Philadelphia Savings Fund Society

Philadelphia Savings Fund Society

Industry	Banking, Financial services
Founded	December 2, 1816 (1816-12-02) in Philadelphia, Pennsylvania, United States
Founder	Condy Raguet
Defunct	December 11, 1992 (1992-12-11)
Fate	Taken over by federal authorities; assets sold to Mellon Financial
Headquarters	Philadelphia , United States
Area served	Philadelphia and surrounding areas; later expanded operations including Florida
Key people	Condy Raguet (founder), Andrew Bayard (first president), Frank Slattery (later controlling stakeholder), Roger S. Hillas (CEO)
Products	Savings bank accounts, home loans, corporate finance, mutual funds, real estate development

The Philadelphia Savings Fund Society (PSFS), initially known as the Philadelphia Saving Fund Society, holds the distinction of being the first savings bank established in the United States. Founded in December 1816 and based in Philadelphia, Pennsylvania, it evolved into one of the nation’s leading savings banks and became a major financial institution within Philadelphia, serving multiple generations of clients.

The bank was created under the leadership of entrepreneur Condy Raguet, who drew inspiration from British models of savings banks. PSFS expanded its operations by introducing new services and opening additional branches, moving to progressively larger headquarters as it grew. By the late 1910s, it led U.S. savings banks in depositor numbers and ranked second in total deposits, following only Emigrant Savings Bank. During the 1920s, PSFS initiated programs aimed at encouraging children to open savings accounts, promoting early financial literacy.

In response to industry challenges during the 1970s that affected smaller banks, PSFS merged with Western Savings Fund Society in 1982, a move supported by government efforts to promote consolidation and stability. This merger, along with regulatory reforms, allowed PSFS to expand its offerings into areas such as corporate finance, mutual funds, and real estate development.

Adopting the name Meritor Financial Group in 1984 to better represent its diversified financial services approach, the company experienced substantial financial setbacks that led to the sale of various subsidiaries and branches. Despite attempts at restructuring, Meritor faced ongoing financial difficulties.

On December 11, 1992, federal authorities took control of the institution after 176 years of operation, placing it into receivership under the FDIC. The FDIC subsequently sold PSFS’s remaining assets to Mellon Financial for US$335 million. Mellon managed these former PSFS branches under the name Mellon PSFS until their acquisition by Citizens Financial Group in 2001.

Founding

Established in 1816, the Philadelphia Saving Fund Society (PSFS) was the first organized savings bank in the United States. The rapid expansion of savings banks in Europe—especially Great Britain—inspired Philadelphia businessman Condy Raguet to create a similar institution locally.

Raguet gathered partners including Richard Peters, Clement C. Biddle, and Thomas Hale to form the bank. On November 25, twelve men agreed to establish the organization, electing Andrew Bayard as its inaugural president on November 28. To avoid negative associations linked with the term "bank" and facilitate legislative approval for a charter from Pennsylvania’s government, they selected the name Philadelphia Saving Fund Society.

PSFS officially commenced operations on December 2, 1816, from the office of its first Secretary and Treasurer, George Billington, situated on South Sixth Street between Chestnut and Market Streets. The institution’s initial depositor was Curtis Roberts, an African American servant of Raguet’s, who made a deposit of five dollars. The Pennsylvania legislature granted formal incorporation to PSFS on February 25, 1819, with endorsement from the Governor.

Growth

PSFS experienced steady growth, establishing branch locations beyond Philadelphia as early as August 1817 in Northern Liberties and Southwark. Initially, the bank operated only on Mondays for deposits and Thursdays for withdrawals; by 1835, services were available on both days, and by 1865, PSFS had transitioned to daily operations.

In 1818, PSFS granted its inaugural home loan to architect William Strickland, amounting to $7,000. That same year, the bank moved to the corner of Sixth and Minor Streets, followed by relocations in 1821 to Decatur Street and in 1826 to Third and Walnut Streets. Facing space limitations, PSFS acquired a building on Walnut Street in 1827 and later commissioned Thomas U. Walter to design a new facility, which opened in 1840.

By 1865, with ambitions for further growth, PSFS purchased land at Seventh and Walnut Streets. Construction of the new headquarters, designed by Addison Hutton, commenced in 1868 and was completed in 1869. The building underwent additional expansions during 1885-86 by Hutton and later between 1897–98 under Frank Furness’s direction.

20th century

By 1917, PSFS led all U.S. savings banks in depositor count and ranked second only to Emigrant Savings Bank in total deposits. In 1923, it initiated the nation’s first school banking program at William Penn School for Girls to cultivate savings habits among children. This program featured student tellers and a dedicated counter at the main office, fostering enduring customer loyalty.

The bank further engaged youth through savings-themed theatrical performances held at playgrounds and settlement houses. These pageants used songs and dramatizations to emphasize the advantages of saving money rather than spending on entertainment.

During the late 1920s, PSFS was the third largest savings bank nationwide and ranked thirty-fourth globally by 1935. In 1932, it unveiled its Market Street headquarters—the PSFS Building—designed by George Howe and William Lescaze. Recognized as the first International Style skyscraper in the United States, it prominently displayed red neon initials atop the structure.

By 1948, PSFS had become the second largest U.S. savings bank with deposits totaling $594 million. In the 1960s, PSFS collaborated with three other Philadelphia savings banks to establish a $20 million fund dedicated to supporting low- and moderate-income minority families, demonstrating its commitment to community development.

Expansion and crisis

The personal finance environment of the 1970s in the U.S., marked by credit cards, money-market funds, and ATMs, contributed to a savings and loan crisis that strained community banks. Government intervention facilitated mergers such as PSFS’s consolidation with Western Savings Fund Society in 1982. This merger was backed by $294 million from the FDIC, increasing PSFS’s assets to $2 billion and recognizing $800 million in supervisory goodwill.

Following this merger, PSFS diversified into areas including equipment leasing, corporate finance, and real estate development. In 1983, it transitioned into a stock company by issuing 35 million shares at $11.25 each. By 1984, it had acquired a $568 million loan portfolio from General Electric Credit Corp., expanded into Florida’s savings and loan market in 1985, and rebranded as Meritor Financial Group to reflect its expanded financial services offerings. In 1986, Meritor introduced mutual funds through a subsidiary, completing its transformation into a comprehensive financial institution.

That same year, Meritor became involved in a landmark Supreme Court sexual harassment case (Meritor Savings Bank v. Vinson), resulting in liability under the Civil Rights Act.

However, Meritor’s growth faltered as competitors gained ground in its market share. Its stock price declined from its initial offering price amid significant losses including a $215 million write-off related to an unsuccessful Virginia mortgage company disclosed in 1985. By October 1987, Meritor reported a quarterly loss of $379.6 million and suspended dividend payments while preparing to divest assets.

In 1988, venture capitalist Frank Slattery acquired a controlling stake of 5.5% and initiated leadership changes by appointing Roger S. Hillas as CEO. Hillas responded by divesting Meritor’s credit card portfolio and subsidiaries to reduce losses. In 1989, Meritor sold over half of its branches—54 locations—to Mellon Bank for $335 million, relinquishing rights to the PSFS name and shedding $4.9 billion in assets. The sale sparked public outcry concerning the iconic PSFS neon sign; following protests, Meritor and Mellon agreed to keep it illuminated.

Despite these measures, Meritor continued facing challenges amid a depressed commercial real estate market characterized by undervalued office properties and unfinished malls. Regulatory capital requirements tightened in 1991; Meritor was unable to comply fully. In August of that year, it resolved disputes with bondholders by issuing common stock equal to 37% ownership plus cash payments to redeem $115 million in debt.

By late 1992, analysts predicted Meritor was at risk of seizure as depositors withdrew more than $100 million from PSFS branches. The company sold its final out-of-state subsidiary in Florida prior to being seized by the Office of Thrift Supervision on December 11; it was placed under FDIC receivership shortly thereafter. The FDIC sold Meritor’s remaining 27 branches to Mellon Bank for $181 million, effectively ending Meritor’s operations.

This era underscores difficulties related to strategic management and adapting to market shifts amid financial crises that significantly affected growth trajectories and financial outcomes within the banking sector.

Mellon PSFS

Following the acquisition of PSFS bank branches and the PSFS brand from Meritor, Mellon managed these locations under the name Mellon PSFS. By 1992, Mellon had completed the purchase of all outstanding PSFS branches from Meritor and pursued further growth throughout the 1990s. This expansion included launching joint Mellon PSFS and Acme Markets branches beginning in 1994. By 2001, Mellon PSFS operated a network of 350 branches, serving approximately 650,000 clients across Pennsylvania, southern New Jersey, and Delaware. That same year, Mellon Financial declared its intention to divest its retail banking operations, including Mellon PSFS, selling them to Citizens Financial Group for $2 billion. By November 2001, all Mellon PSFS locations were rebranded as Citizens Bank of Pennsylvania.

Lawsuit

The FDIC received the funds paid by Mellon, resulting in Meritor’s shareholders receiving no financial return. In 1993, Meritor’s founder Slattery—who opposed government intervention—filed a lawsuit against the FDIC for failing to fulfill a 1982 commitment concerning goodwill related to Meritor’s merger with Western Savings Fund Society. This legal action maintained interest in Meritor stock, with investors purchasing shares at low prices in anticipation of a potential settlement.

Progress remained slow until a 2002 court decision determined the FDIC had improperly taken control of Meritor and ruled that shareholders were entitled to compensation. In 2006, investors were awarded $371.7 million in damages, equating to roughly $6.75 per share.

In the case Slattery (Meritor Savings) v. U.S., after an unfavorable ruling at the Federal Circuit panel level, the government requested an en banc rehearing to contest jurisdiction and assert that the FDIC qualifies as a Non-Appropriated Fund Instrumentality (NAFI). This designation suggests that any judgments against the FDIC would be funded by member banks rather than federal Treasury resources. The government argues that Congress is not compelled to guarantee deposits with the full faith and credit of the United States—a central point in this ongoing legal dispute.

External links

• MeritorPSFS Shareholders Association, Inc.
• Historic American Buildings Survey (HABS) documentation for Philadelphia, Philadelphia County, PA: