How Charlotte became a banking giant, outpacing Pittsburgh's banks

BankTown USA / First in a series

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BankTown USA

The 60-story Bank of America Corporate Center towers over the bustling Charlotte N.C. skyline.

Bob Leverone, Associated PressHugh McColl, chief executive officer of NationsBank, relaxes in the corporate offices in Charlotte, N.C.. In 1998, BankAmerica Corp., agreed to merge with NationsBank Corp. to create one of the biggest banks in the nation, Bank of America.

Day Two: How Charlotte's two dominant banks pervade all aspects of life in this fast-growing city.

Day Three: Charlotte is a major attraction for former Pittsburghers moving there for job opportunities.

Web Extra: A conversation with former Bank of America CFO Jim Hance about the rise of Charlotte

CHARLOTTE, N.C. -- Hugh McColl can see all of Charlotte, N.C., from his perch atop the Bank of America Corporate Center, a building capped with a crown and taller than any other man-made structure in the Southeast.

The retired bank executive admits to feeling pleased at the view he created. The 60-story "Taj McColl," as it is called by many, overwhelms all rivals in this sunny city, including the 42-story headquarters of crosstown banking rival Wachovia Corp.

"Do I prefer having the tall one?" said Mr. McColl, who speaks with a small-town South Carolina drawl. "Yes," he admitted. "It is befitting our place."

There is no greater symbol of Charlotte's exalted place in the banking world, its boosterish fervor, its aggression, its newfound wealth, than Mr. McColl. A fifth-generation banker and ex-Marine, he retired as chief executive officer of Bank of America in 2001, three years after pulling off the first coast-to-coast banking merger in U.S. history.

He is one of several reasons why once-sleepy Charlotte is now the nation's second-largest banking center, after New York, with $1.7 trillion in assets, and why one out of every five people in the region now has a finance-related job. Some 32,000 of them work for either Charlotte-based Bank of America, the nation's largest financial institution; or Charlotte-based Wachovia, the nation's fourth-largest.

But why did it happen in Charlotte? And why not Pittsburgh, which in many ways had a head start. Two decades ago, when the U.S. Supreme Court untangled a set of archaic banking regulations barring cross-state acquisitions, Pittsburgh was a larger, better-known financial center than Charlotte.

Indeed, Pittsburgh-based PNC Financial Services Group was then a leader among what were called super-regional banks, having engineered the largest merger in banking history, the 1983 combination of Pittsburgh National and Philadelphia's Provident National. Following the example set by Mr. McColl's North Carolina National Bank, or NCNB, PNC busted out of its state borders with purchases of major banks in Kentucky and Ohio, quickly becoming the nation's 11th largest financial institution.

It was all part of a sweeping shift in banking, ensuring the industry would no longer be dominated by New York and San Francisco, a shift that would eventually reduce the number of banks operating in the United States from 14,000 to less than 8,000.

Pittsburgh's mistake
But Pittsburgh stumbled -- and then hunkered down -- as bad loans and poor investment choices slowed PNC and crosstown rival Mellon Bank in the late 1980s and early 1990s. "We always thought PNC would be there," said Jim Hance, Mr. McColl's chief financial officer. "For some reason they stopped and pulled back."

PNC Chief Executive Officer James Rohr argues that the bank's change in direction and strategy had more to do with a pursuit of "higher-growth opportunities" such as mutual fund processing and that any evaluation of Pittsburgh's performance compared to Charlotte "depends on what your objective is."

"If your objective is to get big, then clearly they did the best job," he said, adding, "I don't think that's everything."

The Charlotte banks pressed ahead with dozens and dozens of acquisitions across the country, taking on new names with each deal and eventually turning this little-known textile and distribution hub into BankTown USA. "We did it with a vengeance," said Mr. McColl, believing such a strategy would ensure survival. Being big "gives you protection from being purchased," Mr. Rohr admitted, but "it doesn't mean your shareholders win."

Now 71, Mr. McColl believes that geography and history had a lot to do with Charlotte's aggression. The city's reputation for producing risky, acquisition-minded bankers can be understood, he said, through the lens of the Southern experience and the ever-present need to repel invaders and retain power. When Britain's Gen. Charles Cornwallis marched the redcoats through the Carolinas during the American Revolution, rebels from Charlotte -- founded in 1768 and named after England's queen -- attacked the British with extreme vigor, driving Cornwallis north to his last defeat in Yorktown, Va., and prompting one enemy officer reportedly to dub Charlotte a "nest of hornets."

"This is a very aggressive part of the world," said Mr. McColl, who grew up 90 miles southeast of Charlotte, in a South Carolina town of 10,000.

In the run-up to the Civil War, Charlotte was secessionist when the rest of North Carolina was not. (Slaves represented 40 percent of Charlotte's population in 1860.) After the war, Charlotte did not lament the loss but instead embraced economic opportunity as a way of building up a New South, one of the few Confederate towns -- Atlanta being the best example -- able to "pull their pants up and get to the business of trying to join the national economy," said Dan Morrill, a professor of history at the University of North Carolina-Charlotte.

"This is a very business-oriented town," Mr. Morrill added. "Charlotte doesn't really care much who your grandmother was. It just cares about your abilities and skills to assist the business world."

Finance was always a key industry for Charlotte. The Federal Reserve opened a branch in the city in 1927, and the first U.S. discovery of gold happened there in 1799, making Charlotte the scene of the nation's first gold rush and attracting enough wealth-seekers to justify the establishment of a U.S. Mint in the 1830s.

Some mines donated low-grade gold to the construction of Charlotte's first road beds, prompting many residents to boast that "we are living in a city paved with gold," said Tony Crumbley, vice president of research for the Charlotte Chamber of Commerce.

What prepared Charlotte for the cross-country bank mergers of the 1980s and 1990s were liberal state banking laws that freed North Carolina financial institutions to expand within their borders in the 1960s and 1970s, a time when banks in other states were relegated to one county or one state.

But the real action arrived in the 1980s and 1990s, and it coincided with the ascension of Mr. McColl and his crosstown counterpart at Wachovia, Ed Crutchfield. Both kept buying banks in the largest and fastest-growing markets (Florida, Texas, Georgia) even as more conservative financial institutions pulled back. It was a risky, controversial strategy driven by a need to be bigger than everyone else during an unprecedented wave of consolidation that threatened the future of any medium-sized, independent bank -- and still does. PNC, the largest bank in Pittsburgh, is one of the few large hometown independents left in the country, and analysts still believe it will eventually be acquired, perhaps by one of the banks in North Carolina. Mr. McColl said he looked at both Mellon and PNC as possible acquisitions while he was in charge.

"We knew there was an end game going on," Mr. McColl said. "If you opted to be out of the game, you would certainly die. So we opted to be in the game. We took a lot of criticism for it from time to time. [But] when one looks at it today, you have to argue we were correct. We survived and prospered while others disappeared."

McColl vs. Crutchfield
The in-town rivalry between Bank of America and Wachovia also has a lot to do with Charlotte's rise, each pushing to outdo the other. Years ago, at a press conference, someone asked Mr. McColl how Charlotte had become such a powerful banking center and Mr. McColl joked: "Because of Ed [Crutchfield] and I."

Asked about that statement today, Mr. McColl downplays it as a "one-liner" and is careful to credit his predecessors, especially former CEO Tom Storrs, who was in charge when the bank made its first foray out of state in 1981.

But he admits that he and Mr. Crutchfield, who could not be reached for comment, "had a long battle and we fought it out over the same ground and tried to acquire the same companies. To be candid, it was all-out war."

The two banks even battled for control of Charlotte's skyline. There was the 32-story tower that Wachovia predecessor First Union built in 1971, the 40-story tower Bank of America predecessor NCNB built three years later, and the 42-story tower First Union finished in 1988.

Mr. McColl won that battle with his 60-story Bank of America Corporate Center in 1992, a building with an elaborate glass atrium, shops, and three 18-by-23 foot frescoes dominating the front lobby.

Liberal banking laws and personal rivalries are part of the story here. But it should also be noted that "part of it was just luck," said Tony Plath, a professor of finance at the University of North Carolina-Charlotte.

The luckiest turn for Mr. McColl and his predecessors at Bank of America was a fluke decision made by a Pittsburgh bank executive -- one that would hand Charlotte an opportunity to beat its rivals to the start of interstate banking.

The man in Pittsburgh was Pittsburgh National Bank chief executive officer Merle Gilliand, who in 1971 bought a little trust company in Orlando, Fla., without asking his board first, according to Mr. McColl and Mr. Storrs. (Mr. Rohr of PNC claims Mr. Gilliand, who died in 1998, never would have made such a decision without informing his board.) When the board members found out, according to the Charlotte bank executives, they asked Mr. Gilliand to get rid of it. Mr. Gilliand called a friend at NCNB, which quickly snapped it up. "A great stroke of good luck," said Mr. Storrs, now 87.

Surprisingly, Florida allowed NCNB to keep the trust company despite legislation barring out-of -state banks, and a decade later, in 1981, the North Carolina bank used its ownership of the trust company as the rationale for buying another Florida financial institution, the National Bank of Lake City, at a time when there was no interstate banking allowed anywhere else in the country.

In 1982, Mr. McColl's bank spent $200 million buying banks in Florida -- the most in one year ever -- and became a feared acquirer throughout the state. To celebrate the moment, Mr. McColl and four colleagues planted a Florida state flag in their Charlotte conference room and posed around it, "Iwo Jima" style, several of them smiling and laughing for a photographer. Mr. McColl wore a military helmet, the straps dangling down to his suit lapels.

When Mr. McColl's boss saw the photo, meant as a private joke, he warned, "If anybody sees this, you're all fired."

Today, Mr. McColl has the picture in his office -- and he is proud of what it represents.

"We were always trying to figure out how to get out of North Carolina," he said. "We knew if we didn't, we would remain unimportant and eventually we would die."

With Mr. McColl and many others, "there is this sense, by damn-it, you are going to take notice of us and understand we are a force of power," said Mr. Morrill, the Charlotte history professor. People might still "make assumptions about the South, but they better not make them anymore. The South will buy them out."

Dan Fitzpatrick can be reached at or 412-263-1752.


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