The loan portfolio at Citizens Bank showed broad deterioration in New England during the first quarter, when the bank charged off $451 million in bad loans and set aside another $609 million for anticipated loan losses.

The results signal that the bank’s credit problems are not slowing down, but in fact escalating after a rough 2008.

The bank’s delinquent and nonperforming loan totals surged to $2.95 billion during the three months that ended March 31, up from $2.1 billion at the end of 2008, according to a recent regulatory filing. Citizens revealed across-the board problems with consumer and business loans and said it received a $300 million capital infusion from its parent company.

Citizens Bank was not available for comment.

The financial results cover most of what’s known as Citizens Financial Group Inc. The Providence, R.I.-based bank holding company has about $170 billion in assets stretched across RBS Citizens and Citizens Bank of Pennsylvania operations. The holding company’s branch operations are in 13 states.

In Massachusetts, customers know RBS Citizens as Citizens Bank, which operates nearly 260 offices in the Bay State and controls some $22 billion in deposits as the No. 2 bank in the state behind Bank of America Corp (NYSE: BAC).

Overall, RBS Citizens generated a net loss of $98.7 million in the first quarter, compared with net income of $170.9 million in the year-ago period, filings show. Those operations have $135 billion in assets, $74 billion in deposits and net loans of $91 billion.

The smaller Citizens Bank of Pennsylvania unit had a net loss of $35.8 million. Results for the entire bank holding company, Citizens Financial Group, are not yet available. Citizens Financial Group is controlled by Royal Bank of Scotland Plc, which lost $34.2 billion in 2008.

Royal Bank of Scotland earlier this year put down speculation that Citizens Bank was on the sale block. Top executives said the bank is a core asset, but they want to see some improvements. In 2008, Citizens Financial Group posted a net loss of $929.3 million, compared with net income of $1.5 billion in 2007.

Royal Bank of Scotland wants Citizens to rank among the top five in the markets the bank serves; generate return on equity of more than 15 percent; create greater organic growth; and increase its “connectivity” with the rest of RBS’ banking group.

RBS Group CEO Stephen Hester is on a mission to cut operations that carry a high degree of leverage. Citizens doesn’t fit into that category because its lending is mostly funded by deposits.

Still, loan losses have weighed on RBS Citizens’ equity capital, which was $16.3 billion. Though it is a healthy cushion against future losses, the bank had $17.6 billion in equity capital at the same time last year, regulatory filings show.

The bank remains well capitalized in the eyes of regulators, but its loan-loss provision of $608.8 million in the first quarter shows that it still has plenty of troubled borrowers on its books. In the year-ago period, the bank’s loan loss provision was only $336.3 million. But that was before the U.S. economy showed rapid deterioration, stressing out consumers and businesses alike.

In addition to credit losses, RBS Citizens said it is sitting on $246.2 million in unrealized losses in its $20.5 billion portfolio of available-for-sale securities., filings show.

Boston Business Journal