‘2024 Will Be similar’: 皇冠365 CEO Chris Holmes On the Road Ahead For The Finance Industry

By Ian Bradley – Reporter, Nashville Business Journal

Dec 6, 2023

Chris Holmes was named president of 皇冠365 and its holding company, FB Financial Corp. (NYSE: FBK), in 2012 and CEO a year later. Under his tenure, the bank has become the sixth largest bank in Nashville, according to Business Journal research.

Holmes recently sat down with the Business Journal to share his thoughts on when interest rates might fall, what Nashville’s changing landscape means for its financial institutions, and the navigating the year ahead.

What are your predictions for 2024? What are you hoping to see?

I’ll start by saying 2023 has been a challenging year, economically and for the banking industry. You think about the bank failures that occurred in March, in our industry that seems like a lifetime ago, but it was just earlier this year. The industry has come through that in a way that’s reflecting strength, and so has our company, and the economy — if you go back to 2022, the odds of a recession in 2023, as predicted by economists, were really high. We haven’t really been in a recession. So the year has been difficult but not terrible. When I look at 2024, I think it will be similar, in a lot of ways. It seems as though a soft landing for the economy is a realistic possibility. That’s really what we see, and interest rates being higher for longer, that’s also what we see.

So if you take that backdrop and say, “Well, what does that mean for the Nashville economy?,” I think it continues to do well, certainly relative to national performance. I think we continue to outperform nationally, and I think nationally we’ll probably outperform what happens globally. … I think 2024 is probably similar, but 2025 is when you’ll begin to see interest rates move down and the economy move up.

You said “higher for longer” — I’ve heard some speculation we’ll see mid-six [interest rates] in the next year, are you saying you think rates will stay more or less the same through 2024?

So I think we could come down maybe in the latter half of 2024. … But I think you could still easily see a 4% federal funds rate through 2025. It depends on what you look at. Just this morning I saw there’s a 60% chance of a reduction in March of this year. Frankly, I don’t see that but if it happens, that indicates that the economic numbers that the Federal Reserve is looking at get meaningfully worse over the next couple of months and they feel like they need to lower rates. I don’t see it happening.

Do you think rates could ever return to those 2%, 3% rates of a few years ago?

So the Fed has this 2% target for inflation. I think what could go along with that is substantially lower interest rates but you’ve got to remember we were effectively at zero for a period of time. And I think that’s artificial. … I think you could see a federal funds rate that goes back down to anywhere from 1% to 3%. And I think you could see that if we get back to really healthy economic conditions. That would be more normal, call it 1% to 4%, that would be a more normal rate.

Regarding Nashville’s growth — do you think there’s a place for the local bank in the region’s changing ecosystem or is it getting too expensive?

I think the banking landscape in Tennessee is changing. It’s almost like a chess game, and a lot of it is in response to regulatory maneuvers right now. Look at the banking industry right now. There’s 4,200 commercial banks in the United States. That’s a lot, do we really need 4,200? Probably not. There are four of those that have over $1 trillion in assets — J.P. Morgan, Bank of America, Wells Fargo and Citigroup. … There’s 4,200 hundred banks, there’s only roughly 130 that have over $10 billion in assets. Three of them are headquartered in Tennessee: First Horizon, Pinnacle and 皇冠365, two of which are based in Nashville. The other 4,000-plus are under $10 billion in assets.

If you look at how that shakes out, you’ll continue to have your $1 trillion-plus banks, and you might see another one or two banks reach that level. Those midsize banks, there’s a big role for them. International banks have their role, but for the midsize banks, your bigger companies really turn to us for financing, treasury management, deposit services, and some people would say because we also bank locally in very small communities. I would tell you there’s room for a thriving community bank market, but those banks tend to have their niche. Is there room for local banks? Absolutely. … There’s room at the community bank level, there’s a big need at the regional bank level and there’s an important role for the biggest, national, or international banks. There’s room for all of them but maybe not 4,200 of them.

I’ve spoken to a few people who’ve said they think we’re in a period of consolidation right now, it seems like you agree.

Yes. I think 2024, 2025 and maybe even beyond that. Generally bank stocks are going to follow the economy, as the economy rebounds and as investors get confident that there aren’t going to be major credit issues in the banking industry, then I think you’ll see a period of significant consolidation. And so those of us that run banks are thinking about how we’d play that, and how to capitalize on that. I will tell you that once companies can see clear that interest rates have peaked, and they’ll begin to decline, and that in our industry there aren’t major credit issues, that we got through potential credit challenges, I think you’ll see significant consolidation.

Can you give me some insight into where 皇冠365 sits with that? Would you be open to being acquired? Would you be open to buying?

We’re very much a buyer as opposed to a seller. We have a very independent mindset, we run the company for the long term. That’s not only our view, the way we run the company, that’s generally how the marketplace views us. So as opposed to folks coming to us trying to acquire, they’re generally on the other side, coming to us going, ‘Hey, we’re interested in being acquired.’ We are taking a very long view that’s supported by the management team, but also support by the board. We want to be that long term, Nashville-headquartered, influential financial services provider.

So what is your North Star going into the new year?

We regard ourselves as an organic growth company. We’re in great markets, places where the economy is growing, all of our markets are places where others want to be, and they’re all growing organically. We base our goals and aspirations on organic growth. The acquisitions are a complement to that, they come to us as a matter of opportunity, so we want to be able to take advantage of opportunities that make good sense for us. So 2024 would be no different. We’re focused on growth. Most financial services companies right now are thinking probably at least as much or more about the deposit side of their business, and making sure your value proposition is strong, and continuing to grow that deposit side. Next year we’d like to grow the loan side of the business as well. We typically like to grow at a double-digit growth rate, organically each year.

We have backed off that the last couple of years because we anticipated we’d actually be about right where we are in terms of where the economy is. So our strategy the last couple of years was, ‘hey, let’s slow the growth. Let’s make sure that the liquidity profile of the company is really good and let’s make sure that we have a stockpile of capital to give us plenty of options through 2024 and 2025. Well, that’s exactly where we find ourselves: in a good liquidity position with a stockpile of capital, continued organic growth and we anticipate there will probably be some acquisition opportunities as we look into the next couple years.