Decision relative to the petition of Citizens Financial Group, Inc., Providence, Rhode Island to acquire Citizens Bank of Pennsylvania (In Organization), Philadelphia, Pennsylvania and Citizens Bank (In Organization), Wilmington, Delaware
By the Division of Banks
Citizens Financial Group, Inc. ("Citizens Financial" or the "Petitioner"), Providence, Rhode Island and related entities as described herein have petitioned the Board of Bank Incorporation (the "Board") pursuant to Massachusetts General Laws chapter 167A, sections 2 to acquire two out-of-state banks both of which are in formation. The two banks are Citizens Bank of Pennsylvania (In Organization), Philadelphia, Pennsylvania and Citizens Bank (In Organization), Wilmington, Delaware. In the Commonwealth, Citizens Financial and related parties are the holding companies for Citizens Bank of Massachusetts and United States Trust Company, both with main offices located in Boston, Massachusetts. The related parties include, among others, The Royal Bank of Scotland, plc, the indirect parent of Citizens Financial.
The formation of the two banks is being done as part of a transaction whereby Citizens Financial will acquire most of the mid-Atlantic retail branch office network and other banking operations as well as other banking business of Mellon Financial Corporation ("Mellon"), Pittsburgh, Pennsylvania. The transaction is structured as a purchase of assets and assumption of liabilities in which Citizens Financial will pay cash for the business interests acquired. According to the application, Mellon's strategic focus in the last ten years has moved away from retail banking and moved toward primarily focusing on fund management and asset administration, as well as other fee based services. The focus of Citizens Financial on operating community banks was stated as a reason for Mellon to sell its mid-Atlantic network to the Petitioner. Both banks will be maintained as subsidiaries of Citizens Financial.
Notice of these applications was published as directed by the Board thereby affording opportunity for interested parties to submit comments. Other standard procedures informing the public of the matters before the Board were implemented. A public hearing relative to these matters was held by the Board on September 7, 2001 and the period for filing comments after the hearing ended on September 14, 2001.
The Board has reviewed the application as well as the oral and written testimony received at the public hearing and comments received during the open comment period which were applicable to matters within the Board's jurisdiction. Joint written comments were received from a community group and a public law center. The Petitioner, as requested by the Board at the public hearing, submitted supplemental documents at the end of the comment period on issues raised during that proceeding. Additional clarification on certain matters was subsequently requested which the Petitioner addressed in its filings dated September 14, 2001 September 28, 2001. The Board's review focused on the statutory and administrative criteria which includes, among other things, whether competition among banking institutions will be unreasonably affected; whether public convenience and advantage would be promoted; and the record of performance under the Community Reinvestment Act ("CRA") by the involved banks. The additional statutory requirements set out in sections 2 and 4 of said chapter 167A were also significant factors in the Board's deliberations on the matters before it.
One such statutory provision requires the Board to have received notice from the Massachusetts Housing Partnership Fund (the "MHPF") that satisfactory arrangements have been made by the Petitioner consistent with statute and the MHPF's various affordable housing loan programs. In the application documents and at the public hearing the Petitioner informed the Board of its discussions and filings with the MHPF in order to meet this requirement. The Board received notice from the MHPF that arrangements satisfactory to it had been made for this transaction in a letter dated September 13, 2001.
As an interstate transaction, the reciprocity of the laws of Citizens Financial's home state must be reviewed. Citizens Financial's home state for determination of applicable law is Rhode Island. Under Massachusetts' law, the determination of the reciprocity of the laws of another state rests solely with the Commissioner of Banks. The Commissioner has previously ruled in transactions involving Citizens Financial that Rhode Island law is reciprocal and does expressly authorize a similar transaction by a Massachusetts holding company under conditions no more restrictive than those imposed by chapter 167A. The Board is aware that the Commissioner has waived the statutory requirement for this transaction that a bank be in existence for three years prior to its acquisition. Accordingly, the proposed transaction is permissible under the Commonwealth's Interstate Banking Act and, therefore, the Board will proceed to consider whether other statutory requirements are met by this application.
Presently, Citizens Financial's indirect parent is The Royal Bank of Scotland plc (the "Royal Bank"). The Royal Bank is a UK commercial and retail clearing bank with antecedents dating back to 1727 and has over 630 branches in the UK. The Royal Bank is, in turn, the principal subsidiary of The Royal Bank of Scotland Group plc which is the 15 th largest banking organization in the world. At December 31, 2000, it had total consolidated assets of $478.6 billion. Since 1999, RSBG International Holdings has been the direct holding company of Citizens Financial. Citizens Financial is one of the 32 largest bank holding companies in the United States and one of the three largest headquartered in the New England region. It was incorporated under the laws of Delaware in 1984. It had consolidated assets of $31.4 billion at March 31, 2001. It operates five banks all in New England including Citizens Bank of Massachusetts, Boston and United States Trust Company, Boston.
Citizens Bank of Massachusetts had total assets of $16.8 billion at June 30, 2001. It currently operates approximately 175 branch offices and is in the process of adding numerous supermarket branch offices as a result of an agreement with a major grocery chain. Citizens Bank of Massachusetts provides a full array of financial services to commercial and consumer customers.
United States Trust Company had total assets of $46.8 million at June 30, 2001. United States Trust Company operates as a limited service commercial bank, focusing on providing trust and money management services. United States Trust Company has just one banking office located in Boston, Massachusetts.
Citizens Bank of Pennsylvania is being formed as a Pennsylvania-chartered savings bank insured by the Federal Deposit Insurance Corporation (the "FDIC"). It will conduct the banking businesses acquired from Mellon which operate in the states of Pennsylvania, New Jersey and Maryland. It will operate the 322 branch offices located in those three states and will acquire the related assets and liabilities including deposits at those branch offices.
Citizens Bank is being formed as a Delaware-chartered commercial bank insured by the FDIC. It will conduct the banking businesses acquired from Mellon which operate in Delaware. It will operate 19 branch offices in Delaware and will acquire the related assets and liabilities including deposits at those branch offices.
The Petitioner has submitted extensive materials to address the issue that competition among banks will not be unreasonably affected by the proposed transaction. Much of that analysis is detailed according to various tests used by federal agencies. That analysis demonstrates that consummation of the transaction will not result in undue concentration of banking resources in the specified banking markets in Massachusetts. Traditionally, however, this Board has not limited its review to those previously cited federal standards in its consideration of whether competition will be unreasonably affected. Rather it its the position of this Board to consider a transaction in light of its impact on the citizens, communities and banking structure in the Commonwealth on a community by community basis instead of by variously grouped markets. Since Citizens Bank of Pennsylvania (In Organization) and Citizens Bank (In Organization) are to be formed and are to be operated, as proposed, in different states, there will be no overlap in the communities served by these banks sought to be acquired in this transaction and the Petitioner's bank subsidiaries in the Commonwealth. Accordingly, upon review, the Board finds that the transaction will not unreasonably affect competition.
The Board has also considered whether public convenience and advantage will be promoted by this proposed transaction. The immediate transaction together with the purchase of assets and assumption of liabilities of Mellon Financial Corporation's 341 branch offices and other facilities will, according to the application, enhance the ability of Citizens Financial to better serve customers and continue to attract employees. Specifically, customers of all Citizens Financial subsidiaries including Citizens Bank of Massachusetts and United States Trust Company will benefit from access to a greatly expanded network of branch offices which will now extend into four additional states. Thus customers relocating or traveling within New England and the mid-Atlantic areas may continue to maintain their existing banking relationships or perform banking transactions at offices of any of the Petitioner's bank subsidiaries under agency powers authorized under state and federal law. Citizens Financial's enhanced financial strength as a result of this transaction will permit its subsidiaries to continue to offer innovative financial products and services at competitive rates, thereby benefiting Massachusetts customers. Additional products and services as set out in the application will now become available to customers of the two new banks. These factors weigh in favor of approval.
At the public hearing the Board raised the issue of identifying products and services which would become available to Massachusetts customers of Citizens Financial as a result of the transaction. The Petitioner's oral testimony addressed this matter. Moreover, the Petitioner stated that its increased size, as a result of the transaction, if approved, would enhance its ability to expand its products and services. The Petitioner's oral testimony is supported by additional information in the application.
The Board has considered the Petitioner's analysis of the "net new benefits" that would result from the proposed acquisition of the two banks as required under section 4 of chapter 167A of the General Laws. The Petitioner's application and oral testimony address this issue in detail on matters of initial capital investments, job creation plans, consumer and business services and commitments to maintain and open branch offices. The Board is aware of the Petitioner's contention that the expansion of the branch network will enhance the financial strength and increase the Petitioner's asset size to allow its subsidiaries to increase their lending limits in the Commonwealth. Additionally, the increased asset size may create future employment opportunities within the Commonwealth.
Related to the issue of public convenience and advantage is the record of performance under the Community Reinvestment Act ("CRA") by the banks which are the parties to this multi-step transaction. Such review for a state-chartered bank includes examination by personnel of the Board as well as analysis of concerns received by the bank's community and its response to those concerns fairly raised. For other institutions, the Board looks to a publicly available descriptive rating and evaluation by a federal or state bank regulatory agency. The matter and the related matter of the Petitioner's fair lending record were specifically addressed at the public hearing by the Board in connection with the written public comments filed. As noted above, subsequent correspondence from the Petitioner was additionally responsive to the issues raised. Such comments and correspondence have been considered by the Board. The Board also has noted that both Citizens Bank of Massachusetts and United States Trust Company received an "Outstanding" rating in their most recent examinations of performance under CRA. The Board is also aware that the Commonwealth's Division of Banks will follow up on certain matters raised during the next examination of Citizens Bank of Massachusetts. The Board's review of factors related to public convenience and advantage are consistent with approval.
The financial structure of the transaction was reviewed and addressed. The resulting capital ratios and projections for the Petitioner are satisfactory. Management factors reviewed in consideration of the proposed transaction before the Board are also supportive of its approval. Additionally, all other requirements of statute relating to a bank holding company acquisition have been met or addressed.
Based on the record of this matter including testimony received at the public hearing, subsequent information provided as a result of the Board's request at the hearing, as well as additional requested information on comments received considered in light of all relevant statutory and administrative requirements, the Board finds that competition among banking institutions will not be unreasonably affected, that public convenience and advantage will be promoted by consummation of the proposed transaction, and that the records of performance under CRA by the banks involved in this transaction are consistent with its approval. Therefore, in accordance with these findings and pursuant to the statutory authority cited herein the Board approves the application and authorizes Citizens Financial and related entities to acquire Citizens Bank of Pennsylvania (In Organization) and Citizens Bank (In Organization).
The approvals granted herein are subject to the condition that all related transactions are completed within one year of the date of this Decision.
| Thomas J. Curry Commissioner of Banks | |
| Bernard F. Crowley, Jr. Acting Commissioner of Revenue | Board |
| Shannon P. O'Brien Treasurer and Receiver-General | |
| October 26, 2001 Date |