Citibank merges Md. bank branches with D.C. thrift Conversion designed to improve efficiency

June 04, 1993|By David Conn | David Conn,Staff Writer

While many of its competitors are fighting an uphill battle for the right to establish bank branches across state lines, Citibank last month did it in Maryland, cleanly and quietly.

In a letter to Maryland depositors mailed two weeks ago, the New York-based banking company said its Citibank (Maryland) N.A. branches had become branches of Citibank Federal Savings Bank in Washington, and that "all Maryland deposits will become D.C. deposits."

Citibank F.S.B., based in California, also has branches in Florida and Illinois. Unlike commercial banks, thrifts are allowed to operate branches across state lines. Citibank (Maryland) has about $1.9 billion in assets.

The company decided to convert from a commercial bank charter to increase efficiencies in operations and reporting, said spokeswoman Maria Rullo.

She said customers should see no difference resulting from the change, which took effect May 1.

But there is one possible impact on consumers, which the bank's letter notes: If a depositor has money in both the Maryland and D.C. Citibank units, those funds will be aggregated in one account. And if the balance of the newly combined account exceeds $100,000, the excess amount will

not be federally insured.

Accounts such as certificates of deposit will continue to be insured separately until Nov. 1, or until the CD matures, whichever is later. Depositors will have a chance to renew their CDs one more time before Nov. 1, at the same terms, and still retain separate FDIC coverage until the new rollover date, the bank said.

Ms. Rullo said Citibank determined that few, if any, depositors would be affected by the $100,000 limit. And she said the management and employees of the company in Maryland probably would not notice a difference. The parent company, Citicorp, still maintains separate commercial banks in New York and Maine.

The new structure allows Citibank F.S.B. to operate essentially as one company, with branches in four states and Washington.

To operate across state lines, commercial banks must now create separate subsidiaries in each state. NationsBank has claimed that unrestricted interstate branching could save U.S. banking companies upward of $50 billion a year in administrative costs by combining operations.

Citibank's new corporate structure will impose one important restriction on the company, said Cynthia Glassman, a partner and director of research at Furash & Co., a bank consulting firm in Washington. The company must pass the "Qualified Thrift Lender" (QTL) test, which requires that at least 65 percent of its assets be real estate-related, and that no more than 10 percent of assets can be commercial/industrial loans.

Most commercial banks keep an average of 25 percent of their assets in commercial loans, according to Ms. Glassman, while thrifts tend to keep only 2 percent.

That doesn't necessarily mean Citibank's business customers in Maryland will be out of luck. The company could originate commercial loans and sell them to its bank affiliates, she said, or expand its balance sheet by buying real estate assets. The company has two years to meet the QTL test, according to the Office of Thrift Supervision.

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