=13&type=section&id=Net%20Interest%20Income) Net interest income decreased 4% to $1.1 billion due to a 34 basis point compression in net interest margin, despite growth in earning assets | Metric | Q1 2021 | Q1 2020 | Change | | :--- | :--- | :--- | :--- | | Net Interest Income | $1,117 M | $1,160 M | -4% | | Net Interest Margin, FTE | 2.76% | 3.10% | -34 bps | | Average Interest-Earning Assets | $164.4 B | $150.9 B | +9% | | Average Deposits | $146.6 B | $126.6 B | +16% | - The decrease in NII was primarily due to lower interest-earning asset yields and elevated cash balances, which were partially offset by an improved funding mix and better deposit pricing[18](index=18&type=chunk) [Noninterest Income](index=15&type=section&id=Noninterest%20Income) Noninterest income grew 9% year-over-year to $542 million, fueled by strong performance in capital markets and mortgage banking fees Noninterest Income (in millions) | Noninterest Income (in millions) | Q1 2021 | Q1 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Mortgage banking fees | $165 | $159 | 4% | | Service charges and fees | $99 | $118 | (16%) | | Capital markets fees | $81 | $43 | 88% | | Trust and investment services fees | $58 | $53 | 9% | | **Total Noninterest Income** | **$542** | **$497** | **9%** | - The significant increase in capital markets fees was driven by higher underwriting revenue and M&A advisory fees, as well as the impact of a mark-to-market loss on loan trading assets in Q1 2020[36](index=36&type=chunk) [Noninterest Expense](index=16&type=section&id=Noninterest%20Expense) Noninterest expense remained stable at $1.0 billion, as higher technology spending was offset by lower other operating expenses Noninterest Expense (in millions) | Noninterest Expense (in millions) | Q1 2021 | Q1 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Salaries and employee benefits | $548 | $549 | 0% | | Equipment and software | $152 | $133 | 14% | | Outside services | $139 | $135 | 3% | | Other operating expense | $91 | $111 | (18%) | | **Total Noninterest Expense** | **$1,018** | **$1,012** | **1%** | [Provision for Credit Losses](index=17&type=section&id=Provision%20for%20Credit%20Losses) A negative provision of $140 million reflects a significant reversal from the $600 million provision in Q1 2020 due to an improved economic outlook | Metric (in millions) | Q1 2021 | Q4 2020 | Q1 2020 | | :--- | :--- | :--- | :--- | | Provision for credit losses | ($140) | $124 | $600 | | Net charge-offs | $158 | $190 | $137 | | Net charge-off ratio | 0.52% | 0.61% | 0.46% | - The negative provision reflects strong credit performance and improvement in the macroeconomic outlook, compared to the adverse impacts from the COVID-19 pandemic in the prior-year quarter[43](index=43&type=chunk)[44](index=44&type=chunk) [Income Tax Expense](index=18&type=section&id=Income%20Tax%20Expense) Income tax expense rose to $170 million due to higher pre-tax income, while the effective tax rate decreased to 21.8% from 24.1% - The effective income tax rate was **21.8% in Q1 2021**, compared to 24.1% in Q1 2020[46](index=46&type=chunk) [Business Operating Segments](index=18&type=section&id=Business%20Operating%20Segments) Both Consumer and Commercial Banking segments reported year-over-year net income growth, driven by varied factors including loan growth and capital markets activity Segment Performance (in millions) | Segment Performance (in millions) | Consumer Banking Q1 2021 | Consumer Banking Q1 2020 | Commercial Banking Q1 2021 | Commercial Banking Q1 2020 | | :--- | :--- | :--- | :--- | :--- | | Net interest income | $863 | $793 | $421 | $365 | | Noninterest income | $351 | $357 | $170 | $125 | | Net charge-offs | $59 | $97 | $101 | $43 | | **Net income** | **$302** | **$236** | **$211** | **$179** | [Analysis of Financial Condition](index=20&type=section&id=Analysis%20of%20Financial%20Condition) Total assets grew to $187.2 billion, while total loans decreased slightly to $122.2 billion and total deposits grew 3% to $151.3 billion [Securities](index=20&type=section&id=Securities) The securities portfolio grew to $28.1 billion, with its average effective duration lengthening to 4.1 years due to higher interest rates Securities (in billions) | Securities (in billions) | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Debt securities available for sale, at fair value | $24.5 | $22.9 | | Debt securities held to maturity, at cost | $3.0 | $3.2 | | **Total Debt Securities** | **$27.5** | **$26.3** | - The portfolio's average effective duration increased to **4.1 years** from 2.7 years at the end of 2020, as higher long-term rates reduced projected securities prepayment speeds[54](index=54&type=chunk) [Loans and Leases](index=21&type=section&id=Loans%20and%20Leases) Total loans and leases decreased by 1% from the prior quarter to $122.2 billion, with slight declines in both commercial and retail portfolios Loan Portfolio (in billions) | Loan Portfolio (in billions) | March 31, 2021 | December 31, 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Total commercial | $60.4 | $60.8 | (1%) | | Total retail | $61.8 | $62.3 | (1%) | | **Total loans and leases** | **$122.2** | **$123.1** | **(1%)** | [Allowance for Credit Losses and Nonaccruing Loans and Leases](index=21&type=section&id=Allowance%20for%20Credit%20Losses%20and%20Nonaccruing%20Loans%20and%20Leases) The Allowance for Credit Losses decreased to $2.4 billion, reflecting a reserve release, while nonaccrual loans remained stable at $1.0 billion Asset Quality Metrics | Asset Quality Metric | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Allowance for credit losses (ACL) | $2.4 B | $2.7 B | | ACL to loans and leases | 1.94% | 2.17% | | Nonaccrual loans and leases (NPLs) | $1.0 B | $1.0 B | | NPLs to loans and leases | 0.82% | 0.83% | - Q1 2021 net charge-offs were **$158 million (0.52% of average loans)**, up from $137 million (0.46%) in Q1 2020, driven by commercial NCOs[61](index=61&type=chunk) - Total commercial criticized loan balances decreased by **$528 million** from year-end 2020 to $4.1 billion, representing 6.8% of total commercial loans[65](index=65&type=chunk) [Deposits](index=26&type=section&id=Deposits) Total deposits increased by 3% to $151.3 billion, driven by government stimulus inflows into money market and demand deposit accounts Deposit Composition (in billions) | Deposit Composition (in billions) | March 31, 2021 | December 31, 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Demand | $46.1 | $43.8 | 5% | | Money market accounts | $51.1 | $48.6 | 5% | | Term deposits | $7.7 | $9.5 | (19%) | | **Total deposits** | **$151.3** | **$147.2** | **3%** | [Borrowed Funds](index=27&type=section&id=Borrowed%20Funds) Total borrowed funds decreased by $203 million from the prior quarter, primarily due to a reduction in short-term borrowings - Total borrowed funds decreased by **$203 million** from December 31, 2020, driven by a **$173 million decrease in short-term** and a $30 million decrease in long-term borrowed funds[78](index=78&type=chunk) [Capital and Regulatory Matters](index=27&type=section&id=Capital%20and%20Regulatory%20Matters) The company maintained a strong capital position with a CET1 ratio of 10.1% and repurchased $95 million of common stock during the quarter Regulatory Capital Ratios | Regulatory Capital Ratios | March 31, 2021 | December 31, 2020 | Required Minimum + SCB | | :--- | :--- | :--- | :--- | | CET1 capital ratio | 10.1% | 10.0% | 7.9% | | Tier 1 capital ratio | 11.4% | 11.3% | 9.4% | | Total capital ratio | 13.4% | 13.4% | 11.4% | | Tier 1 leverage ratio | 9.5% | 9.4% | 4.0% | - The company's Stress Capital Buffer (SCB) of **3.4%** became effective on October 1, 2020, and applies through September 30, 2021[82](index=82&type=chunk) - In January 2021, the board authorized the repurchase of up to **$750 million** of common stock; during Q1 2021, the company repurchased **$95 million** of its stock[83](index=83&type=chunk)[97](index=97&type=chunk) [Liquidity](index=31&type=section&id=Liquidity) A robust liquidity position was maintained with total available liquidity of $80.1 billion and a healthy loan-to-deposit ratio of 80.7% - Total available liquidity was approximately **$80.1 billion**, which includes a contingent liquidity buffer of $50.2 billion[108](index=108&type=chunk) - The consolidated period-end loan-to-deposits ratio was **80.7%**, indicating that core deposits are the primary source of funding[108](index=108&type=chunk) - The Parent Company's cash and cash equivalents totaled **$2.7 billion** as of March 31, 2021[100](index=100&type=chunk) [Off-Balance Sheet Arrangements](index=34&type=section&id=Off-Balance%20Sheet%20Arrangements) Total off-balance sheet arrangements increased 2% to $78.4 billion, driven by a $2.0 billion rise in commitments to extend credit Off-Balance Sheet Arrangements (in billions) | Arrangement (in billions) | March 31, 2021 | December 31, 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Commitments to extend credit | $76.2 | $74.2 | 3% | | Letters of credit | $2.1 | $2.2 | (7%) | | **Total** | **$78.4** | **$76.6** | **2%** | [Critical Accounting Estimates](index=34&type=section&id=Critical%20Accounting%20Estimates) The Allowance for Credit Losses remains the most critical estimate, based on an economic forecast of 3.2% GDP growth for 2021 - The ACL is the most critical accounting estimate, based on expected lifetime credit losses over the contractual life of the loan portfolio[116](index=116&type=chunk) - The economic forecast used for the Q1 2021 ACL projects real GDP growth of approximately **3.2%** and an unemployment rate in the range of **6.3% to 7.0%** throughout 2021[116](index=116&type=chunk) - A sensitivity analysis using a more pessimistic scenario would result in an increase of approximately **$350 million** to the quantitative lifetime loss estimate, before qualitative adjustments[118](index=118&type=chunk) [Risk Governance](index=37&type=section&id=Risk%20Governance) The company's integrated risk management framework, overseen by the Board and executive committees, remained unchanged during the quarter - The Board of Directors sets the risk appetite, with delegated authority for risk management and oversight given to Board and executive management level risk committees[120](index=120&type=chunk) - The Executive Risk Committee (ERC), chaired by the Chief Risk Officer, is responsible for oversight of risk across the enterprise[120](index=120&type=chunk) [Market Risk](index=37&type=section&id=Market%20Risk) The company's primary market risk is its asset-sensitive balance sheet, where a 200 basis point rate increase would boost NII by 8.5% | Interest Rate Scenario (Gradual Change) | Estimated % Change in NII over 12 Months | | :--- | :--- | | +200 bps | 8.5% | | +100 bps | 4.3% | | -25 bps | (1.3%) | - The company's balance sheet is **asset sensitive**, meaning net interest income benefits from rising interest rates[122](index=122&type=chunk)[124](index=124&type=chunk) - The company is operationally prepared for the transition from LIBOR and is continuing efforts to move new originations to alternative reference rates during 2021[130](index=130&type=chunk) [Financial Statements](index=45&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited interim Consolidated Financial Statements for the three months ended March 31, 2021 Consolidated Balance Sheet (in millions) | Consolidated Balance Sheet (in millions) | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Total Assets | $187,217 | $183,349 | | Net Loans and Leases | $120,001 | $120,647 | | Total Deposits | $151,349 | $147,164 | | Total Liabilities | $164,564 | $160,676 | | Total Stockholders' Equity | $22,653 | $22,673 | Consolidated Statement of Operations (in millions) | Consolidated Statement of Operations (in millions) | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net Interest Income | $1,117 | $1,160 | | Provision for Credit Losses | ($140) | $600 | | Total Noninterest Income | $542 | $497 | | Total Noninterest Expense | $1,018 | $1,012 | | **Net Income** | **$611** | **$34** | [Part II. Other Information](index=79&type=section&id=Part%20II.%20Other%20Information) [Legal Proceedings](index=79&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal and regulatory matters from normal business operations, which are not expected to have a material impact - The company is a party to legal proceedings and regulatory matters arising from normal business operations, including issues related to fair lending, unfair/deceptive practices, and mortgage-related issues[237](index=237&type=chunk) - Management believes that the aggregate liabilities, if any, from these proceedings will not have a materially adverse effect on the company's consolidated financial statements[239](index=239&type=chunk) [Risk Factors](index=79&type=section&id=Item%201A.%20Risk%20Factors) This section refers to the detailed discussion of risk factors in the company's 2020 Annual Report on Form 10-K - For a detailed discussion of risks, the report refers to the "Risk Factors" section in the company's 2020 Form 10-K[261](index=261&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=79&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased 2.2 million shares in Q1 2021, with $655 million remaining available under the current repurchase program Share Repurchase Activity | Period | Total Shares Repurchased | Weighted Average Price Paid Per Share | Maximum Dollar Amount Remaining | | :--- | :--- | :--- | :--- | | Jan 1 - Jan 31, 2021 | 2,103,412 | $42.32 | $660,988,442 | | Feb 1 - Feb 28, 2021 | — | $— | $660,988,442 | | Mar 1 - Mar 31, 2021 | 141,512 | $42.32 | $655,000,000 |

Investors Bancorp, Inc. (ISBC) Q1 2021 Earnings Conference Call April 29, 2021 11:00 AM ET Company Participants Kevin Cummings - Chairman & CEO Sean Burke - CFO Domenick Cama - President & COO Conference Call Participants Jared Shaw - Wells Fargo Securities Mark Fitzgibbon - Piper Sandler Steven Duong - RBC Capital Markets Michael Perito - KBW Laurie Hunsicker - Compass Point Matthew Breese - Stephens Operator Good morning, and welcome to the Investors Bancorp's First Quarter Earnings Call. [Operator Instru ...