Billionaire family expands First Citizens by scooping up failed banks

(March 28): With his deal to buy the assets of Silicon Valley Bank, Frank B Holding Jr has now scooped up at least a dozen failed banks since 2008.

The acquisition by First Citizens BancShares Inc from the Federal Deposit Insurance Corp creates a US$143 billion loan portfolio and turns Holding’s little-known bank into one of the country’s largest lenders to the venture capital and private equity industries. It also means Raleigh, North Carolina-based First Citizens will now be one of the top 15 US banks, with more assets than the likes of Morgan Stanley or American Express Co, according to Federal Reserve data.

“Let me say that this acquisition is compelling financially, strategically and operationally,” Holding, the 61-year-old chief executive officer of First Citizens and one of its largest individual shareholders, told analysts on a conference call on Monday. First Citizens’ stock soared after the announcement. “It is also a great illustration of regulators and banks working together to protect depositors.”

Earlier this month, SVB Financial Group announced a plan to sell US$2.25 billion of shares — as well as significant losses on its investment portfolio. Shares in the Santa Clara, California-based company sank 60% the next day on the news, and its Silicon Valley Bank unit collapsed into FDIC receivership the following day.

First Citizens got its start with US$10,000 in capital as the Bank of Smithfield in 1898, primarily serving North Carolina’s Johnston County. In 1935, Frank Holding’s grandfather RP Holding took over as president and chairman, leading the company until his death in the 1950s.

At that point, leadership of the bank transferred to his three sons, Robert Holding, Lewis R Holding and Frank B Holding. In the 1970s, the firm moved its headquarters to Raleigh as assets surpassed US$1 billion for the first time, according to the company’s website.

It wasn’t until 1994 that First Citizens began opening branches outside its home state after acquiring a bank in West Virginia. A few years later, the company added a federal thrift subsidiary, allowing it to expand further across the country.

Frank B Holding Jr was named CEO of First Citizens in 2008, then chairman the following year, at the height of the global financial crisis. A handful of other bank executives — including vice-chairman Hope Holding Bryant and President Peter Bristow — are also Holding family members.

“He sort of does look like the family banker,” said Lawrence Baxter, a Duke University School of Law professor who once was a First Citizens customer himself and regularly sees Holding in ads that are part of the bank’s PBS North Carolina sponsorship.

Five branches

Holding and his relatives have became part of the world’s ultra-rich through their banking business, becoming a billionaire finance dynasty split across at least five branches.

Like other billionaire dynasties, such as the Murdochs, the family has maintained a tight grip on the direction of their major asset, even though they don’t hold a majority of its equity, by employing a dual-class share structure. Frank Holding and his relatives hold Class B shares with 16 voting rights each, compared with the single vote for each of the Class A shares the banking dynasty also holds, and they’ve passed down their wealth generation to generation by shifting stock to scores of trusts.

Frank Holding and relatives listed as First Citizens shareholders oversee a stake worth more than US$1.7 billion in First Citizens after the company’s shares surged 54% on Monday, erasing their sudden wealth slump from SVB’s collapse, according to the Bloomberg Billionaires Index. They’ve also received at least US$35 million through dividends and share sales over the past four decades and diversified their fortunes into commercial real estate, farming and philanthropy.

Stock purchases

Frank Holding already took advantage of SVB’s collapse by joining other regional bank executives in snapping up shares of their companies. He spent US$260,000 buying up First Citizens stock in early March for US$650 a share, 27% below the company’s current share price of US$895.61, according to regulatory filings.

Some younger members of the Holding family are already working for the bank. Perry Bailey, Frank’s daughter, earned US$224,082 working at First Citizens last year, while her cousin and Frank’s nephew John Patrick Connell pocketed US$105,116 during the same period, according to regulatory disclosures.

Not all of the family are bankers. Olivia Holding, Frank’s sister, is president of E&F Properties, a real estate investment firm that’s acquired land in North Carolina. She also helps to oversee Twin States Farming, an agricultural business that leases excess office space from First Citizens.

“Our family has been in North Carolina for at least five generations,” Olivia Holding said for a 2016 profile. “We want to promote the success of the state.”

Buying banks

Since the global financial crisis, First Citizens has acquired lenders in a series of deals from Washington state to Wisconsin and Pennsylvania.

“First Citizens has a history of troubled banks,” Herman Chan, an analyst with Bloomberg Intelligence, said in an email. “It’s a strategy to grow the bank when times are difficult — to conduct M&A at advantageous prices.”

Growth has come not only from failed-bank deals though: First Citizens last year completed the acquisition of CIT Group Inc in a deal valued at more than US$2 billion.

“In the long run, what you’ll get is more — more services, more ways to manage your money, more places to find us,” Holding told customers in a video announcing the takeover. “We’re not just making a bigger bank, we’re making an even better bank.”

The moves have meant First Citizens is now a national player, with more than 500 branches and private-banking offices spread across states as far away from its headquarters as Hawaii. With more than 10,000 employees, the lender offers the traditional businesses of banking to individual consumers and companies, and is also one of the largest lenders to the rail industry — even owning a fleet of rail cars and locomotives that it leases to railroads and shippers.

Negotiating prowess

But it’s the acquisition of Silicon Valley Bank that transforms First Citizens, which was the 30th largest commercial bank in the US by assets at the end of 2022, into a higher tier among US lenders. It also shows off the negotiating prowess Holding has honed in his myriad deals with regulators in recent years: First Citizens is buying about US$72 billion of SVB’s assets at a discount of US$16.5 billion, according to an FDIC statement.

First Citizens said it will assume US$56 billion in deposits, and 17 legacy branches will begin operating as Silicon Valley Bank, a division of First Citizens. There will be no immediate change to customer accounts.

“The selection of First Citizens through a competitive bid process reflects not just the attractiveness of our bid but also the strength, stability and expertise we are bringing to the legacy SVB business,” Holding said. “We also have a proven track record of successfully integrating acquisitions.”