Dive Brief:

• The Federal Reserve approved Citizens Financial Group's application to acquire Investors Bancorp in a $3.5 billion cash-and-stock deal, the central bank announced Tuesday. 
• The tie-up between Providence, Rhode Island-based Citizens and Short Hills, New Jersey-based Investors will create the nation's 17th-largest lender with roughly $214.9 billion in consolidated assets. That would boost Citizens' assets from a Dec. 31 total of $188.4 billion, according to Fed figures.
• The combined bank must take part in an additional stress test in 2023 to refigure its stress capital buffer, as Citizens’ scheduled 2022 stress test will not take into account the effects of the acquisition, the central bank said.

Dive Insight:

The Fed has been steadily reducing a backlog of applications regarding bank tie-ups. By late last year, a handful of mergers and acquisitions stood in limbo over a lack of sign-off from the central bank. First Citizens BancShares and CIT extended the timeline to complete their merger once last year's third quarter wrapped up with no green light from the Fed. M&T Bank and People's United did the same in late February. 

The Fed has since approved both of those delayed deals — the former in December and the latter this month — as well as a few more.

The central bank signed off on Webster Bank’s $5.1 billion all-stock acquisition of Sterling Bancorp — and WSFS Financial’s $976.4 million purchase of Bryn Mawr Trust — in December. And it approved the $2.5 billion merger between Evansville, Indiana-based Old National Bank and Chicago-based First Midwest Bank in January.

Some of the approvals have drawn fire for their timing. The nonprofit Better Markets, in particular, called out the Fed this month for announcing its nod to the M&T deal late on a Friday afternoon. 

“This is becoming a disturbing pattern that undermines the credibility of the Federal Reserve. It opens the question — what is it trying to hide by releasing such important information at a time when it will get the least attention, media coverage, and scrutiny?” Phillip Basil, director of bank policy at Better Markets, said in a press release. “Such end-of-week, late-in-the-day announcements are a disservice to the public and beneath the proper role of the Fed."

The Citizens-Investors announcement, too, came at 4:30 p.m. Eastern — a typical release time for the central bank — albeit on a Tuesday.

The deal marks to second major revenue stream to be folded into Citizens in just over a month. Citizens transitioned deposit accounts from 800,000 inherited HSBC customers in late February and announced three days later that it had closed its acquisition of 80 HSBC branches.

Citizens last month indicated to American Banker it expected the Investors deal to be finalized in the second quarter.

"The acquisition of Investors, following on the heels of the acquisition of HSBC’s East Coast branches, further strengthens our formidable franchise in the northeast, together adding roughly one million customers and boosting our near and long-term growth potential," Citizens CEO Bruce Van Saun said in July, when the Investors deal was first announced. 

The Investors acquisition will give Citizens an additional 154 branches, including 130 in and around New York City. Citizens estimated the tie-up would save the combined company $130 million per year, and forecast roughly $400 million in pretax integration costs. 

The four Fed governors approved the deal unanimously, American Banker reported Tuesday. 

The White House issued an executive order in July, demanding that the Fed, Justice Department, Office of the Comptroller of the Currency (OCC) and Federal Deposit Insurance Corp. (FDIC) update guidelines to provide more robust scrutiny of banking mergers.

The central bank and the OCC this month held a public hearing on the proposed acquisition of MUFG Union Bank by U.S. Bank. That is just one of the deals the Fed is still processing more than six months after its announcement. Another is New York Community Bank's $2.6 billion acquisition of Michigan-based Flagstar Bank, announced last April.