RELATED PARTY TRANSACTIONS

The Company is an indirect subsidiary of RBSG. In September 2014, the Company entered into certain agreements with RBS Group that will provide a framework for its ongoing relationship with RBS Group. Specifically, the Company entered into the following agreements with RBSG or other affiliates of RBS Group: Separation and Shareholder Agreement, Registration Rights Agreement, Trade Mark License Agreement, Amended and Restated Master Services Agreement, and Transitional Services Agreements. These agreements were filed as exhibits in Part II, Item 6 — Exhibits to the Company's Quarterly Report on Form 10-Q/A filed November 14, 2014.

The following is a summary of inter-company borrowed funds:



				December 31,
(dollars in millions)	Related Party	Interest Rate	Maturity Date	2014	2013
Subordinated debt	RBSG	4.082%	January 2025	$334		$—
	RBSG	4.023%	October 2024	333	—
	RBSG	4.153%	July 2024	333	—
	RBSG	4.691%	January 2024	334	334
	RBSG	4.771%	October 2023	333	333
	RBS	5.158%	June 2023	333	333

Total interest expense recorded on inter-company subordinated debt was $64 million, $16 million and $9 million for the years ended December 31, 2014, 2013 and 2012, respectively.

During the fourth quarter of 2014, the Company purchased a portfolio of performing commercial loans to customers in the oil and gas industry from RBS. The Company paid $413 million, which was the estimated fair value corroborated by an independent appraiser, as of the purchase dates, to purchase 17 customer relationships with outstanding principal balances of $417 million and unfunded commitments totaling $458 million. Also related to these loans, the Company entered into offsetting customer derivative contracts with an aggregate notional amount of $946 million, and an aggregate fair value of ($17) thousand on the purchase dates.

The Company maintained a $50 million revolving line of credit at December 31, 2013 with RBS. This line of credit was not drawn upon at December 31, 2013, expired on January 31, 2014, and was not renewed. No interest expense was incurred on this revolving line of credit for the year ended December 31, 2013.

The Company enters into interest rate swap agreements with RBS for the purpose of reducing the Company’s exposure to interest rate fluctuations. As of December 31, 2014, the total notional amount of swaps outstanding was $5.8 billion with fixed rates ranging from 1.66% to 4.30%. Included in this balance were $4.0 billion of receive-fixed swaps with rates ranging from 1.78% to 2.04% maturing in 2023 and $1.0 billion of pay fixed swaps with fixed rates ranging from 4.18% to 4.30% maturing in 2016. The company also has a medium term swap agreement with a notional of $750 million and a receive-fixed rate of 1.66% that had been executed as of December 31, 2014. As of December 31, 2013, the total notional amount of swaps outstanding was $5.5 billion, with fixed rates ranging from 1.78% to 5.47%. Included in this balance were $1.5 billion of pay-fixed swaps with fixed rates ranging from 4.18% to 5.47% with maturities from 2014 through 2016 and $4.0 billion of receive-fixed swaps with fixed rates ranging from 1.78% to 2.04% maturing in 2023. The Company recorded net interest expense of $27 million, $146 million, and $311 million for the years ended December 31, 2014, 2013, and 2012, respectively. The lower pay-fixed swaps expense and higher interest income on the receive-fixed swaps resulted in lower expense in 2014 and 2013 compared to 2012.

In order to meet the financing needs of its customers, the Company enters into interest rate swap and cap agreements with its customers and simultaneously enters into offsetting swap and cap agreements with RBS. The Company earns a spread equal to the difference between rates charged to the customer and rates charged by RBS. The notional amount of these interest rate swap and cap agreements outstanding with RBS was $9.8 billion and $13.4 billion at December 31, 2014 and 2013, respectively. The Company recorded expense of $209 million, $32 million, and $285 million within other income for the years ended December 31, 2014, 2013, and 2012, respectively.

Also to meet the financing needs of its customers, the Company enters into a variety of foreign currency denominated products, such as loans, deposits and foreign exchange contracts. To manage the foreign exchange risk associated with these products, the Company simultaneously enters into offsetting foreign exchange contracts with RBS. The Company earns a spread equal to the difference between rates charged to the customer and rates charged by RBS. The notional amount of foreign exchange contracts outstanding with RBS was $4.7 billion and $4.6 billion at December 31, 2014 and 2013, respectively. Within foreign exchange and trade finance fees, the Company recorded income of $58 million for the year ended December 31, 2014 and expense of $15 million and $9 million for the years ended December 31, 2013 and 2012, respectively.

The Company receives income for providing services and referring customers to RBS. The Company also shares office space with certain RBS entities for which rent expense and/or income is recorded in occupancy expense. The total fee income, net of occupancy expense, was $16 million, $26 million, and $28 million for the years ended December 31, 2014, 2013, and 2012, respectively. Also, the Company receives certain services provided by RBS and by certain RBS entities the fees for which were recorded in outside services expense. Total outside services expense was $22 million, $20 million, and $21 million for the years ended December 31, 2014, 2013, and 2012, respectively.

In 2014 and 2013, the Company paid $666 million and $1.0 billion, respectively, of common stock dividends to RBS as part of exchange transactions. Additionally, the Company paid $124 million, $185 million and $150 million in regular common stock dividends to RBS for the years ended December 31, 2014, 2013 and 2012, respectively.

On October 8, 2014, Citizens executed a capital exchange transaction which involved the issuance of $334 million of 10-year subordinated notes to RBSG at a rate of 4.082% and the simultaneous repurchase of 14,297,761 shares of common stock owned by RBS Group for a total cost of $334 million and an average price per share of $23.36. The purchase price per share was the average of the daily volume-weighted average price of a share of our common stock as reported by the New York Stock Exchange over the five trading days preceding the purchase date.

The Company, as a matter of policy and during the ordinary course of business with underwriting terms similar to those offered to the public, has made loans to directors and executive officers and their immediate families, as well as their affiliated companies. Such loans amounted to $126 million and $78 million at December 31, 2014 and 2013, respectively.