#$234

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How 1 Bank Turned $234 Million Into $2.3 Trillion in Just 51 Years

In 1957, American Commercial Bank, a $ 234 million commercial lender based in Charlotte, N.C., committed itself to reshaping the U.S. bank industry. Fifty-one years later, as recounted in Ross Yockey’s biography of Hugh McColl, it had morphed into the $ 2.3 trillion universal banking behemoth Bank of America (NYSE: BAC  ) .

This is the dream of every banker and bank investor, and as a result, it’s worth noting three of the underlying factors that allowed American Commercial Bank to achieve such a monumental feat.

1. Timing When American Commercial Bank, under the direction of then-CEO Addison Reese, set off on its incredible journey in 1957, the bank industry looked dramatically different than it does today.

The Great Depression was still fresh in bankers and regulators’ memories, leading to a conservative mind-set among most bank management teams. Interstate banking was prohibited. And with a handful of exceptions, banks weren’t even allowed to operate multiple branches within the same state.

By taking the initiative to break these barriers down, and particularly the restriction on interstate banking, Reese’s bank was able to capture the all-too-important first mover’s advantage that later propelled his bank to the industry’s pole position.

2. Strategic acquisitions American Commercial Bank’s growth was fueled principally by acquisitions, but not just any acquisitions. In many critical instances, these were at bargain-basement prices consummated at the behest of federal regulators.

Here are two examples: In 1988, by then operating under the banner of North Carolina National Bank, it acquired the No. 1 bank in Texas, First RepublicBank, which was on the brink of insolvency following that decade’s oil crisis. Three years later, NCNB completed a similar deal to merge with a then-leading bank in Georgia and Virginia, C&S/Sovran, which was limping along thanks to a downturn in commercial real estate prices.

The important point to note here is that NCNB — “NationsBank” after the C&S/Sovran deal — was able to pursue this strategy because it had avoided most of the lending fads, such as lending money to less developed countries in the 1960s and 1970s, that had hindered many of its peers throughout the years.

3. Continuity of leadership The third piece of the puzzle was NationBank’s focus on the continuity of management, which is an underappreciated trait of great banks. Over nearly five decades of explosive growth, the bank had only three CEOs, each of which had been groomed by his predecessor.

As a result of these seamless transitions, NationsBank was not only able to maintain its strategic vision, but it was able to quickly and cordially build on the successes of previous management teams as opposed to allowing infighting to impede immediate progress.

All of this ended, of course, 10 years after NationsBank merged with Bank of America in 1998, as Ken Lewis, a longtime NationsBank executive, was forced out as CEO following the disastrous Countrywide Financial acquisition on the eve of the financial crisis of 2008-2009.

NationsBank’s incredible success At the end of the day, it’s hard not to be in awe of NationsBank’s incredible success throughout the years. But, as the recent crisis shows, even a great past can’t insulate a bank from the need to always act responsibly.