CITIZENS FINANCIAL GROUP INCRI

Net interest income is our largest source of revenue and is the difference between the interest earned on interest-earning assets (generally loans and investment securities) and the interest expense incurred in connection with interest-bearing liabilities (generally deposits and borrowed funds). The level of net interest income is primarily a function of the difference between the effective yield on our average interest-earning assets and the effective cost of our interest-bearing liabilities. These factors are influenced by the pricing and mix of interest-earning assets and interest-bearing liabilities which, in turn, are impacted by external factors such as economic conditions, competition for loans and deposits, the monetary policy of the FRB and market interest rates. For further discussion, refer to the “Market Risk” and “Risk Governance” sections of our 2023 Form 10-K.

(1) Net interest income and net interest margin is presented on a FTE basis using the federal statutory tax rate of 21%. The FTE impact is predominantly attributable to commercial and industrial loans for the periods presented.

Net interest income decreased $178 million, or 11%, and decreased $379 million, or 12%, for the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023, reflecting lower net interest margin and a decline of 2% and 1%, respectively, in average interest-earning assets.

Net interest margin on a FTE basis decreased 30 basis points and 34 basis points for the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023, reflecting higher funding and swap costs and the impact of building liquidity, partially offset by higher interest-earning-asset yields and the benefit of Non-Core portfolio runoff.

Average interest-earning assets decreased $3.0 billion and $2.8 billion for the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023, driven by a decline in total loans and leases, partially offset by an increase in investment securities and cash held in interest-bearing deposits.

Average deposits increased $421 million and $1.1 billion for the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023, driven primarily by growth in Private Bank deposits, partially offset by a decline in treasury and commercial deposits reflecting deposit optimization initiatives.

Average total borrowed funds decreased $2.8 billion and $3.5 billion for the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023, reflecting a decline in FHLB advances driven by Non-Core portfolio runoff, partially offset by a remix of funding to long-term senior debt and secured borrowings collateralized by auto loans.