When thinking of financial centers, cities like New York and London immediately come to mind, as do names like Citibank and Goldman Sachs. However, another city and another name should also come to mind – Charlotte and Bank of America. How did Charlotte, a small southern city become the headquarters for one of the largest financial institutions in the world? The answer is an odd and interesting combination of history, industry and legal quirks.
Bank of America can trace its roots to 1874 when, with only $50,000 in equity and $200,000 in deposits, the Commercial National Bank was founded in Charlotte. The bank filled the void left in the aftermath of the Civil War, during which every bank in the Carolinas failed. At that time, Charlotte had a population of about 4,000, but the city was quickly becoming a rail center and textile hub in need of a local bank.
The first big steps to this amazing story occurred in the late 1950s, when Commercial National merged with Charlotte’s American Trust and Security National of Greensboro. Recognizing that the institution was no longer strictly a Charlotte bank, the banks became the North Carolina National Bank (NCNB). By the 1970s, these mergers, along with an aggressive growth strategy, made NCNB the largest bank in North Carolina.
North Carolina National Bank was poised for further growth, but expansion was difficult. During this time, state laws throughout the country prevented banks from having branches in more than one state. Therefore, a North Carolina bank could not have a branch in another state and vice versa. However, this prohibition on interstate banking was not enough to stop the management of NCNB; they soon found a way.
In 1982, the bank owned a small Florida trust company, which was not a bank and therefore, under state laws, could be owned by an out of state bank. NCNB used this loophole to purchase a small bank in Florida and, in accordance with the law, begin expansion within the state. With branches now open in Florida, NCNB officially became one of the first interstate banks.
In 1983, a new leader, hungry for expansion, took the reins at NCNB. As the new CEO, Hugh McColl implemented an acquisition strategy that brought the bank to national and international prominence. McColl’s strategy was aided by the North Carolina Legislature, which, in 1985 passed the Southeastern Regional Banking Compact, a law allowing North Carolina banks to own branches in other states, while forbidding northern banks from entering North Carolina. This act of protectionism allowed NCNB to continue expansion with little fear of acquisition by an outside bank.
The field was now open for the next big merger. In 1989, First Republic, a Texas bank, failed during an oil bust and was taken over by the FDIC. Fortunately, Texas interstate banking restrictions did not apply when buying a failed bank from the FDIC, allowing NCNB to purchase First Republic. Just like in Florida, once NCNB owned a Texas bank it could expand within the state.
These early entries into interstate banking put NCNB ahead of other banks struggling to get over the wall of interstate branch restrictions. In later years, as the legal walls came down, other banks crossed them only to find NCNB already there. Further mergers followed, and in recognition of its growing interstate presence, in 1982, NCNB changed its name to NationsBank. Another name change soon followed when NationsBank made its pinnacle acquisition, changing the bank from a primarily eastern institution into a truly national one.
In 1998, NationsBank acquired the San Francisco based BankAmerica and became Bank of America. BankAmerica had a huge west coast presence and the purchase created the first coast-to-coast bank.
What started as a small, local bank transformed into one of the largest banks in the United States. Today, Bank of America employs over 223,000 people and has revenues of over $85.1 billion. Although, the era of large mergers and outsized growth ended with the recent recession, the long path from a small Charlotte bank to an international giant firmly placed Charlotte on the financial map.
Rick Rothacker, Banktown, (Winston-Salem 2010)
Greg Farrell, Crash of the Titans, (New York 2010)