First Citizens CEO says ‘consistency of culture’ is behind family-owned bank’s success

Frank Holding Jr., chairman and CEO, First Citizens Bank.
Frank Holding Jr., chairman and CEO, First Citizens Bank. First Citizens Bank

The chairman and CEO of First Citizens Bank says that the Raleigh-based financial institution is always on the lookout for possible acquisitions.

“I’m going to confess that we look for opportunities for expansion regularly,” Frank Holding Jr. said in an interview last week.

That’s no surprise given the bank’s recent track record.

After the recession hit, First Citizens acquired a half-dozen failed community banks that were taken over by the Federal Deposit Insurance Corp. The bank’s conservative banking practices made it one of the select few that could afford to buy troubled banks during that time.

But that was just a warm-up to the bank’s recent $600 million-plus acquisition of the similarly named First Citizens Bank and Trust. The deal for the South Carolina-based bank, which has 176 branches in South Carolina and Georgia, was completed in September.

The two banks shared more than just a name. Raleigh’s Holding family owned a controlling stake in both banks, and combining the two created the nation’s largest family-controlled bank with more than 570 branches in 18 states and the District of Columbia. It’s also the sixth-largest bank headquartered in the Southeast.

Holding Jr., 53, is the third generation of the Holding family to lead the bank. He was named CEO in January 2008 and became chairman the following year.

Staff writer David Ranii interviewed Holding, who rarely speaks to the media, by phone. The following excerpts from his 30-minute interview have been edited for space and clarity.

On future acquisitions: “There’s ongoing conversations all the time about different (acquisition) opportunities.”

However, “we’re not focused on geographic expansion. We would rather add flesh to our existing frame. It is really for the purpose of being more efficient. … It will be more efficient for us to add flesh to the frame we have rather than expanding our frame.”

On what triggered the acquisition of the South Carolina-based First Citizens: “We operated for decades separately. … A big part of the reason was our size prompted us to operate differently. … When South Carolina was $1 billion (in assets), we might have been $8 billion. There’s a big cultural difference between that.

“When they got to $8.5 billion and we were $22 billion or so, then culturally and operationally we became much more aligned. … We woke up one day and we realized just how close, operationally, we are.

“Once we get the consolidation done, it would allow our Raleigh customers to use the 175 offices in South Carolina, to use them seamlessly. ... So it provides greater customer convenience.

“We’re extremely excited about our future. That maybe sounds terribly generic, but it is the emotion that I have and the emotion that is shared here.”

On integrating the two banks: “We have had a legal consolidation at our holding company level. Legally, the banks are still separate until right after the first of the year. The plan would be to do the computer consolidations some time in September of 2015.”

On the timetable for adopting a single brand and logo: “I don’t think we’ve made that decision yet. The reason that we haven’t made that decision is because we do share a common name.

“The surviving brand will be the North Carolina brand, the ‘Forever First’ brand. But when do we physically go and change out all the signs in South Carolina? I think that’s to be determined.”

On the prospects of First Citizens buying two other banks controlled by the Holding family – Fidelity Bank of Fuquay-Varina, which has 62 branches in North Carolina and southern Virginia; and Southern Bank of Mount Olive, which has 70 branches in North Carolina and Virginia: “We’re not looking at that today. … I would say that Southern and Fidelity, they’re smaller banks … they operate at a different level than we do.

“We’ve had this (ownership) in these different financial institutions for decades. It’s nothing new. And I’m going to confess … I get these questions all the time.”

On the competitive landscape in the banking industry: “There is continuing consolidation in our industry. The cost for (regulatory) compliance and the regulatory issues that we face continue to go up so that the need for scale in our industry continues to grow.”

On why the bank stepped up its advertising in the past year: “I’m tempted to put on my little advertising hat here. … As we got to be larger, I think we looked out and asked ourselves, what is the most efficient way for us to grow to the next level? And a part of that included a greater emphasis on advertising.

“We thought we had a great story to tell. We developed the tag line ‘Forever First.’ We thought that conveyed a great message. It was true to who we are. We want to run a quality bank in terms of high asset quality and strong capital and strong liquidity. We think we have a reputation for that. ... By advertising that, we’re leveraging our reputation to a whole other level.”

On the virtues of being a family-controlled bank: “We can focus on doing the right thing, what we think can drive long-term results, sometimes at the expense of quarterly results. … We can invest in things that other entities, if they were worried about short-term measures, would hesitate on.

“For instance, we are making serious investments in infrastructure here, in our information technology, and we do that knowing that they are great long-term investments. I would say we have active projects in place whose full value exceeds $100 million.

“They’re difficult investments because it is hard for my clients to appreciate them in the short run, but having strong information infrastructure is critical to the long-term success of any organization.

“When I ask our people here what that means to them, the dominant answer I get is, it drives a consistency of culture.

“I’m the third CEO here since the 1930s. That consistency of culture means a lot to our associates internally as well as to our clients external. It means there is a certain level of dependability here, a certain level of stability and consistency, that we think adds value.

“Many of our clients are small and midsized business owners themselves, and they relate to that family control and that family ownership.”

On the state of the bank: “We’re as successful as our clients are. We would say overall business and banking conditions continue to improve. Our loan volumes are up. Demand for business credit is up. And credit quality and credit standards remain very high. So those are good statistics for us.”