Enlarge This ImageFirst Citizens Bancshares Inc. is one of the more peculiar success stories — and for that reason, its small band of followers say, worthy of imitation by struggling peers in need of fresh ideas.
Run under the tight grip of a low-profile North Carolina family, the Raleigh company overcame some earlier missteps and prospered during the financial crisis without taking government aid.
It has grown to $21.1 billion of assets while countless others shrank, making it this year's lone entrant to the ranks of the 50 biggest banking firms. It commanded further attention by snapping up four failed banks in the past year.
Even a former critic of First Citizens' longtime strategy — picky lending, slow growth and opening branches in far-flung markets — says it's worth a second look because it endured where others' strategies flopped.
"Early on, if you had asked me about First Citizens I would have called it one of the worst-run banks in the country from a textbook definition of how to leverage your company," said Laurence Pettit 3rd, who manages the community bank portfolio at Anderson & Strudwick in Richmond, Va.
"In hindsight," Pettit added, "there are a lot of folks wondering if they should have followed the same model."
First Citizens has given industry watchers plenty to second guess over the years. In 2002 it began opening branches through a thrift affiliate, IronStone Bank, in states such as Arizona, California and Florida. That move contradicted traditional views of economies of scale and efficiency: IronStone generated heavy startup expenses and had credit problems as real estate valuations in many of those states came under pressure.
At the same time, the First Citizens Bank unit — which remained concentrated in the Middle Atlantic — was knocked for being too conservative. It confined its lending mostly to affluent professionals who were also candidates for the bank's wealth management services. Though First Citizens Bank made commercial real estate loans, it largely focused on owner-occupied properties rather than speculative development.
But the company's aptly named controlling shareholders — the Holding family — stayed the course. "They are going to do it their way and stick with it regardless of people criticizing them," said D. Anthony Plath, a finance professor at the University of North Carolina at Charlotte.
"This is a very quirky bank with a private group of people, but they have made it work over long periods of time," Plath said. "It's a great bank, which you can see by how well they have come through the financial crisis and recession."
First Citizens can afford to be independent-minded, given its management and ownership structures. The Holding family's controlling stake goes back three generations, and family members directly or indirectly own more than 90 percent of the company's voting shares. Four Holding family members are among the company's 18 directors. It is the second-biggest family-owned bank in the country, trailing only the $23.9 billion-asset BOK Financial Inc.
The Holdings have a central-casting feel: affluent and reclusive, with nearly a century of experience in the industry.
Robert Holding became a teller at a rural bank in 1918 and was president of First Citizens when he died in 1957. His sons, Robert Jr., Lewis and Frank, inherited his legacy and further expanded the family's banking operations across the Carolinas. Lewis succeeded his father at First Citizens, spending more than 50 years developing the company's unique culture and honing its strategy.
Frank Holding Jr. took over from his uncle in 2008 and has been responsible for the company's four government-assisted transactions. (Lewis Holding died last August.)
