Banking on the family Featured

10:29am EDT October 31, 2002
When Margaret Irvine Weir returned in 1990 to work in the family business, Citizens National Bank of Evans City held about $140 million in assets.

That was a miniscule amount compared to the multibillion dollar banks she'd worked for in Maryland and Washington, D.C., after graduating with a degree in finance from the University of Maryland in 1983.

For Weir, who was accustomed to calling on Fortune 100 customers, the homecoming was a substantial adjustment.

"It was a culture shock," says Weir, now president of Citizens National.

Since then, mergers and acquisitions have swallowed up all of the banks Weir worked for before returning to Citizens National as a wave of consolidation has removed a lot of bank marquees from the landscape.

Citizens National, now based in Butler with 16 branch offices, $386 million in assets and 250 employees, has survived well into a fourth generation.

Founded in 1878 by Edward Dambach and S.J. Irvine in Evansburg, Butler County, the bank has survived the Great Depression, two world wars, a regional business collapse and revival. It has also survived two decades of industry consolidation (there were 9,000 bank mergers between 1980 and 2000, according to banking consulting firm NuBank) and the sweeping tide of regulatory changes in the financial services industry in the 1990s.

Family owned businesses have an almost tragic record when it comes to survival, so Citizens National's survival as a community bank and a family business is no small feat. While more than 80 percent of businesses in North America are family owned, according the Family Firm Institute, only 12 percent will survive into a third generation and 3 percent will make it to a fourth.

And it doesn't get any easier as the business grows. Larger family businesses face bigger and different challenges than those encountered by small ones.

"Large family businesses have a number of demands upon them as they grow that are unique," says Ann Dugan, executive director of the Institute for Entrepreneurial Excellence at the University of Pittsburgh's Katz Graduate School of Business. "In particular, they have to find ways to keep the family values widespread throughout the organization so that they assure a legacy of continuity and success."

Weir credits her father, S.J. "Buzz" Irvine III, now the bank's board chairman, with much of the bank's success. Irvine led Citizens National through much of its growth, beginning in the late 1950s.

Rich Snebold, co-founder of the Family Business Center at Citizens, the bank's latest venture, says a board made up of mostly entrepreneurs, many with family business backgrounds, has been a major resource.

A cadre of long-term employees like Don Shamey -- who took over as CEO this year as the first non-family member to hold that position and who has been with the bank for 20 years -- has helped. And, says Weir, Citizens National has culled talented people from the big banks, both as a result of cutbacks at those institutions and because some employees were looking for opportunities in a less bureaucratic and traditional corporate environment.

Family business consulting

With its own success as a family business, a wide range of family businesses as clients -- about 800 companies with annual sales ranging from $250,000 to $50 million -- and a need for services to ease or head off family business problems, it's little surprise the bank would parlay those strengths into a new business venture, the Family Business Center.

"We have customers from out-of-the-garage businesses to household names in our market," says Weir. "We have a tremendous number of family businesses that have a lot of the same issues."

The Family Business Center developed out of a concept that Snebold, now a vice president with the bank, envisioned as a second career after his exit from the insurance and financial planning business, a move he planned to make when he was 60. Snebold thought his 32 years of experience in financial planning and his contacts in a variety of disciplines would allow him to consult with family businesses and solve their succession and financial problems by referring them to appropriate professions.

Now 56, Snebold, a talkative consultant who likes to use props like a fake goose and golden eggs to illustrate his points, fleshed out his vision for a resource center for family businesses with Weir and others at Citizens National.

"I started to talk about this plan, and their eyes lit up," says Snebold, who was managing partner of the Acacia Group in Pittsburgh at the time.

Citizens National offered to set up the center as part of the bank, with an office at its Cranberry Township office, and Snebold gave the scheme six months. Now he says he's there to stay.

He likens the concept to a "Cleveland Clinic for family businesses," and compares his role to that of a primary care physician. He does an initial assessment with a client, then recommends a plan of action that might bring in one of two dozen professional specialists -- lawyers, accountants, e-commerce providers, insurance experts -- to solve a family business issue.

Snebold says he's negotiated discounts with service providers that individual businesses couldn't get on their own, and those rates allow the Family Business Center to offer a competitive price while earning a fee from all services.

He says that while the center can refer clients to one of its network of service providers, they are free to consult the professional of their choice.

"We don't want to disrupt existing relationships as long as they're working," Snebold says.

Citizens National owns an insurance agency, for instance, but also refers clients to other providers, depending on the client's needs.

Snebold doesn't see much competition coming directly from the large banks, because, they tend to want to own and control the entire operation, and staffing can be expensive. And with Citizens Bank's network of strategic partners as advisers, he has a team of what he terms "A players." They're virtually all entrepreneurs with six-figure incomes, a line-up most banks would have a hard time duplicating in-house.

The long-range plan, says Snebold, is to refine the concept over the next three to five years, then sell it to other community banks in the state, most likely on a franchise basis.

Developing businesses not traditionally associated with banking isn't new for Citizens National. When regulatory changes opened the door to banks venturing into other businesses, it took advantage of the situation, forming an information technology business.

"We looked at those moves in the industry as a strategic opportunity for us to offer services to other banks," says Weir.

In the 1990s, Citizens National converted to an operating system that enabled it to offer backroom processing services to smaller banks. It later sold the operation to the company that provided the software for the system.

Hometown image

The challenge for Citizens Bank may be simply in retaining its warm community bank image while it expands its business horizons. Snebold says the bank has an agility that larger banks can't match.

"Even though they have to be fiscally conservative, they're very flexible," says Snebold. "Even in the lending area, they're not cookie-cutter."

To help its business clients foster the family business tradition and ensure that carries over to successive generations, Citizens National has established the Citizens Junior Bank Board, a program that gives high school juniors and seniors opportunities to learn about banking and the role banks play in the economy and their communities.

Teens learn about running a business, career planning and other business-related topics through field trips, group projects and hands-on experiences.

Weir doesn't sound like she's about to abandon what she says has given the bank an edge over four generations.

"We are relying on the fact that our customers, both retail and business, like to walk in and see their relationship manager here, their financial planner is here, we've got a mortgage originator here, I'm here a lot," says Weir, who maintains an office at the Wexford branch. "They like to know that we know them. When you deal with big companies, you get lost." How to reach: Citizens National Bank of Evans City, www.citizensnatl.com; NuBank, www.NuBank.com; Joseph M. Katz Graduate School of Business, www.katz.pitt.edu