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07/21/2017

Citizens Financial Group, Inc. Reports Second Quarter Net Income of $318 Million and Diluted EPS of $0.63

Second quarter 2017 net income up 31% and diluted EPS up 37% versus year-ago quarter

ROTCE* of 9.6% with 5% positive operating leverage year over year; 7% Underlying

PROVIDENCE, R.I.--(BUSINESS WIRE)-- Citizens Financial Group, Inc. (NYSE: CFG or “Citizens”) today reported second quarter net income of $318 million, up 31% from $243 million in second quarter 2016 with earnings per diluted common share of $0.63, up 37% from $0.46 per diluted common share in second quarter 2016. Second quarter 2017 net income was relatively stable with first quarter 2017, which included a $23 million, or $0.04 per share, benefit related to the settlement of certain state tax matters, and second quarter earnings per diluted common share increased 3% from $0.61 in first quarter 2017. On an Underlying basis,* which excludes the benefit of the first quarter state tax settlement, second quarter net income increased 7% and earnings per diluted common share increased 11% relative to first quarter 2017.

Second quarter 2017 results reflect a pre-tax $26 million impact related to impairments on aircraft lease assets which, in addition to provision expense of $70 million, resulted in total credit-related costs of $96 million. The lease impairments, which largely relate to a non-core runoff portfolio, reduced noninterest income by $11 million and increased noninterest expense by $15 million. Year-over-year operating leverage was 5%; 7% Underlying before the impact of the lease impairments.*

Return on Average Tangible Common Equity (“ROTCE”) of 9.6% in second quarter 2017 compared to 9.7% in first quarter 2017, or 9.0% on an Underlying basis, and 7.3% in second quarter 2016.*

“We are pleased to report another quarter of strong results, which reflect continued execution of our strategic initiatives,” said Chairman and Chief Executive Officer Bruce Van Saun. “We believe we are turning the corner and emerging from our turnaround phase, having made strong strides in growing our balance sheet and customer base and building out our capabilities in both Consumer and Commercial. We aim to become a top-performing regional bank, and remain confident in our outlook and ability to deliver strong earnings growth and capital returns.”

Citizens announced the launch of the next phase of its Tapping Our Potential (“TOP”) efficiency programs, which are designed to drive continuous improvement in the overall efficiency and effectiveness of the organization while self-funding investments to drive future growth. The new TOP IV program is expected to deliver pre-tax run-rate expense and revenue enhancements in the range of $90 million to $105 million by the end of 2018.

Citizens also announced that its board of directors declared a third quarter cash dividend of $0.18 per common share, an increase of $0.04 per share, or 29%. The dividend is payable on August 16, 2017 to shareholders of record at the close of business on August 2, 2017.

*Please see important information on Key Performance Metrics and Non-GAAP Financial Measures at the end of this release for an explanation of our use of these metrics and non-GAAP financial measures and their reconciliation to GAAP financial measures. “Underlying” results, as applicable, exclude a 1Q17 $23 million benefit related to the settlement of certain state tax matters and reclassify 2Q17 results for the pre-tax impact of $26 million of lease asset impairments to reflect their credit-related impact.

Second Quarter 2017 vs. First Quarter 2017

Key Highlights

• Second quarter highlights include net interest income growth of 2%, strength in mortgage banking fees, service charges and fees and capital markets fees along with continued expense management discipline. Results reflect net interest margin expansion to 2.97% and an efficiency ratio of 61.9%, or 60.4% before the impact of lease impairments.*
• Tangible book value per common share of $26.61 increased 2%. Fully diluted average common shares outstanding decreased by 3.9 million shares.

Results

• Total revenue of $1.4 billion increased 1% with a 2% increase in net interest income, partially offset by a $9 million decrease in noninterest income, driven by $11 million of finance lease impairments recorded in other income.
  • Net interest income of $1.0 billion increased $21 million, driven by 1% growth in average loans and leases, the benefit of day count and net interest margin expansion to 2.97%.
  • Net interest margin of 2.97% reflects the benefit of higher short-term interest rates and improving loan mix towards higher-return assets, partially offset by the effects of lower long-term rates on securities portfolio premium amortization expense and an increase in funding costs.
  • Although noninterest income of $370 million decreased $9 million, it was up modestly before the impact of finance lease impairments. Results reflect another record quarter in capital markets revenue, improvement in mortgage banking fees, seasonally higher service charges and fees and growth in letter of credit and loan fees, partially offset by modest declines across several other fee categories.
• Noninterest expense of $864 million increased $10 million, driven by a $15 million increase tied to operating lease impairments recorded in other expense. Before the impact of lease impairments, noninterest expense of $849 million decreased by $5 million compared with $854 million in first quarter 2017. Results reflect a seasonal reduction in salaries and benefits expense and a reduction in equipment and occupancy expense, partially offset by higher outside services and other expense, including higher FDIC expense, advertising and public relations costs and travel expense.
• Provision for credit losses of $70 million improved 27%, driven by continued improvement in overall portfolio credit quality, which more than offset reserves to fund loan growth. Including the impact of lease residual impairments, credit-related costs totaled $96 million, flat with first quarter 2017.
• Efficiency ratio of 61.9%, or 60.4% before the impact of lease impairments, compared with 61.7% in first quarter 2017; ROTCE of 9.6% compared with 9.7% in first quarter 2017; 9.0% on an Underlying basis.*

Balance Sheet

• Average interest-earning assets increased $1.2 billion, or 1%, driven by 1% loan growth. Results reflect the $124 million average impact of the sale of $596 million of lower-return commercial loans and leases associated with balance sheet optimization initiatives. Before the impact of the commercial loan and lease sales, average loan growth was 1.1% and period-end loan growth was 1.4%.
• Average deposits increased $836 million, or 1%, reflecting growth in checking with interest, term and savings.
• Nonperforming loans and leases (“NPLs”) to total loans and leases ratio of 0.94% improved from 0.97%, reflecting a reduction in retail NPLs. Allowance coverage of NPLs improved to 119% from 117%.
• Net charge-offs of 28 basis points improved from 33 basis points in first quarter 2017, reflecting continued strong results in core retail and core commercial, partially offset by an increase in non-core portfolios.
• Robust capital strength with a common equity tier 1 (“CET1”) risk-based capital ratio of 11.2%.
• Repurchased 3.7 million shares of common stock in the quarter; as of June 30, 2017, 2016 CCAR Capital Plan repurchases totaled 24.5 million common shares at a weighted-average price per share of $28.21. Including common dividends, capital returned to shareholders was $957 million.
• Received a non-objection to the 2017 CCAR Capital Plan, which includes up to $850 million in share repurchases and the ability to increase the quarterly dividend to $0.22 per share in early 2018.

Second Quarter 2017 vs. Second Quarter 2016

Key Highlights

• Second quarter results reflect a 31% increase in net income available to common stockholders, led by revenue growth of 9%, as net interest income increased 11% given 6% average loan growth and a 13 basis point increase in net interest margin as well as noninterest income growth of 4%. Before the impact of lease impairments, revenue increased 10% with noninterest income growth of 7%.*
• Continued strong focus on top-line growth and expense management helped drive positive operating leverage of 5%, a 2.8% improvement in the efficiency ratio and a 2.3% improvement in ROTCE.*
• Before the impact of lease impairments, operating leverage was 7% and the efficiency ratio improved 4.4%.*
• Fully diluted average common shares outstanding decreased by 23.0 million.

Results

• Total revenue of $1.4 billion increased $118 million, or 9%, reflecting strong net interest income and noninterest income growth.
  • Net interest income increased 11% given 6% average loan growth and a 13 basis point improvement in net interest margin.
  • Net interest margin of 2.97% reflects improved loan yields, driven by higher rates and balance sheet optimization initiatives, partially offset by investment portfolio growth and higher funding costs.
  • Noninterest income increased 4%, as strength in capital markets fees, card fees, mortgage banking fees and letter of credit and loan fees was partially offset by the $11 million impact of finance lease impairments. Before the impact of finance lease impairments, noninterest income was up 7%.*
• Noninterest expense increased 4%, reflecting higher other expense, driven by the $15 million impact of operating lease impairments and higher FDIC expense, as well as an increase in advertising and public relations costs. Results also reflect stable salaries and employee benefits and equipment expense, as well as an increase in outside services, occupancy and amortization of software expense. Before the impact of operating lease impairments, noninterest expense increased 3%.*
• Provision for credit losses decreased $20 million, or 22%, reflecting continued improvement in overall portfolio credit quality that more than offset the impact of an increase in commercial charge-offs. Total credit-related costs of $96 million, including lease impairments, were up modestly from second quarter 2016.
• ROTCE* of 9.6% improved 2.3%, from 7.3%.

Balance Sheet

• Average interest-earning assets increased $8.1 billion, or 6%, reflecting 6% loan growth and a 7% increase in the investment portfolio.
• Average deposits increased $6.8 billion, or 7%, on strength in checking with interest, term, money market and savings.
• NPLs to total loans and leases ratio of 0.94% improved from 1.01%, as a reduction in retail nonperforming loans more than offset an increase in commercial nonperforming loans, largely commodities-related credits, partially offset by improvement in commercial real estate. Allowance coverage of NPLs of 119% remained relatively stable.
• Net charge-offs of 28 basis points of loans increased modestly from a relatively low 25 basis points in second quarter 2016, reflecting continued improvement in retail, partially offset by an increase in commercial that represents continued normalization from lower charge-off levels.

Update on Plan Execution

Consumer Banking

• Performance paced by solid loan growth with continued traction in education, mortgage and unsecured retail, along with increased loan yields, reflecting improving mix and higher rates.
• Wealth management business continues to build scale and add capabilities, with fee income growth of 2% and managed money fees up 26% from second quarter 2016. Positive trend continues in migrating sales mix from transaction to fee-based products.
• Mortgage business continues to demonstrate strength, with improved secondary mix year-over-year and strong customer satisfaction scores that reflect the impact of investments in our platform and talent.

Commercial Banking

• Strong year-over-year performance in fee income was led by loan syndications, letter of credit and loan fees and card fees as we continue to benefit from investments in our growth initiatives.
• Continued balance sheet and customer growth with 6% average loan growth from second quarter 2016, reflecting strength in Commercial Real Estate, Mid-corporate and Middle Market, Franchise Finance and Industry Verticals. In addition, grew average deposits 14% from second quarter 2016. Continue to add coverage bankers to expand expertise in industry groups and to extend geographic reach.

Efficiency and balance sheet optimization strategies

• TOP III continues to deliver benefits and is now projected to deliver $110 million in pre-tax revenue and expense run-rate benefits in 2017, including $20 million of tax benefits.
• TOP IV initiatives are expected to deliver $90 million to $105 million of run-rate pre-tax revenue and expense benefits by the end of 2018 and will help drive continued positive operating leverage and fund investments for future growth.
• Initiatives to shift loan portfolio mix to higher-return categories continue to deliver benefits. Stepped up efforts in Commercial Banking to exit lower-return relationships and recycle capital towards new business with greater cross-sell opportunities.

1) Current reporting-period regulatory capital ratios are preliminary. Basel III ratios assume that certain definitions impacting qualifying Basel III capital will phase in through 2019.
2) Capital adequacy and asset-quality ratios calculated on a period-end basis, except net charge-offs.

Discussion of Results:

Second quarter 2017 results reflect a pre-tax $26 million impact related to impairments on aircraft lease assets which, in addition to provision expense of $70 million, resulted in total credit-related costs of $96 million, detailed in the table below.

Second quarter 2017 net income available to common stockholders of $318 million was relatively stable with first quarter 2017, which included a $23 million, or $0.04 per share, benefit related to the settlement of certain state tax matters. Diluted EPS of $0.63 increased $0.02, or 3%, from first quarter 2017. On an Underlying basis,* second quarter net income increased 7% and earnings per diluted common share increased 11% relative to first quarter 2017. Second quarter 2017 results reflect a pre-tax $26 million impact related to impairments on aircraft lease assets. The lease impairments reduced second quarter noninterest income by $11 million and increased noninterest expense by $15 million. Second quarter 2017 EPS reflects a 3.9 million reduction in fully diluted average common shares outstanding from first quarter 2017.

Compared with second quarter 2016 levels, net income available to common stockholders increased $75 million, or 31%, driven by 7% Underlying positive operating leverage, as strong revenue growth and disciplined expense management drove 24% growth in Underlying pre-provision profit.* Diluted EPS of $0.63 increased $0.17, or 37%, reflecting 31% net income growth and a 23.0 million reduction in fully diluted average common shares outstanding from second quarter 2016.

Net interest income of $1.0 billion increased $21 million, or 2%, from first quarter 2017, given a 1% increase in average loans and leases, the benefit of day count and net interest margin expansion to 2.97%. The improvement in net interest margin reflects the benefit of higher short-term interest rates and higher interest-earning asset yields with improving loan mix toward higher-return categories, partially offset by higher deposit and funding costs and the effects of declining long-term rates on securities portfolio premium-amortization expense.

Compared to second quarter 2016, net interest income increased $103 million, or 11%, reflecting 6% average loan growth and a 13 basis point improvement in net interest margin. The improvement in net interest margin reflects higher commercial and consumer loan yields given higher interest rates and balance sheet optimization initiatives, partially offset by higher deposit and funding costs and the impact of growth in the securities portfolio.

1) Other income includes bank-owned life insurance and other income.

Noninterest income of $370 million decreased $9 million from first quarter 2017 and included an $11 million impact related to finance lease impairments recorded in other income. Underlying noninterest income of $381 million increased modestly from first quarter 2017.* Results reflect another record quarter in capital markets fees, improvement in mortgage banking fees, seasonally higher service charges and fees and growth in letter of credit and loan fees, partially offset by modest declines across other fee categories. Service charges and fees increased $4 million, largely reflecting seasonality. Card fees remained relatively stable with first quarter levels that included lower card reward expense, given seasonally higher purchase volume and out-of-network ATM fees. Capital markets fees increased $3 million, driven by strong results in loan syndications. Trust and investment services fees were stable as the benefit of an increase in investment sales was offset by a shift in sales mix and lower transaction sales margins. Foreign exchange and interest rate products income remained relatively stable. Mortgage banking fees increased $7 million, reflecting higher origination volumes and higher loan sale gains. Securities gains of $3 million offset the impact of a securities portfolio other-than-temporary-impairment charge of $3 million in other income tied to a model update.

Noninterest income increased $15 million, or 4%, from second quarter 2016 levels. Excluding the $11 million impact of finance lease impairments recorded in other income, Underlying* noninterest income of $381 million increased 7% from second quarter 2016. Results reflect strength in capital markets fees, card fees and mortgage banking fees. Card fees increased $8 million, reflecting the benefit of revised contract terms for processing fees and an increase in purchase volume. Capital markets fees increased $13 million, reflecting strength in loan syndications, given strong market volumes and the investments made to broaden our capabilities. Trust and investment services fees remained relatively stable as growth in managed money assets and an increase in investment sales was offset by the impact of a shift in transaction sales mix. Mortgage banking fees increased $5 million, driven by an increase in production fees.

Noninterest expense of $864 million increased $10 million, driven by a $15 million impact related to operating lease impairments included in other operating expense. Underlying* noninterest expense of $849 million decreased from $854 million in first quarter 2017. Salaries and employee benefits expense decreased $12 million, reflecting a seasonal decrease in payroll taxes and 401(k) benefit costs. Outside services expense increased $5 million, largely reflecting an increase in consumer loan origination and servicing costs. Occupancy expense decreased $3 million from higher first quarter levels that included higher costs associated with our branch rationalization efforts and seasonally higher maintenance costs. Other expenses increased $22 million, reflecting the impact of the $15 million operating lease impairments, higher FDIC expense, advertising and public relations costs and travel expense, partially offset by lower credit collection costs.

Compared with second quarter 2016, noninterest expense increased $37 million, or 4%, driven by the $15 million impact related to operating lease impairments. Underlying* noninterest expense increased 3% from second quarter 2016. Results reflect stable salaries and employee benefits, as a reduction tied to the change in timing of incentive payments offset the impact of our growth initiatives. Results also reflect higher outside services, amortization of software, occupancy and FDIC expense and advertising and public relations costs, partially offset by lower credit collection costs. Outside services increased $10 million, reflecting an increase in consumer loan origination and servicing costs and the impact of our efficiency initiatives. Occupancy expense increased $3 million, reflecting an increase in costs associated with branch rationalization and maintenance. Amortization of software expense increased $4 million, reflecting the impact of technology investments. Other expense increased $20 million, reflecting the impact of lease impairments, higher FDIC expense, advertising and public relations costs, partially offset by lower credit collection costs.

The effective tax rate for second quarter 2017 was 31.1%, which reflects an increase in historic tax credits and a modest benefit from the early payoff of a sale-in and lease-out (“SILO”) transaction. The first quarter 2017 tax rate was 26.4%, or 31.6%, on an Underlying basis,* which excludes the 5.2% benefit related to the settlement of certain state tax matters. The second quarter 2016 tax rate was 32.6%.

1) Represents period end unless otherwise noted.
2) Includes loans held for sale.
3) Current reporting period regulatory capital ratios are preliminary. Basel III ratios assume that certain definitions impacting qualifying Basel III capital will phase in through 2019.

Total assets of $151.4 billion increased $1.1 billion, or 1%, from March 31, 2017, driven by a $1.0 billion increase in loans and leases and loans held for sale. Compared with June 30, 2016, total assets increased $6.2 billion, or 4%, driven by a $5.4 billion increase in loans and leases and loans held for sale, as well as a $1.0 billion increase in investment portfolio assets, partially offset by a $135 million reduction in other non-earning assets.

Average interest-earning assets of $137.6 billion in second quarter 2017 increased $1.2 billion, or 1%, from the prior quarter, driven by a $620 million increase in retail loans, a $455 million increase in commercial loans and leases, including a $124 million impact tied to the sale of lower-return commercial loans and leases, and a $59 million increase in investment portfolio assets. Compared to second quarter 2016, average interest-earning assets increased $8.1 billion, or 6%, driven by commercial loan growth of $3.4 billion, retail loan growth of $3.1 billion and a $1.8 billion increase in investment portfolio assets, including a $1.7 billion increase in securities and a $133 million increase in interest-bearing cash.

Period-end investments and interest-bearing deposits of $28.8 billion as of June 30, 2017 decreased $647 million, or 2%, compared with March 31, 2017, reflecting an $881 million decrease in securities and a $234 million increase in cash positions. Compared with June 30, 2016, investments and interest-bearing deposits increased $1.0 billion, or 4%, including a $717 million increase in securities and a $290 million increase in cash and equivalents. At the end of second quarter 2017, the average effective duration of the securities portfolio decreased to 4.0 years compared with 4.4 years at March 31, 2017, given lower long-term rates that drove an increase in securities prepayment speeds. Securities portfolio duration was 2.4 years at June 30, 2016, reflecting higher long-term rates at that time, which reduced securities prepayment speeds.

Period-end loans and leases of $109.0 billion at June 30, 2017 increased $935 million, or 1%, from $108.1 billion at March 31, 2017, driven by a $939 million increase in retail loans. Commercial loans and leases were relatively stable, reflecting the impact of the sale of $596 million of lower-return commercial loans and leases associated with balance sheet optimization initiatives. Period-end loan growth was 1.4% before the impact of these sales. Compared to June 30, 2016, period-end loans and leases increased $5.5 billion, or 5%, from $103.6 billion, reflecting a $3.2 billion increase in retail loans and a $2.3 billion increase in commercial loans and leases.

Average loans and leases increased $1.1 billion, or 1%, from first quarter 2017, reflecting a $620 million increase in retail loans and a $455 million increase in commercial loans and leases. Average loan growth was 1.1% before the $124 million average impact of the balance sheet optimization commercial loan and lease sales. Commercial loan and lease growth was largely driven by strength in Commercial Real Estate, Middle Market and Franchise Finance. Retail loan growth reflects strength in education, mortgage and other unsecured retail loans, partially offset by lower home equity and auto balances.

Compared with second quarter 2016, average loans and leases increased $6.5 billion, or 6%, reflecting a $3.4 billion increase in commercial loans and leases and a $3.1 billion increase in retail loans. Commercial loan and lease growth was driven by strength in Commercial Real Estate, Franchise Finance, Mid-corporate and Industry Verticals and Middle Market. Retail loan growth was driven by mortgage, education and other unsecured retail, partially offset by lower home equity and auto balances.

Total period-end deposits of $113.6 billion at June 30, 2017 increased $1.5 billion, or 1.0%, from March 31, 2017. Compared with June 30, 2016, period-end total deposits increased $7.4 billion, or 7%, reflecting growth in all categories with particular strength in checking with interest, term deposits and money market accounts.

Second quarter 2017 average deposits of $110.8 billion increased $836 million, or 1%, from first quarter 2017, reflecting strong growth in checking with interest and term and savings deposits, partially offset by a reduction in money market accounts and demand deposits. Compared with second quarter 2016, average deposits increased $6.8 billion, or 7%, reflecting growth in all categories with particular strength in checking with interest and term deposits.

Total borrowed funds of $15.6 billion at June 30, 2017 decreased $48 million from March 31, 2017, reflecting a $1.4 billion increase in long-term borrowings, which was more than offset by a $758 million decrease in other short-term borrowings, primarily Federal Home Loan Bank (“FHLB”) advances and a $664 million decrease in federal funds purchased and securities sold under agreements to repurchase. Compared with June 30, 2016, total borrowed funds increased $290 million, reflecting a $1.3 billion net increase in long-term borrowings, partially offset by a $766 million decrease in other short-term borrowings, primarily FHLB and a $288 million decline in securities sold under agreements to repurchase.

Average borrowed funds of $16.7 billion increased $473 million from first quarter 2017 as a $1.2 billion increase in long-term borrowed funds was partially offset by a $762 million reduction in short-term borrowed funds, largely FHLB advances. Compared with second quarter 2016, average borrowed funds increased $1.7 billion, as a $3.3 billion increase in long-term borrowed funds was partially offset by a $1.6 billion reduction in short-term borrowed funds, largely FHLB advances.

1) Current reporting-period regulatory capital ratios are preliminary
2) Basel III ratios assume that certain definitions impacting qualifying Basel III capital will phase in through 2019.

On June 30, 2017, our Basel III capital ratios on a transitional basis remained well in excess of applicable regulatory requirements with a CET1 capital ratio of 11.2% and a total capital ratio of 14.0%. Our capital ratios continue to reflect progress against our objective of realigning our capital profile to be more consistent with that of peer regional banks, while maintaining a strong capital base to support our growth aspirations, strategy and risk appetite. Tangible book value per common share of $26.61 increased 2% versus first quarter 2017 and 3% versus second quarter 2016.

As part of CFG’s 2016 Capital Plan (the “Plan”), during second quarter 2017 the company repurchased 3.7 million shares of common stock and including common dividends, returned $201 million to shareholders. During the Plan period, CFG completed repurchases of 24.5 million common shares at a weighted-average price per share of $28.21. In accordance with the Plan, the company paid quarterly dividends of $0.12 per common share in the third and fourth quarters of 2016 and $0.14 per common share in the first and second quarters of 2017. During the Plan period, CFG returned $957 million to shareholders, including $690 million in common share repurchases and $267 million in common dividends, representing a payout ratio of 80%.

CFG’s 2017 Capital Plan, beginning in third quarter 2017 and ending in second quarter 2018, includes the ability to repurchase up to $850 million shares of Citizens’ outstanding common stock, a 23% increase compared to the 2016 Capital Plan, and proposed quarterly dividends of $0.18 per share beginning in third quarter 2017, a 29% increase compared to second quarter 2017. CFG’s 2017 Capital Plan also anticipates the potential to raise quarterly dividends an additional 22%, to $0.22 per share beginning in early 2018. Future capital actions are subject to consideration and approval by CFG’s Board of Directors.

Overall credit quality continued to improve, reflecting growth in higher quality, lower risk retail loans and broadly stable risk appetite in commercial categories. Nonperforming loans of $1.0 billion decreased $25 million from March 31, 2017, reflecting continued improvement in retail real-estate secured categories and relatively stable results in commercial. Compared to June 30, 2016, nonperforming loans and leases decreased $19 million as an $86 million decrease in retail, largely real-estate secured categories, was partially offset by a $67 million increase in commercial, driven by growth in commodities-related credits, partially offset by improvement in commercial real estate. The nonperforming loans and leases to total loans and leases ratio of 0.94% at June 30, 2017 improved modestly from March 31, 2017 levels and improved 7 basis points from 1.01% at June 30, 2016.

Net charge-offs of $75 million decreased $12 million from first quarter 2017, driven by a $7 million reduction in retail net charge-offs and a $5 million reduction in commercial net charge-offs. Compared with second quarter 2016, net charge-offs increased $10 million from relatively low second quarter 2016 levels, reflecting an increase in commercial net charge-offs, largely driven by an increase in commodities-related credits. Second quarter 2017 net charge-offs of 28 basis points of average loans and leases compares with 33 basis points in first quarter 2017 and 25 basis points in second quarter 2016.

Allowance for loan and lease losses of $1.2 billion decreased slightly compared to first quarter 2017 and decreased modestly from second quarter 2016 levels, reflecting continued improvement in credit quality that helped offset reserves to fund loan growth.

Allowance for loan and lease losses to total loans and leases was 1.12% as of June 30, 2017, relatively stable compared with 1.13% as of March 31, 2017 and down modestly from 1.20% as of June 30, 2016. The allowance for loan and lease losses to nonperforming loans and leases ratio of 119% as of June 30, 2017 increased modestly compared to 117% as of March 31, 2017 and was stable with June 30, 2016.

Additional Segment Detail: