One Citizens Plaza
Company Perspectives:
We will build a great company where every employee shares a deep commitment to our customers. We will provide exceptional service to and earn the long-term loyalty of those customers who choose Citizens as their primary bank. We will be the absolute leader in commitment to our employees, communities, and to the highest ethical standards. We will remain the leading New England super-community bank, and be one of the best financial performers nationally in banking.
Citizens Financial Group, Inc. is the second largest commercial bank holding company in New England, behind only the much larger FleetBoston Financial Corporation, and was one of the top 30 commercial banks in the United States as of mid-2001. Wholly owned by The Royal Bank of Scotland Group plc, Citizens Financial owned retail banks in four states as of mid-2001: Rhode Island, where it had 66 branches and $7.4 billion in assets; Massachusetts, 140 branches and $16.8 billion in assets; Connecticut, 43 branches and $2.4 billion in assets; and New Hampshire, 80 branches and $5.7 billion in assets. In July 2001 Citizens reached an agreement to acquire the regional banking business of Mellon Financial Corporation, a deal that, if completed, would add to Citizens' holdings 345 branches in Pennsylvania, Delaware, and New Jersey, along with $16.4 billion in assets. This deal would catapult Citizens into a position as one of the top 20 banks in the United States, with nearly $50 billion in assets.
The group, which traces its origins back to the founding of High Street Bank in 1828, had assets of only about $1.5 billion when it went public in 1985. After being acquired by the Royal Bank of Scotland in 1988, Citizens began a period of spectacularly rapid growth through acquisition following the appointment of Lawrence K. Fish as chairman and CEO in 1992.
19th-Century Beginnings As High Street Bank and Citizens Savings Bank
High Street Bank, which was chartered as a commercial bank, was founded in 1828 in Providence, Rhode Island's Hoyle Square, at the time one of the city's busiest intersections for travelers from the nearby manufacturing towns and from the countryside. Hoyle Square was named after the Hoyle Tavern, a very popular locale in the city, while the bank took its name from its offices, which were located in two rooms of a residence on High Street.
With Rhode Island serving as one of the main industrial areas of New England in the mid-19th century, competition was fierce in the commercial banking sector. Eventually, as the need for banks serving ordinary citizens increased, the directors of High Street Bank decided to branch out. In 1871 they obtained a second charter from the Rhode Island legislature that established Citizens Savings Bank, a mutual savings bank. Jessie Grant, the daughter of the bank's vice-president, made the first deposit into the bank on April 19 of that year, and by the end of the year the new bank had deposits of $52,000. The next 50 years consisted of a period of slow growth for both Citizens Savings and the Hoyle Square neighborhood as Providence's position as an industrial center and seaport deteriorated. By the early 1920s, the bank's future seemed more promising, so the bank built a new headquarters on the site of Hoyle Tavern, which had been torn down in 1890.
The Great Depression of the 1930s hit New England hard, with Rhode Island suffering particularly from the ongoing decline of its important textile industries. Citizens Savings saw its deposits decline and had to contend with increased numbers of defaulted mortgages, but because the bank's lending practices were fairly prudent, its travails were not as severe as those of many other financial institutions.
Recovery and change came during the 1940s. In 1943 Citizens Savings gained the ability to acquire stock in High Street Bank because of a change in Rhode Island investment law. Citizens quickly gained full control of its former parent, foiling an attempt by a High Street stockholder to take control of High Street Bank. In 1947 High Street Bank relocated its offices to those of Citizens Savings. One year later, High Street Bank was renamed Citizens Trust Company.
Citizens began developing a branch network in 1947, when it opened an office in Cranston. Three years later the bank became a member of the Federal Deposit Insurance Corporation (FDIC). It was the first mutual savings bank to do so. Expansion continued in 1954 with the acquisition of Greenville Trust Company. This added two more branches as well as assets of more than $8 million. Growth continued throughout the 1960s and 1970s. By 1971 Citizens Savings was the 80th largest mutual savings bank in the United States. Ten years later, the bank was operating 29 branches throughout Rhode Island, and assets totaled $971 million.
1981–92: Emergence of Citizens As Unit of Royal Bank
Also in 1981, George Graboys was named CEO of the bank. Graboys had practiced law before joining his family's asset-based lending company, U.S. Finance Corp., in the mid-1960s. After Citizens acquired U.S. Finance in 1969, Graboys began working within the commercial bank unit, then was elected president of Citizens Savings in 1975. It was during Graboys' tenure as CEO of Citizens that the bank would be transformed into a more modern financial institution as well as trade its independence for the security of a deep-pocketed parent.
Citizens avoided the fate of other savings and loan institutions during the disastrous and criminal savings and loan crisis of the 1980s by sticking to its conservative business and lending practices. Graboys did, however, respond surely to the key events of the decade for financial institutions: the deregulation of interest rates, the removal of interstate barriers, and increased competition. He sought to expand his bank's loan and retail banking businesses outside of Rhode Island and to engage in all aspects of retail banking and middle-market corporate lending. In 1983 the bank opened its first commercial loan office outside of Rhode Island, locating it in Boston. To prepare to convert from a mutual savings bank to a stock savings bank, Citizens Bank became a federal savings bank in October 1984. Then in mid-1985, Citizens Financial Group, Inc. was created as a bank holding company for both Citizens Bank and Citizens Trust. Citizens Financial then sold 4.3 million shares of common stock at $23 per share in an initial public offering. The new holding company began its existence with assets of $1.6 billion. The holding company structure enabled the group to move into other financial services businesses and into other geographic markets.
Graboys began using the proceeds from the stock offering to fund acquisitions. In 1986 the group acquired Gulf States Mortgage Company, an Atlanta-based residential mortgage origination and service firm with a loan portfolio of just over $1 billion. The new subsidiary was later renamed Citizens Mortgage Corporation. In July 1988 Citizens Financial completed its first acquisition of a retail bank located outside Rhode Island by spending $39 million for Fairhaven Savings Bank, which was based in Fairhaven, Massachusetts, and had five branches in the southeastern portion of that state and $266 million in assets. Fairhaven Savings became the initial building block for Citizens Bank of Massachusetts, which would eventually become the group's largest retail banking unit.
By 1988 Citizens Financial was the fifth largest bank in New England but was far smaller than the top four at the time: Bank of Boston, Fleet Financial Group, Bank of New England, and Shawmut National. Graboys believed that Citizens needed to ally itself with a larger company if it were to have any chance of competing against its much larger rivals. At the same time, however, Graboys wished to keep his bank at least semi-independent. The solution to this dilemma was for Citizens to be acquired by a foreign bank that would allow it to operate as a separate U.S. bank. That bank turned out to be the Edinburgh-based Royal Bank of Scotland Group plc, which at the time was the sixth largest U.K. bank with assets of more than $36 billion. Royal Bank paid about $440 million for Citizens in a transaction that was completed in December 1988. Citizens would now be able to tap into the deep pockets of its new parent to fund further growth, while Royal Bank gained a platform for U.S. expansion.
The well-run Royal Bank also helped Citizens survive a turbulent period for New England banking in the late 1980s and early 1990s, following the collapse of the New England real estate market and the resulting wave of loan defaults. Both Bank of New England and Bank of Boston fell into serious financial difficulties in the early 1990s; the former failed and was taken over by Fleet in 1991.
Citizens Financial began the 1990s by moving into a new 13-story headquarters called One Citizens Plaza. The building was located in downtown Providence at the confluence of the Moshassuck and Woonasquatucket Rivers. Citizens' desire for growth through acquisition was initially stymied by the crisis in New England banking. A number of acquisition targets were dropped from consideration because of the level of nonperforming loans in their portfolios. In fact, Citizens reached an agreement to acquire BankWorcester Corporation of Worcester, Massachusetts, for $149 million in early 1990, only to pull out of the deal later in the year because of the growing size of BankWorcester's nonperforming assets. Graboys nevertheless completed one acquisition in late 1990, that of Old Colony, the Rhode Island subsidiary of the troubled Bank of New England. Citizens thereby added 22 branches to its Rhode Island network of 30 branches, giving it the largest branch network in the state. Adding Old Colony's $1.2 billion in assets moved Citizens from fourth to second place in size among the state's banks. Old Colony was founded in 1803 as Newport Bank, which was the 12th bank founded in the United States.
Doubling in Size Under Lawrence K. Fish: 1992–95
By 1992 Graboys had accomplished a quadrupling of the bank's assets during little more than a decade of leadership, to $4 billion. That year, Lawrence K. Fish succeeded Graboys as chairman and CEO. A banking veteran, Fish was a former executive at Bank of Boston who received accolades for his efforts to revive the failing Bank of New England during his brief tenure from 1990 to 1991 as chairman and CEO of the Boston-based bank. The Royal Bank of Scotland handed Fish the mission of taking a more aggressive approach to expanding its U.S. subsidiary.
Fish quickly delivered for his new bosses, completing seven acquisitions from September 1992 through January 1995, in the process increasing Citizen's assets to more than $10 billion. A number of the deals were for failed banks and savings and loans that were being liquidated by the FDIC or the Resolution Trust Corporation (RTC), a U.S. government agency set up to sell insolvent financial institutions. This was the case with the bank acquired in September 1992, Plymouth Five Cents Savings Bank, which was acquired from the FDIC and whose eight branches doubled the size of Citizens Bank of Massachusetts. Also bought from the FDIC was New England Savings Bank, acquired in May 1993. Citizens gained its first presence in Connecticut through the purchase of New London, Connecticut-based New England Savings, which became the base for Citizens Bank of Connecticut. New England Savings had 21 branches and $695 million in assets. Later in 1993, Citizens Financial completed its largest acquisition to date, the purchase of The Boston Five Bancorp and its 22 metropolitan Boston branches for $95 million. Boston Five, which boasted assets of $1.63 billion, also had an extensive New England mortgage operation, which was added to Citizens Mortgage, doubling that subsidiary's mortgage portfolio to more than $8 billion.
During 1994 Citizens Financial completed three more acquisitions: Neworld Bancorp, Coastal Federal Savings Bank, and Old Stone Federal Savings Bank. Boston-based Neworld had 14 branches in Boston and another eight on Cape Cod, bringing Citizens Bank of Massachusetts' branch total to 55. Purchased for $144.3 million, Neworld had assets of $1.1 billion. Coastal was another failed thrift and was purchased from the RTC for $10.7 million. This added nine branches and $100 million in assets to Citizens Bank of Connecticut. Also acquired from the RTC for $133.6 million was Old Stone, which was the fourth largest bank in Rhode Island with 28 branches and assets totaling $501 million. Citizens now held 29 percent of the bank deposits in its home state, second only to Fleet's 34 percent. Also in 1994, Citizens Financial became one of the last large banks to begin selling mutual funds through its branches. It formed alliances with two major Boston-based fund managers, Fidelity Investments and Putnam Cos., to sell 30 of their stock and bond funds.
In early 1995 Citizens further entrenched itself in the Massachusetts market by acquiring Quincy Savings Bank for $141 million. Quincy operated 14 branches in Boston's suburban South Shore and had assets of $813 million. This latest acquisition increased the assets of Citizens Financial to $10.3 billion, more than double the figure when Fish took over. During the same period earnings tripled to $52.7 million as Fish found success with a strategy of positioning Citizens as a service-oriented, "supercommunity" banking franchise catering to the needs of working-class customers. This approach involved more of the old-fashioned human contact than the high-tech electronic services, such as ATMs and online banking, that rivals were rapidly adopting as the wave of the future. This focus on community banking also led Citizens to open its first supermarket banking branches in 1995 through a deal with Shaw's Supermarkets. Later deals placed Citizens branches within such supermarkets as Stop & Shop, Star, Victory, Shop'n'Save, and Wal-Mart.
1996 and Beyond: Accelerating the Pace of Growth
In April 1996 Citizens Financial merged with First NH Bank, which was based in Manchester, New Hampshire, was the largest financial services firm in the state, and was owned by Bank of Ireland. Royal Bank of Scotland paid $245 million in cash and notes to Bank of Ireland, which also gained a 23.5 percent stake in Citizens. Royal Bank retained 76.5 percent ownership of Citizens. First NH was recast as Citizens Bank of New Hampshire, bringing to Citizens Financial 73 bank branches, 12 supermarket banks, and 153 ATMs. The addition of $4 billion in assets made Citizens the third largest bank in New England, trailing Fleet (which had acquired Shawmut in 1995) and Bank of Boston. Citizens also leaped into the top 50 among U.S. banks.
The newly enlarged bank completed two more significant acquisitions within the next 12 months. In November 1996 Farmers & Mechanics Bank, based in Middletown, Connecticut, was acquired for $53.2 million in cash. The purchase expanded Citizens Bank of Connecticut by 12 branches and $569 million in assets. Citizens Bank of Massachusetts grew through the March 1997 buyout of Grove Bank, which was headquartered in Chestnut Hill, Massachusetts, and had ten branches in the lucrative suburban markets west of Boston. Purchased for $87 million, Grove Bank had assets of $747 million. Also in late 1996 and early 1997, Citizens Financial exited from the mortgage servicing market, believing that its Atlanta-based mortgage servicing unit was too small to compete with large national mortgage servicers. Citizens Mortgage continued to originate and process mortgages from the bank's New England branches. In late 1996 Citizens Capital, Inc. was formed as a Boston-based subsidiary specializing in making loans to small and medium-sized businesses. In keeping with the bank's traditional conservative lending practices, the loans would range from $1 million to $50 million, with the vast majority consisting of loans of less than $10 million. In yet another development around this same time, Citizens in January 1997 launched a four-state marketing campaign featuring the slogan "Not Your Typical Bank." The campaign was designed to emphasize the bank's strategy of being a supercommunity bank offering the personal service of a smaller, neighborhood bank in contrast to the impersonal reputations of its much larger rivals.
Continuing to fill in geographic gaps in its New England base, Citizens spent $57.2 million for Bank of New Haven in August 1997. The $350 million in assets bank operated 11 branches in Connecticut, bringing Citizens' network in that state to 41. In August 1998 Citizens Bank of Massachusetts expanded into Boston's northern suburbs with the purchase of Woburn National
Bank and its five branches and $165 million in assets. One month later, Royal Bank of Scotland regained full control of Citizens Financial by paying Bank of Ireland $750 million for its 23.5 percent stake. In October 1998 Citizens Bank of Connecticut added four branches of Branford Savings Bank, expanding its presence in the greater New Haven area. Later that same year, Citizens sold its Visa credit-card portfolio to Bankcard Services of MBNA, one of the giants of the credit card industry. Citizens continued to offer credit cards to its customers, but the cards would now be serviced by MBNA instead of the bank.
While continuing to emphasize personal, branch-based banking, Citizens in 1999 also launched Citizens Bank Online, a full-service electronic banking and bill payment service. The year was also significant because of the merger of Fleet and BankBoston that created FleetBoston Financial Corporation, a $190 billion financial giant that ranked as the eighth largest bank in the United States. Citizens Financial thereby gained the number two spot among New England banks but with just $18 billion in assets was now dwarfed by its much larger rival. This increased the pressure on Citizens to complete more acquisitions, and it did just that. In October 1999 the bank paid $350 million to acquire State Street Corp.'s retail bank, which included four branches in Boston and Quincy, Massachusetts, and a commercial loan portfolio totaling $2.2 billion. The deal was particularly significant for its bulking up of Citizens' commercial portfolio by nearly 50 percent, to $7 billion, or one-third of its total assets of $21 billion. Citizens was now well-positioned to be a major player in New England in middle-market loans to corporations, small businesses, and nonprofits.
In January 2000 Citizens Financial completed its largest acquisition yet, the $1.4 billion purchase of Boston-based UST Corporation. This deal doubled the size of Citizens Bank of Massachusetts to $14 billion in assets, adding 87 more branches to that unit. It also increased Citizens Financial's commercial loan portfolio by another $4.4 billion. Citizens also gained United States Trust Company of Boston, UST's asset management unit, which had more than $3.5 billion under management for individual and institutional investors; and Brewer & Lord, a full-service insurance agency. Overall, the State Street and UST deals helped increase Citizens Financial's assets to nearly $31 billion by the end of 2000, making the bank one of the 30 largest banks in the nation. Meanwhile, Citizens' parent had also bulked itself up during 2000, acquiring National Westminster Bank Plc for $33 billion and becoming one of the top three banks in the United Kingdom, with total assets of nearly $500 billion. For Citizens, having a larger Royal Bank of Scotland as a parent appeared likely to open up even more avenues for growth because the U.S. unit would now generate a much smaller proportion of Royal Bank's operating earnings.
This soon proved to be the case as Citizens Financial announced in July 2001 that it would purchase the retail banking operations of Pittsburgh-based Mellon Financial Corporation for about $2.1 billion. If completed, the deal would be not only Citizens' largest in history but also its first foray outside its New England base. Included in the purchase would be 345 branches in Pennsylvania, Delaware, and southern New Jersey and $13.4 billion in consumer and commercial deposits, as well as $6.1 billion in loans, mainly to small and middle-market banking customers. Citizens would instantly become the third largest bank in Pennsylvania and with nearly $50 billion in total assets become one of the 20 largest commercial banks in the United States. It appeared quite likely that additional acquisitions would follow the Mellon deal, with speculation centering on gaps in Citizens' geographic coverage, such as in northern New Jersey and New York state, and on further expansion of Citizens' territorial extent, such as moving west into Ohio. Regardless of future deals, however, Citizens seemed certain to maintain its winning formula of a focus on customer service coupled with a local, conservative approach to lending.
Principal Subsidiaries: Citizens Bank of Rhode Island; Citizens Bank of Connecticut; Citizens Bank of Massachusetts; Citizens Bank of New Hampshire; Citizens Business Credit; Citizens Capital, Inc.; Citizens Ventures, Inc.; Citizens eBusiness; Citizens Financial Services, Inc.; Citizens Leasing Corporation; Citizens Mortgage Corporation; Brewer & Lord; Firestone Financial; United States Trust Company of Boston.
Principal Competitors:FleetBoston Financial Corporation; Sovereign Bancorp, Inc.
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