Rhode Island Mutual Switching to Stock: Citizens Savings Plans to Become Unitary Thrift Holding Company

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PROVIDENCE -- Citizens Savings Bank, a $1.3 billion-asset mutual savings bank based here, plans to restructure itself in a two-step process culminating in its conversion to a stockholder-owned institution, bank officials said.

George Graboys, president and chief executive officer, said that in its final form as a unitary, or single, thrift holding company, Citizens would be better able to raise capital and diversify than as a mutual savings bank.

It is the second time this month that a large Rhode Island banking company has announced a major transformation. On Sept. 17, Old Stone Corp., a $2.3 billion-asset bank holding company, revealed plans to acquire the struggling Rhode Island Federal Savings and Loan Association and, in the process, convert Old Stone Bank, a state-chartered commercial bank, into a federal savings bank.

Old Stone and Citizens are making their moves for different reasons.

Old Stone seeks the single thrift holding company format largely in order to pursue its expansion goals in North Carolina. Old Stone owns a savings and loan association there and wants to buy a second one, but the latter purchase has been thwarted by the Federal Reserve Board. As a thrift holding company, Old Stone would escape federal regulations.

Citizens, on the other hand, would actually be adding a layer of regulation -- that of the Federal Home Loan Bank Boad -- and increasing the Fed's regulatory role. But Mr. Graboys said he isn't worried about regulation.

The first step in Citizens' transformation is for it to convert from a state to a federal charter, a move its board of corporators will vote on on Oct. 9, Mr. Graboys said. If a majority of the 150-member board approves, Citizens expects the Federal Home Loan Bank Board to issue the charter before the end of October.

That will set up the conversion, which Mr. Graboys hopes will take place before the end of the first quarter of 1985. He acnowledged that the market has been unfriendly to thrift conversions this year, but he is confident, he said, that "our quality will be readily recognized" by investors.

"We look upon ourselves as somewhat unique," Mr. Graboys said. "I don't think we'll be grouped with traditional thrifts."

Citizens, Rhode Island's fourth largest bank, is an extraordinarily well-capitalized thrift with a strong earnings record. Its net-worth-to-assets ratio of 9.01% placed it eighth among the nation's 300 largest thrifts in the American Banker 1984 survey.

For the last three years, Sheshunoff & Co., an Austin, Tex., firm that analyzes financial institutions based on Federal Deposit Insurance Corp. call reports, has listed Citizens in the top three in return on assets among mutual savings banks with assets of over $500 million. Its 19003 ROA was 1.06%.

Citizens had a local reputation as a sophisticated, although not particularly flashy, bank. …