NationsBank Corporate Center
100 South Tryon Street
Charlotte, North Carolina 28202
Fax: (704) 386-5000
Incorporated: 1960 as North Carolina National Bank
Total Assets: $165 billion
Stock Exchanges: New York Stock Exchange
SICs: 6712 Bank Holding Companies; 6021 National Commercial Banks
NationsBank is one of the United States’ largest banking and financial companies. Based in Charlotte, North Carolina, the company grew at breakneck speed through the late 1980s and early 1990s to claim a spot as one of the nation’s top five financial institutions. Industry analysts credit this phenomenal growth to the company’s foundation of bold, aggressive management and thorough, professional planning. They also credit the company’s success to the personality and leadership of Hugh L. McColl, Jr., who has served as NationsBank’s CEO since 1983. McColl’s style, that of a southern-born and bred ex-Marine, contrasts sharply with that of most members of the banking community, and has contributed to NationsBank’s image as one of the mavericks of the banking world.
NationsBank was officially formed on December 31, 1991, with a merger between the $69 billion asset North Carolina National Bank Corporation (NCNB) and the $49 billion asset C&S/Sovran Corporation. The merger created the fourth-largest banking company in the United States. McColl became the first president and chief executive officer of NationsBank, and Bennett A. Brown became the first chairman.
The two companies entered the merger having both completed a decade of rapid growth that was typical of the banking industry in the 1980s. NCNB and C&S/Sovran both followed the common industry pattern of numerous mergers and acquisitions in the 1980s. After expanding into South Carolina and Florida in the early to mid-1980s, Charlotte-based NCNB took an unprecedented leap forward through a unique expansion into Texas in 1988. The FDIC selected NCNB to manage the restructured subsidiary banks of First RepublicBank Corporation of Texas. Atlanta-based C&S Bank had banking offices throughout Georgia, Florida, and South Carolina. In 1990, this company merged with similarly sized Sovran Financial of Norfolk, Virginia. Sovran had banking offices throughout Virginia, the District of Columbia, and Maryland, as well as in Tennessee and Kentucky. After these two companies merged, the resulting organization established dual headquarters in Atlanta and in Norfolk.
NCNB traces its illustrious history back to the Commercial National Bank, which was organized by several prominent Charlotte citizens in 1874. Its initial start-up capital was $50,000. A series of mergers with other North Carolina financial institutions in the 1950s ultimately led to the creation of North Carolina National Bank on July 1, 1960. At the time of its formation, NCNB had 1,300 employees, 40 offices in 20 North Carolina communities and assets of $480 million. The bank continued to acquire smaller institutions, and by 1969 NCNB had grown to 91 offices in 27 North Carolina counties with deposits of more than one billion dollars. Ten years later, it stood as the state’s largest bank.
In the mid-1950s, however, when the nation talked about banking in the state of North Carolina, most people were talking about Wachovia Bank and Trust Company, NCNB’s arch-rival. Based in Winston-Salem, Wachovia had offices from the mountains to the coast and exercised considerable political clout in the capitol city of Raleigh. Bankers at other institutions stood in envy of Wachovia. Many bankers thrived on the competition, and some, such as Addison Reese at American Commercial Bank—one of NCNB’s predecessor institutions—in Charlotte, considered that competition the reason for going to work each morning.
At the time, Reese believed that North Carolina banking was poised for a change and nothing could stop him from meeting Wachovia’s threats. North Carolina’s banking laws were more liberal than in most states. They had been on the books since the early 1800s, when a Wilmington, North Carolina, bank appealed to the state legislature for permission to open an office about ninety miles away in Fayetteville. The legislature complied with the bank. Unlike in most states, the North Carolina legislature saw no reason to restrict branch banking during the intervening 150 years. In retrospect, many people believe that it was the close competition with backyard rival Wachovia that spurred NCNB’s rapid growth.
North Carolina National Bank broke new ground when it expanded into Florida in 1981 with its purchase of First National Bank of Lake City, Florida. At the time, it became the first non-Florida bank to expand its retail services into the state. After a quick approval of the purchase by the Federal Reserve Board of Governors, NCNB rapidly purchased several other Florida banks.
In 1986, NCNB benefited from a change in North Carolina’s interstate banking laws. With the advent of reciprocal interstate banking in the Southeast, North Carolina National Bank moved into South Carolina with the purchase of Bankers Trust Company. In 1985, it acquired Southern National Bankshares of Atlanta and Prince William Bank of Dumfries, Virginia, in 1986. North Carolina National Bank moved into Maryland in 1987 with the purchase of CentraBank of Baltimore. In 1989, NCNB acquired full ownership of First RepublicBank in Texas. During this period of growth, North Carolina National Bank established several “firsts” in its industry. For example, NCNB was the first U.S. bank to use commercial paper to finance the activities of nonbank subsidiaries; to open a branch in London; to operate a full-service securities company; and to list its common stock on the Tokyo Exchange.
The C&S/Sovran side of the NationsBank puzzle traces its roots back to the 1860s. The company that would eventually become Sovran opened its doors in Richmond during that decade. At the time, its customer base included Confederate Army commander Robert E. Lee. More than a century later, in 1984, two major institutions—Virginia National Bankshares and First and Merchants—merged to form Sovran Financial Corporation. At the time, it was the largest banking merger in Virginia’s state history.
Sovran’s management team decided to merge with D.C. National Bancorp, headquartered in Bethesda, Maryland, in 1986. By November of 1987, Sovran was moving west by merging with Commerce Union, a 71-year-old bank holding company based in Nashville. Commerce Union’s business at the time spanned Tennessee and had a presence in Kentucky. The merger gave Sovran strongholds in both of those states.
Around the time Sovran Bank’s foundations were being laid, the Citizens Bank of Savannah, Georgia, opened its doors in the temperate coastal city on November 2, 1887. At the time, the bank had $200,000 in startup capital. In 1906 it merged with its crosstown rival, Southern Bank, to form Citizens and Southern Bank. The resulting organization became the state’s largest financial institution. It began to spread rapidly across the state of Georgia. Citizens and Southern began opening offices in South Carolina in 1928, but the company sold its operations there in 1940 when it anticipated federal rules preventing banks from owning branches in multiple states. The resulting C&S Bank of South Carolina was rejoined with Citizens and Southern in 1986 when the Georgian giant bought them back. That acquisition, along with the purchase of Landmark Banks of Florida in 1985, helped Citizens and Southern doubled its size within eighteen months during the mid-1980s.
C&S can also claim several firsts in the industry. Among the highlights in C&S history are being the first bank to figure “to the penny” balances; offering one of the first checking accounts in the South; being among the first banks to issue its own credit card; and being the first bank in the nation to offer 24-hour access to its services via automated teller machines. The nation’s first ATM machine was set up in Valdosta, Georgia, under the C&S banner.
In spring of 1989, C&S was successful in resisting a takeover bid by NCNB. At the time, C&S cited what it considered a low price offer and concerns about NCNB’s recent entry into the then-depressed Texas banking market. Soon thereafter, C&S and Sovran merged in a deal finalized on September 1, 1990.
The banking environment, however, was in the midst of tremendous change. Large banks were continuing to consolidate. As a result, smaller banks were under constant pressure to find new ways to improve their efficiency and productivity and reduce their workforces. In addition, the nation as a whole experienced a downturn in the real estate market—an area responsible for much of an average bank’s business. The newly merged C&S/Sovran (the merger was announced in the spring of 1989 and consummated in the fall of 1990) was suffering from the recession in the Southeast, and it had been particularly hard hit by mounting losses on loans in the District of Columbia metropolitan area. Real estate loans made up 32 percent of the bank’s $34 billion portfolio at the end of 1990, with Washington, D.C., accounting for 21 percent of the real estate total. C&S/Sovran’s stock price had dropped from $35.88 at the close of the first quarter in 1989, when NCNB announced its merger intentions, to $15.63 at the close of the fourth quarter in 1990. Under these circumstances, North Carolina National Bank renewed its offer to merge with C&S/Sovran.
Prior to reissuing his offer, McColl gathered with his advisors. According to Howard Covington and Marion Ellis in the book The Story of NationsBank: Changing the Face of American Banking, McColl told Senior Vice-President C. J. “Chuck” Cooley, “I am going to buy C&S/Sovran. I don’t know when. I don’t know how.” He instructed Cooley to hire the best talent available and deliver a complete psychological profile on C&S/ Sovran’s key players, including Bennett Brown and Dennis Bottoroff. Cooley handled the job himself, and several weeks later, he handed McColl a profile of Brown as well as a profile of McColl himself, as seen by Brown.
Cooley told his boss that the keys to Brown’s relationships with people were honesty, sincerity, warmth, and friendliness. To McColl’s chagrin, however, each of those traits was opposite the characteristics that McColl portrayed to Brown. From Brown’s vantage point, McColl was arrogant, crude, and ungentlemanly. After hearing Cooley’s report, McColl and several other advisors began an intense series of role-playing sessions. McColl was schooled to avoid the use of militaristic terms and other verbal and nonverbal examples of his usual aggressive style. His staff coached him to become softer, more receptive, and friendlier in his approach.
Meanwhile, McColl’s confidence was growing as C&S/Sovran’s problems continued to multiply. The credit problems in the D.C. area increased, and the bank’s board split badly between an Atlanta faction and a Tennessee and Virginia faction. News filtered down to the NCNB leaders that although both factions preferred to remain independent, a merger with NCNB was the second choice among those on both sides. With this knowledge, McColl renewed his merger efforts with Brown.
On June 20, McColl departed Charlotte in the NCNB plane for Atlanta to make Bennett Brown a second offer. The two banking leaders sat down in Brown’s home to discuss the terms of the deal. Brown’s concerns were predictable: he wanted to know about leadership, cuts in personnel and staff, the name of the new bank, and—most important—the price.
McColl supplied the right answers to all of Brown’s questions. The merged bank would carry the name NationsBank, which eased concerns about the North Carolina flag flying over Georgia. Shortly after NCNB’s Texas acquisitions, the marketing group began experimenting with new names that would better reflect the company’s size and geographic diversity, as well as be more acceptable in new markets. At that time, the company began working with the Naming Center in Dallas. The Naming Center enlisted the work of academic linguists who worked with Latin teachers and poets to develop names rather than generating them by computers.
On the list of prospective names was the word “Nation.” Using poster-sized flash cards, the company combined two of them to create the single word “NationsBank.” Everyone was surprised when lawyers determined that the new name was not in use anywhere else in the world, and it soon cleared marketing surveys conducted nationwide. Ironically, NationsBank consistently scored as one of the most recognized and highly regarded names in banking, although it had never been used before. The corporate identity firm of Seigel and Gale in New York then developed a graphic look for the word that would reinforce its characteristics.
As for the issue of leadership, McColl wanted Brown to take the chairmanship, while he retained the title of CEO and president. McColl also pulled a sheet of paper from his coat that illustrated an exchange of 0.75 shares of NCNB stock for each share of C&S/Sovran. That exchange would mean a total payout of $3.99 billion for C&S/Sovran’s shareholders. Brown was receptive to the deal, but could not supply McColl with a firm answer.
It was on June 25 that the news about the probable merger broke in the Charlotte community. Even the national media focused on the possibility of a megabank deal in the South. C&S/Sovran’s leadership soon received the second offer with enthusiasm. Among other issues, NCNB had proven the wisdom and success of the large Texas acquisition, and C&S/Sovran was seeking the efficiencies and economies of scale inherent in a merger of this magnitude. The merger was approved by the Federal Reserve on November 29, 1991, and NationsBank officially opened its doors on January 2, 1992. At the time of the union, North Carolina National Bank was the tenth-largest bank in the United States, and C&S/Sovran was the twelfth largest. Together, they thrust each other to a position among the top three banking leaders in the United States.
The new entity quickly went to work to establish its presence in its chosen corporate headquarter city of Charlotte. Already, NCNB’s office buildings jutted into the southern skyline, but as NationsBank, the company decide to build a new headquarters building. The result of this goal was the new NationsBank Corporate Center, a pristine sixty-story tower designed by architect Cesar Pelli. At the time it was built, it became the tallest building in the Southeast, and NationsBank firmly established itself as one of the nation’s financial heavyweights. As tribute to the man who led this building effort, many Charlotte onlookers began to call the new Corporate Center the “Taj McColl.”
The new bank had more domestic deposits than New York’s Citibank, market capitalization to rival J.P. Morgan & Company, more branch offices than almost any other competitor, and assets of nearly $120 billion. In addition to serving as a leader in the financial world, in the early 1990s NationsBank served as a role model to the larger corporate community as well. Nationwide, it was known as a company that exercised not only sound management practices, but cultural consciousness as well. Under McColl’s leadership, NCNB had already established flexible hours for working parents and a pretax child care expense reimbursement fund. Maternity leave was extended to six months, and the concept was expanded to include time off for new fathers. These ground-breaking policies attracted the attention of the Wall Street Journal, which in its centennial issue edition in 1989 selected NCNB as one of twelve companies in the world to watch in the future. Fortune magazine also chose McColl as one of the year’s twenty-five most fascinating business people—the only one selected from the banking industry—in its January 1989 issue.
The company’s financial strength also served as a resource for the many communities it supported. Charlotte itself was one of the nation’s fastest growing metropolitan areas, due largely to the growth and visibility of NationsBank. In 1994, the company had 1,800 branch offices, which made it the second-largest branch network in America. By providing traditional banking products to retail and corporate customers, as well as investing in innovative products and services, the company’s assets had grown to $165 billion.
NationsBank of Florida; NationsBank of Georgia; NationsBank South Carolina; NationsBank of Tennessee; NationsBank of Texas
Covington, Howard E., and Marion A. Ellis, The Story of NationsBank: Changing the Face of American Banking, Chapel Hill: The University of North Carolina Press, 1993.
—Wendy Johnson Bilas