Citibank Mortgage to Acquire Source One Mortgage Services Corp

Business Wire, March 25, 1999

NEW YORK--(BUSINESS WIRE)--March 25, 1999--

Latest Citigroup Move Further Strengthens Core Consumer Business

Citigroup today announced that its Citibank Mortgage unit has signed an agreement to acquire the principal operating assets and assume certain liabilities of Michigan-based Source One Mortgage Services Corp. and its wholly-owned subsidiary, Central Pacific Mortgage (CPM). The transaction is expected to close during the second quarter of 1999.

This is the fourth consumer lending acquisition Citigroup has announced or completed this month; the transactions are part of an overall corporate strategy to further strengthen Citigroup's core consumer business. Earlier this month, Citigroup's Commercial Credit announced an agreement to acquire a loan portfolio and a network of sales offices from The Associates, while Citibank announced plans to acquire Mellon Bank Corp.'s credit card assets, and also completed the acquisition of Chilean consumer finance company Financiero Atlas.

"The acquisition of Source One is in keeping with our overall business goal - to be the leader in providing high-quality, end-to-end financial services for consumers around the world," explained Robert B. Willumstad, Head of Global Consumer Lending for Citigroup. "We're in the process of refocusing our resources on businesses in which we are a clear leader, as well as those that present the best opportunity for growth. Our mortgage business is an important component to our strategy to cross-sell within the organization."

Expanded Offerings for Low- to Moderate-Income Borrowers

With the purchase of Source One, Citibank Mortgage will become the ninth largest mortgage originator ($27 billion in 1998) and the 11th largest mortgage servicer ($70 billion in 1998) in the United States. The addition of Source One Mortgage and Central Pacific Mortgage, both of which specialize in FHA and VA loans, enhances Citibank Mortgage's offerings for low- to moderate-income home buyers.

"Source One has an established presence and expertise with low- to moderate-income borrowers, which Citigroup views as an important customer segment," said Carl Levinson, Executive Director of Consumer Assets for Citibank. "We're achieving three important things with this acquisition. Number one, we've significantly broadened our product line. Number two, we've underscored our commitment to those communities in which we do business. Third, we're dramatically expanding our retail presence via Source One's existing network of approximately 160 sales offices, 300 brokers and 200 correspondents."

"This is an ideal situation for our employees and our customers," added James H. Ozanne, Chairman of Source One. "Citibank Mortgage is an extremely well-run and disciplined business, and is an industry leader in customer service and product innovation. We look forward to a smooth integration of our operations."

Citibank Mortgage Adjusts Business Strategy, Moves into Growth

Mode

The Source One acquisition is the latest chapter in building Citibank Mortgage into a leadership position within the home-loan industry. The creation of Citigroup, via last year's merger of Citicorp and Travelers, left Citibank Mortgage well-positioned within the overall organization, and in the last 18 months, the group has made significant strides toward solidifying its position within the industry.

Citibank's expertise is jumbo mortgage originations, as well as the ability to portfolio loans, through an extensive broker and correspondent network. Its other distribution channels include Citibank retail branches, corporate relocation and direct consumer sales. Source Ones' expertise and distribution compliment those of Citibank Mortgage, with little duplication. Citibank's mortgage origination volume jumped 100% last year, from $8.2 billion in 1997 to $16.4 billion in 1998. Citibank ranked No. 3 nationally among the top mortgage servicers in terms of maintaining a low customer delinquency ratio.

"We have an exceptionally high-quality team at Citibank Mortgage. Under the leadership of David Lowman, they've worked extremely hard to enhance our position within the mortgage industry, as well as our reputation with clients, and the effort is clearly paying off," noted Citibank's Mr. Levinson. "We plan to unveil several service enhancements in our mortgage business during 1999. And while we do want to continue growing the business at a significant rate, we remain dedicated to controlling risk by maintaining our prudent credit thresholds."

St. Louis-based Citibank Mortgage is part of Citigroup, the world's most global financial services organization. Citigroup's consumer businesses cover a broad range of financial services in 57 countries - retail and private banking, credit and charge cards, student loans, mortgage lending, consumer lending, personal financial planning, personal insurance and investment brokerage and counseling. These services are marketed through Citibank, Commercial Credit, Primerica, Travelers Life & Annuity and Travelers Property Casualty and Salomon Smith Barney. Together these consumer businesses earned $2.8 billion in 1998, representing 58 percent of Citigroup's core business income.