CITIZENS FINANCIAL GROUP INC/RI

Credit risk represents the potential for loss arising from the failure of a customer, counterparty, or issuer to perform in accordance with the contractual terms of an obligation. While the majority of our credit risk is associated with lending activities, we do engage with other financial counterparties for a variety of purposes including investing, asset and liability management, and trading activities. Given the financial impact of credit risk on our earnings and balance sheet, the assessment, approval, and management of credit risk represents a significant part of our overall risk management responsibility.

Our independent Credit Risk Function is responsible for reviewing and approving the credit risk appetite across all lines of business and credit products, approving larger and higher-risk credit transactions, monitoring portfolio performance, identifying problem credit exposures, and ensuring remedial management. Credit Risk actively monitors and manages concentrations of loan limits, loan types, industries, and geographies to ensure that our risk appetite is well balanced to achieve our goals.

We employ a comprehensive and integrated risk control program to proactively identify, measure, monitor, and mitigate existing and emerging credit risks across the credit life cycle including origination, account/portfolio management, and loss mitigation and recovery. For more information regarding our credit risk management practices, see “Credit Risk” in our 2025 Form 10-K.

Consumer

Our retail banking portfolio is comprised of five categories of loans: residential mortgages, home equity, education, automobile, and other retail.

As discussed in our 2025 Form 10-K, we utilize LTV, along with other credit attributes, as part of our overall risk management analysis and monitoring of our real estate secured portfolio, as it is an important measure of collateral quality and potential loss severity. While LTV is primarily utilized at origination for underwriting purposes, we continue to monitor LTV distribution and trends to evaluate collateral risk and sensitivity to changes in property values.

LTV information on our outstanding residential mortgage and home equity portfolios is updated quarterly based on relevant home price indices. LTV is the ratio of the loan’s outstanding principal balance to the current property value estimate. For home equity and second mortgages, CLTV is the ratio of the first mortgage original principal balance and the second lien outstanding principal balance combined to the current property value estimate. The weighted-average CLTV for our real estate secured portfolio was 50% as of June 30, 2026 and December 31, 2025.

Commercial

Our commercial banking portfolio consists of traditional commercial and industrial loans, commercial leases, and commercial real estate loans.

As discussed in our 2025 Form 10-K, we utilize internal risk ratings to monitor credit quality for commercial loans and leases. Criticized balances include loans with an internal risk rating of Special Mention, Substandard Accrual, or Nonaccrual. Total commercial criticized balances of $5.3 billion at June 30, 2026 decreased from $6.3 billion at December 31, 2025. For more information on internal risk ratings and the distribution of commercial loans and leases by vintage date and internal risk rating, see Note 4. In addition, see discussion of criticized balances below for our commercial and industrial and CRE portfolios.

Commercial and Industrial

The commercial and industrial portfolio includes both loans and leases made to commercial customers for use in normal business operations to finance working capital needs, equipment purchases, capital call facilities, or other projects/acquisitions. Commercial and industrial criticized balances of $2.2 billion at June 30, 2026 decreased from $2.6 billion at December 31, 2025 as repayments, upgrades, and charge-offs outpaced downgrades.

The following table presents our commercial and industrial loan portfolio by industry sector:

Commercial Real Estate

The CRE portfolio consists of both commercial property and construction loans that support a wide range of property development and investment activities including, but not limited to, multifamily, office spaces, industrial facilities, and retail shopping centers. Commercial real estate criticized balances of $3.1 billion at June 30, 2026 decreased from $3.7 billion at December 31, 2025. Approximately 97% of CRE loans remain current on payments as of June 30, 2026 as repayments, upgrades, and charge-offs outpaced downgrades.

The following table presents our CRE loan portfolio by property type and state:

(1) Credit tenant lease includes loans to nationally recognized tenants with high credit ratings and life sciences includes loans to provide lab and office space for tenants involved in the study and development of scientific discoveries.

(2) Includes Georgia, Maryland, North Carolina, South Carolina, and Virginia.

Loan Asset Quality

Delinquency

We utilize credit scores provided by FICO and payment and delinquency status, among other data points, to monitor credit quality for retail loans. FICO credit scores represent current and historical national industry-wide consumer level credit performance data, which management believes are the strongest indicator of potential credit losses over the contractual life of the loan and a good predictor of a borrower’s future payment performance. A loan’s past due status is determined based on its contractual repayment terms or, if modified, based on its restructured terms.

The following table presents an aging analysis of accruing and nonaccrual loans for our retail loan portfolio:

Loans that are 90 days or more past due and accruing are not placed on nonaccrual status and continue to accrue interest if they are (i) adequately secured by collateral, in the process of collection, and reasonably expected to be restored to current status, (ii) managed in homogeneous portfolios with specified charge-off timeframes adhering to regulatory guidelines, or (iii) insured or guaranteed by a U.S. government agency.

For more information on the aging of accruing and nonaccrual retail loans and the distribution of retail loans by vintage date and FICO score, see Note 4.

Nonperforming Assets

Nonaccrual loans and leases are those on which the accrual of interest is suspended and excludes LHFS, loans insured or guaranteed by a U.S. government agency, and loans accounted for at fair value. For more information on nonaccrual loans and leases, see Note 4.

The following table presents nonaccrual loans and leases:

Nonaccrual loans and leases as of June 30, 2026 declined compared to December 31, 2025, driven by improvement in commercial, partially offset by an increase in retail primarily driven by mortgage.

Other real estate owned represents property acquired through foreclosure or other proceedings and totaled $17 million and $19 million, respectively, as of June 30, 2026 and December 31, 2025.

The ACL, comprised of the ALLL and the allowance for unfunded lending commitments, 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. For additional information regarding the ACL, see “Critical Accounting Estimates – Allowance for Credit Losses” and Note 4 in this report, and Note 4 in our 2025 Form 10-K.

The following table presents the ACL and associated coverage ratio for our loan and lease portfolios:

(1)Represents the percentage of each loan category to total loans and leases.

(2)Coverage ratio includes total commercial allowance for unfunded lending commitments and total commercial allowance for loan and lease losses in the numerator and total commercial loans and leases in the denominator.

(3) Coverage ratio includes total retail allowance for unfunded lending commitments and total retail allowance for loan losses in the numerator and total retail loans in the denominator.

The ACL as of June 30, 2026 increased $1 million compared to December 31, 2025, reflecting consideration for economic uncertainty and targeted risk concerns, largely offset by improved loan mix, given runoff of certain retail portfolios.

The following tables present the net charge-off ratio for our loan and lease portfolios:

For the three and six months ended June 30, 2026, net charge-offs decreased $32 million and $94 million, respectively, and the net charge-off ratio decreased 11 basis points and 15 basis points, respectively, compared to the same periods in 2025. These declines during the three and six months ended June 30, 2026 are driven primarily by CRE and other retail, with education also a driver during the six-month period reflecting a $25 million charge-off resulting from the sale of education loans in the first quarter of 2025.