The threat of the fiscal cliff and higher capital gains taxes may have contributed to a major ownership change at one of the nation's largest family-owned banks.
A member of the family that controls First Citizens BancShares (FCNCA) in Raleigh, N.C., has unloaded most of her shares in the company, according to regulatory filings by both parties.
Carmen Holding Ames, whose late father was a chief executive of First Citizens, sold more than $225 million of stock on Thursday, according to regulatory filings. The sales nearly erased her ownership of 30% of First Citizens' voting rights. Ames, a director since 1996, also resigned from the company's board.
Of equal importance was the change in control for other members of her family. Frank Holding Sr., her uncle, and his children now control 57% of the company's voting rights, compared with 42% before the sale, according to the regulatory filings.
It is unclear exactly why Ames sold her shares. Barbara Thompson, a spokeswoman for the $21 billion-asset company, said the Ames told the company she was selling the stock and leaving the board to "focus her energies on family and personal interests." A call to a lawyer for Ames were not returned.
The sales could have something to do with financial planning, given the threat that lawmakers will increase taxes on dividends and stock gains. "The tax laws aren't going to get any better than they are now," says Lee Burrows, the chief executive of Banks Street Partners in Atlanta.
"Given all the tax law changes looming, there's a lot of movement going on with closely held companies in regard to" ownership, says Walter Todd 3rd, a portfolio manager at Greenwood Capital Associates in Greenwood, S.C.
The drastic shift in ownership is a function of First Citizens' stock structure. It has two classes of stock. Class A shares are traded on the Nasdaq. It also has a series of class B shares that are mostly owned by members of the Holding family, and each is equivalent to 16 shares of class A stock.
Banking has been a way of life for the Holdings for decades. It is the second-largest family-owned bank in the country, trailing only the $27.1 billion-asset BOK Financial (BOKF) in Tulsa, Okla., according to industry experts. Three members of the Holding family remain on First Citizens' board.
Ames is the granddaughter of Robert Holding, who became First Citizens' president and chairman in the 1930s. Her father, Lewis Holding, was the chief executive from 1957 to 2008, and her uncle, Frank Holding, is the company's executive vice chairman. Her cousin, Frank Holding Jr., became the chief executive in 2008. Lewis Holding died in 2009.
In the run-up to the financial crisis, the family ran the company conservatively. Its bank made loans mostly to affluent professionals who were candidates for wealth management services. The bank made commercial real estate loans, but it focused on owner-occupied properties instead of speculative development.
In recent years, First Citizens has been an acquirer, entering a number of far-flung states, such as California and Colorado, largely by buying failed banks.
Ames sold her class A shares to "accredited investors" and her class B shares to the company, leaving her uncle and his children as the primary holders of outstanding class B shares, according to the regulatory filings. Thompson said First Citizens' board determined that it was a "prudent decision" to buy the class B shares. Thompson said she could not comment on the entities that bought Ames' class a shares.
The ownership change at First Citizens could make the company an easier takeover target. Private-equity firms have actively consolidated North Carolina banks.
"When one group has over 50% of the stock, they don't have to get the other owners to agree," says Todd, who declined to discuss First Citizens specifically.
The Holding family also has large, if not controlling, stakes in First Citizens Bancorp in Columbia, S.C., and three other North Carolina banks: Southern Bancshares, Fidelity BancShares and Heritage Bank.
First Citizens stated in its filing Thursday that the repurchase agreement with Ames was approved by the independent members of its board following a recommendation by a special committee that also consisted of independent directors.