The dwindling supply of locally owned N.C. banks

 In June 2018

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Amid the hottest economy in state history, governance and power in North Carolina banking have never been less in the control of North Carolinians. Three years ago, 17 commercial banks holding more than $1 billion in assets were based in the state. That number has shrunk to 11, three of which are controlled by one family, the Holdings of Raleigh.

Giant Bank of America Corp., the No. 2 bank in the U.S. based on assets, tops the annual list, though most of its top managers work from New York. Wilmington-based Live Oak Bank, the most profitable bank based on return on assets, is a fast-growing innovator specializing in Small Business Administration loans and doesn’t have retail branches.

Super-regional BB&T Corp. remains North Carolina-based, with top executives working from Winston-Salem and a boardroom that has three Tar Heels, including CEO Kelly King, High Point University president Nido Qubein and former gas-company CEO Tom Skains. Otherwise, only First Citizens BancShares of Raleigh, First Bancorp of Southern Pines, Asheville-based HomeTrust Bancshares and Mount Olive-based Southern BancShares remain as lenders with more than $2 billion in assets, followed by four with more than $1 billion, each headquartered in small towns: Fuquay-Varina-based Fidelity BancShares, Newton-based Peoples Bancorp, Franklin-based Entegra Financial Corp. and Dunn-based Select Bancorp. The Holding family controls First Citizens, Southern and Fidelity.

Business North Carolina

In short, many of the levers of control in North Carolina banking now reside in Atlanta, Cincinnati, Memphis, Nashville and other homes to regional banking companies that have gobbled up the local institutions. “There really aren’t any tweeners left,” says Rick Manley, a 21-year N.C. banking veteran who helped build Capital Bank Financial Corp. into a multistate operation before its $2.2 billion sale last year to Memphis-based First Horizon National Corp. It’s a necessary, valuable change, Manley says. A bigger, multistate organization is better for employees because they have greater career opportunities, and better for customers who can tap into a broader array of products, he says. Buying Capital added more than 125,000 retail customers and 4,000 commercial clients to First Horizon, Tennessee’s largest bank.

In most cases, it’s also better for shareholders, adds Buddy Howard, an independent Raleigh bank analyst who has provided industry research for more than 20 years. “Bank managers’ ultimate job is to build shareholder value, and where they don’t build that, they are more exposed to more efficient companies that are building value more rapidly.” Shareholders of the nine N.C. banks acquired in the last year received a combined $5.6 billion.

Building value rapidly was the plan at Raleigh-based Yadkin Financial Corp. (“Slow start”) and Capital Bank, where a management team led by former Bank of America executives Gene Taylor and Chris Marshall took over three failed banks in 2010 with Federal Deposit Insurance Corp. assistance, made a series of acquisitions, dismissed many senior executives at the acquired banks and created a $10 billion-asset business with a hard-driving culture. Their inroads in the fast-growing Carolinas and Florida markets appealed to First Horizon, which had entered North Carolina with an office in 2013 then bought Raleigh-based TrustAtlantic Bank for $80 million in 2015.

“We went through some trials and tribulations,” Manley says, comparing Capital’s growth to tearing down an old house and building a new one. “Some people are going to agree with what you’ve done, and others don’t.”

One person who didn’t agree was Rick Callicutt, former CEO of High Point-based BNC Bancorp, which was acquired for $1.85 billion by Nashville-based Pinnacle Financial Partners in 2017. In a 2014 interview with Business North Carolina, he noted that his team had built BNC methodically over 23 years. “It’s a culture that Capital Bank can’t have. They bought all of these troubled banks, but now they don’t know what to do with them.” His comment drew a retort from Capital board member Marc Oken, a former BofA chief financial officer: “Gene Taylor knows more about bank consolidation than those guys will ever know.”

First Horizon, making its biggest acquisition ever, apparently agrees. Manley says only a couple of Capital regional executives have left since the bank’s sale, suggesting the company had developed a cohesive culture.

Of course, the loss of bank headquarters has stunted growth in several N.C. towns, such as Wilson, which lost BB&T; Whiteville, former home to United Carolina Bank; and Rocky Mount, which lost Centura Bank. But it doesn’t always work out that way: San Francisco-based Wells Fargo employs 25,000 people in Charlotte, more than worked for the old Wachovia Corp. before its sale in 2008.

While the BNC Bancorp and Yadkin Financial brands are gone, Capital Bank is retaining its name rather than adopting the First Tennessee moniker. That reflects a local-oriented approach, Manley says, echoing a comment that virtually every rival also makes.

“First Horizon believes in local decision-making. We have the opportunity to run our bank as entrepreneurs.” For North Carolina’s sake, it doesn’t hurt that First Horizon CEO Bryan Jordan is a Salisbury native and Vice Chairman Gene Taylor is a longtime Charlottean.

 

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