NCNB CORPORATION

1874–1988

Stock Index: New York

Expanding across the southern United States with lightning speed, NCNB Corporation has become known in the last decade for its voracious approach to the banking business. With the 1988 purchase of First Republic Bank of Texas, NCNB Chairman Hugh McColl Jr. quintupled his bank's assets in only five years and elevated of from a regional financial leader to a national powerhouse. NCNB is now in the biggest financial pond of them all, where the other fish await its next attack with more trepidation than they might care to admit. Chairman McColl is an ex-Marine who, according to Fortune, once considered adopting as his motto, "crush the sons of bitches and have a nice day." McColl, however, has inspired his employees to make NCNB the American bank to watch over the next decade.

NCNB's history was unremarkable until very recently. Its earliest ancestor was the Commercial National Bank of Charlotte, founded in February, 1874 with paid-in capital of $50,000. Despite Charlotte's tiny population of 2,500, the bank immediately prospered; its first president, Major Clement Dowd, waited only nine months before announcing the first of what would become an unbroken string of dividend payments. Through a combination of relatively conservative fiscal policy, sound analysis, and a helping of plain good luck, Commercial National weathered the banking storms of 1893, 1907, and 1929-1933 with its assets largely intact. When World War II ended in 1945 the bank was in excellent condition, well-poised to take advantage of the postwar economic boom.

Its earliest ancestor was the Commercial National Bank of Charlotte, founded in February, 1874 with paid-in capital of $50,000.

1901–1973

Commercial National's future partners were not founded until the early part of this century. The Southern States Trust Company was created in 1901 in Charlotte by two businessmen named George Stephens and Word H. Wood, who changed the bank's name in 1907 to American Trust Company. Security National Bank was formed in Greensboro at the height of the Depression. It not only survived, but later established offices in a number of other North Carolina cities.

All three of these banks prospered in the fertile postwar economic environment, when intensified competition made large-scale mergers at first appealing and then inevitable. Commercial National and American Trust were Charlotte neighbors, the former a largely retail bank, the latter preferring commercial markets. In November of 1957 the two banks agreed to pool their complementary portfolios and become American Commercial Bank, to which the First National Bank of Raleigh was soon added. This flurry of mergers created one of the Carolinas' largest banks and set the stage for still more dramatic changes. No sooner had American's cross-state rival Security National merged with yet another sizable player, Depositors National Bank of Durham, than American and Security began discussing the combination of their recently swollen institutions. On July 1, 1960, the merger was completed and North Carolina National Bank opened the doors of its 40 offices across the state. The new regional bank had assets of $480 million and deposits of approximately the same amount.

In the decades following, NCNB consolidated its position as one of the Southeast's leading financial powers. By means of a long series of minor acquisitions the company quickly grew to include some 91 offices in 27 North Carolina cities and towns, with total deposits reaching more than $1 billion by 1969. In 1973, NCNB had passed its arch rival, the Wachovia Corporation of Winston-Salem, as the leading bank in the entire southeast region.

1960–1987

The following year nearly proved disastrous for the high-flying NCNB, however, when its real estate investment trust suffered large losses, precipitating a general belt tightening and shift in company philosophy--in the direction of still further expansion. Always aggressive, the bank accelerated its program of acquisition and finished the decade with $100 million mergers with the Bank of Asheville and Carolina First National in Lincolnton. With assets of $6 billion and 172 offices across North Carolina, NCNB was forced to look outside the state for its next campaign, even though interstate banking was still prohibited by law in 1979.

The bank began lobbying heavily for an end to restrictions on regional banking, and in 1981 it discovered a loophole in Florida law which would allow it to purchase banks via a subsidiary it had owned in that state since 1972. After a long legal battle, NCNB's position was upheld and its invasion of Florida began. In rapid order, NCNB snapped up First National Bank of Lake City, Gulfstream Banks of Boca Raton, and Ellis Banks of Bradenton, the latter alone holding $1.8 billion in assets and operating 75 branches. NCNB had largely concentrated its Florida purchases along the state's west coast, but in 1985 it charged into the competitive Miami area with the acquisition of Pan American Banks, with $2 billion in assets and 51 offices. By the time the dust had settled in 1987, NCNB National Bank of Florida had become the fourth-largest financial institution in a state whose rapidly growing, affluent population makes it one of the most desirable markets in the banking world.

Meanwhile, the southeastern United States had agreed in 1985 to allow reciprocal interstate banking, launching another spate of takeovers by Chairman McColl and his "hungry tiger," as he sometimes refers to NCNB. On the last day of 1985 the tiger gobbled up Southern National Bankshares of Atlanta, moved next to Bankers Trust Company of South Carolina in 1986, and finished the repast with Prince William Bank of Dumfries, Virginia at the end of that year. The following year, CentraBank of Baltimore fell victim, making NCNB the only bank to operate in six southern states and rounding off its combined assets at a tidy $20 billion. The scope of NCNB's expansion drive becomes clear when one recalls that the corporation has grown fortyfold since it was formed in 1960.

1983–1988

Along the way, NCNB and McColl (chairman since mid-1983) have alienated more than a few southern bankers. One company went so far as to accept a significantly lower takeover bid from a white knight in order to avoid becoming part of the NCNB empire. Some analysts believe that McColl's style has been a handicap for the company, but it is hard to argue with success. In 1988 the chairman pulled off a still-greater coup with the purchase of a bankrupt Texas giant, the $26 billion First RepublicBank.

In a complicated deal, NCNB received from the Federal Deposit Insurance Corporation a five-year option to buy all of First Republic's shares, which it did, plus a cash infusion and IRS tax breaks worth an estimated $5.5 billion. Not only has the carefully planned acquisition catapulted NCNB into the banking big league, with total assets now at around nearly $60 billion, but even the troubled First Republic has already contributed a handsome profit. And McColl shows no signs of slowing down. Most recently, NCNB tried to put together a deal for Citizens and Southern of Atlanta which, had it gone through, would have created the sixth-largest bank in the United States. Citizens was not interested, and McColl quickly withdrew his bid, with NCNB management already stretched thin by the First Republic takeover. With the additional purchase of the London investment firm of Panmure Gordon, NCNB is beginning to focus on the international market as well. As Chairman McColl has said, "I expect the Herculean." So far he has gotten it.