Decision relative to the petition of Citizens Financial Group, Inc., Providence, Rhode Island and certain related entities to acquire Thistle Group Holdings, Co., Philadelphia, Pennsylvania

By the Massachusetts Division of Banks

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Citizens Financial Group, Inc. ("Citizens Financial"), Providence, Rhode Island and certain related entities, as described herein and including Citizens Bank of Pennsylvania (collectively, the "Petitioner") have petitioned the Board of Bank Incorporation (the "Board") pursuant to Massachusetts General Laws chapter 167A, sections 2 and 4, to acquire Thistle Group Holdings, Co. ("Thistle Group"), Philadelphia, Pennsylvania, and its subsidiary, Roxborough-Manayunk Bank ("RM Bank"), also located in Philadelphia, Pennsylvania. As a result of the transaction, RM Bank will be merged with and into Citizens Bank of Pennsylvania (hereinafter, "CBP"), a Pennsylvania savings bank subsidiary of Citizens Financial. In the Commonwealth, Citizens Financial is the holding company for Citizens Bank of Massachusetts and Boston Trust and Investment Management Company, formerly United States Trust Company.

As directed by the Board, a notice of the application was published and posted and a public hearing was scheduled, thereby affording an opportunity for interested parties to attend or submit comments. Other standard procedures for informing the public of this matter before the Board were implemented. The public hearing was held on December 8, 2003. Representatives of the Petitioner and Thistle Group offered testimony and responded to questions from the members of the Board. Following the hearing, the public comment period remained open until December 15, 2003 so that interested parties could submit any additional comments. One comment, discussed in more detail below, was received in opposition to the proposed transaction.

Citizens Financial, a bank holding company described in greater detail below, is part of a larger international banking organization. Its indirect parent is Royal Bank of Scotland plc (the "Royal Bank") a commercial and retail clearing bank based in the United Kingdom. The Royal Bank, in turn, is an operating subsidiary of Royal Bank of Scotland Group, plc ("RBSG"), which, at December 31, 2002, held approximately $663 billion in total consolidated assets.

Based in Providence, Rhode Island, Citizens Financial is one of the larger bank holding companies headquartered in the New England region, with $69.4 billion in total consolidated assets at June 30, 2003. Citizens Financial operates seven subsidiary banks: (1) Citizens Bank of Massachusetts; (2) Citizens Bank of Rhode Island; (3) Citizens Bank of New Hampshire; (4) Citizens Bank, a Delaware-chartered bank formed and acquired by CFG in 2001; (5) Boston Trust and Investment Management Company, formerly United States Trust Company; (6) Citizens Bank of Connecticut; and (7) CBP. As of June 30, 2003, CBP had total assets of $23.9 billion.

Thistle Group is a federal unitary thrift holding company headquartered in Philadelphia, Pennsylvania. In addition to RM Bank, Thistle Group has four non-bank subsidiaries: TGH Corp., TGH Securities, Inc., and TGH Trust. In addition, Thistle Group holds a minority, non-controlling interest in The Philadelphia Trust Company ("Philadelphia Trust"), a Pennsylvania trust company, and in several other companies. Prior to the close of the transaction, Thistle Group's investment will be reduced to 4.99% or less of Philadelphia Trust's voting securities. As of June 30, 2003, Thistle Group's total consolidated assets were $913.6 million. RM Bank serves the metropolitan Philadelphia area through its main office and 14 additional branch offices.

The proposed acquisition would be accomplished through a series of interrelated transactions, which will ultimately result in RM Bank being merged with and into CBP. First, CBP will establish a wholly-owned shell subsidiary ("Merger Sub"), which will merge with and into Thistle Group. As a result, Thistle Group and RM Bank will become, respectively, direct and indirect subsidiaries of CBP. Thereafter, Thistle Group will be dissolved, with all of its assets and liabilities being distributed to, and assumed by, CBP. In a related transaction, Citizen Financial's Delaware subsidiary, Citizens Bank, will purchase RM Bank's single Delaware branch and assume the deposits and certain other liabilities. In the final step, RM Bank will merge with and into CBP, with CBP as the surviving entity.

Prior to approving an application under chapter 167A, the Board must have received notice from the Massachusetts Housing Partnership Fund (the "MHPF") that the Petitioner has arranged to participate in the MHPF's various affordable housing loan programs. In its application documents, Petitioner indicated that it had made a filing with the MHPF. In a letter dated October 24, 2003, MHPF notified the Board that satisfactory arrangements had been made for this transaction.

The Board's review of this matter focuses on the applicable statutory and administrative criteria which include, among other things, whether competition among banking institutions will be unreasonably affected and whether public convenience and advantage will be promoted. In determining whether the public convenience and advantage are promoted by the transaction, the Board considers, among other things, whether there has been a showing of "net new benefits." Net new benefits are defined as initial capital investments, job creation plans, consumer and business services, commitment to maintain and open branch offices within a bank's delineated local community, and such other matters as the Board may deem necessary or advisable. The Board also considers the banks record of performance under the Community Reinvestment Act ("CRA") and any relevant testimony received at the public hearing or submitted during the open comment period.

On the issue of whether competition will be unreasonably affected by the proposed transaction, the Board considers, but does not rely exclusively on, the various indices used by federal agencies in measuring competition in a given market. In this case, the federal standards indicate the proposed transaction will not result in undue concentration of banking resources in the relevant banking markets. However, the Board further considers the competitive effect of the proposed transaction in light of its impact on the citizens, communities, and banking structure of the Commonwealth on a community by community basis. In this case, the Petitioner has submitted the HHI analysis for the markets where its subsidiaries banking operations overlap with those of RM Bank. Pursuant to the federal guidelines, the proposed transaction would not unreasonably interfere with competition in these markets. Furthermore, the proposed transaction will have no impact on any Massachusetts banking market. For these reasons, the Board concludes that competition among banking institutions will not be unreasonably affected.

The Petitioner submitted a variety of materials relating to the public convenience and advantage it asserts would result from the proposed transaction. The customers of RM Bank will have access to a broader array of financial products and services, it maintains, and a greatly expanded service area. Likewise, Petitioner notes that its existing customers will benefit from its expansion into southeastern Pennsylvania. As a general matter, Petitioner asserts that the regional diversification and acquired infrastructure will increase its financial strength, thereby enabling it to offer financial products and services to its customers at competitive rates. This enhanced financial strength, Petitioner argues, will also provide a platform for its future growth in Massachusetts. After considering all of the material submitted, the Board's review weighs in favor of the finding that the public convenience and advantage will be promoted. The Board further concludes that the criteria for net new benefits has been established.

The Board's review of this transaction includes an assessment of the subsidiary banks' performance under the CRA. Such assessment for a state-chartered bank involves examination by Division of Bank personnel, as well as an analysis of the legitimate concerns raised by the community and the bank's response to those concerns. For other institutions, the Board reviews the descriptive rating and evaluation by the applicable federal or state bank regulatory agency. The most recent CRA examination of RM Bank, performed by the Office of Thrift Supervision, resulted in a "Satisfactory" rating. As newly chartered banks, the CRA performance of CBP and Citizens Bank of Deleware has not yet been assessed. However, the most recent examinations of Citizens Bank of Rhode Island, Citizens Bank of Connecticut, Citizens Bank of New Hampshire, and Citizens Bank of Massachusetts all resulted in "Outstanding" ratings.

Written comments submitted to the Board raised questions regarding the business practices of the Petitioner's bank and non-bank subsidiaries, its corporate parent, and certain allied but unaffiliated lenders. The Petitioner provided the Board with a written response to these concerns, pointing out the consistently high CRA performance of its subsidiary banks and questioning the data relied on by the commenter.

The Board and staff of the Division of Banks have reviewed the issues raised and the response thereto on matters within their jurisdiction. Based on this review, the Board is unable to conclude that the Petitioner's application should be denied. To the contrary, and based upon the Petitioner's strong record of meeting the credit needs of the communities in which it operates, the Board is satisfied that the banks involved in this transaction will adequately meet the credit needs of the relevant communities.

As part of its inquiry, the Board reviews the financial structure, tax consequences, and the operational aspects of the transaction. The Board has reviewed the consolidated financial statements of the parties and the details of the proposed transaction, and is satisfied with the Petitioner's capital ratios and projections. Information regarding the tax consequences of the proposed transaction was provided by Petitioner and considered by the Board. Finally, operational issues were considered, and the Board is satisfied with Petitioner's efforts to ensure the smooth transition of its systems.

Conclusion

Based on the record of this matter and considered in light of all relevant statutory and administrative requirements, the Board concludes that the proposed transaction will not have a significant impact on competition among banking institutions in the Commonwealth and will promote the public convenience and advantage. Specifically, the Board finds that the transaction will benefit the customers of RM Bank, and further finds that the banks involved in this transaction have a satisfactory record of performance under the CRA. In accordance with these findings and pursuant to the statutory authority cited herein, the Board approves the application and authorizes Petitioner to acquire Thistle Group Holdings Co., and Roxborough-Manayunk Bank.

The approval granted herein is subject to the condition that all related transactions are completed within one year of the date of this Decision.

Steven L. Antonakes ___________________________ Commissioner of Banks
Alan L. LeBovidge ___________________________ Commissioner of Revenue	Board of Bank Incorporation
Timothy P. Cahill ___________________________ Treasurer and Receiver General
January 2, 2004 _____________________ Date

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