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NationsBank looms large in size, competitiveness Critics say it ignores low-income areas

THE BALTIMORE SUN

CHARLOTTE, N.C. -- From the 60th floor of the NationsBan Corp. tower, even on a cloudy day you can see forever. Maybe even to the boundaries of the corporate realm: north to Baltimore, south to Miami and west to El Paso, Texas.

The year-old tower rises above an otherwise small-town skyline, 22 stories higher than rival First Union Corp.'s headquarters a few blocks away, as NationsBank officials are pleased to note. And it reflects the NationsBank approach to business and life: Where other companies may make a splash, NationsBank creates a tidal wave.

The company runs more than 1,800 branches and employs more than 50,000 people. With $118 billion in assets as of Dec. 31 -- seven times more than MNC Financial Inc. -- NationsBank is the fourth-largest bank holding company in the nation and holds the No. 1 market position in five of the nine states where it operates.

Now it's coming to Baltimore in a big way.

This month, NationsBank announced it will buy MNC, the parent of Maryland National Bank and American Security Bank in Washington, for $1.36 billion, if MNC shareholders and the government agree.

Today, NationsBank holds third place in Maryland's banking market, with few branches in Baltimore. But if the merger is completed by September, as expected, a pen stroke will make NationsBank the biggest bank in town.

What Marylanders can expect first is an overwhelming promotional splash. When it acquired the $40 billion Atlanta-based C&S;/Sovran Corp. in 1991, for instance, the former NCNB Corp. gave $40 million to Atlanta's 1996 Olympics organizing committee.

Baltimore's boards of directors, chambers of commerce and parent-teacher associations will find their former MNC colleagues joined by an army of polite, well-groomed bankers with mild Southern accents and a strong drive to succeed. That spirit is inspired by their headline-grabbing chairman, a South Carolina native and ex-Marine named Hugh L. McColl Jr., and cultivated through the ranks.

"I think there's a competitiveness among us that manifests itself as a will to win that is incredibly strong," says Kenneth D. Lewis, the Atlanta-based president of the company's General Bank, which serves retail customers and businesses with less than $100 million in annual revenues.

Mr. Lewis, 45, is widely recognized as the likely successor to the 57-year-old Mr. McColl, though the chairman says he won't retire any time soon.

In NationsBank's wake comes controversy. Community activists say the company ignores the needs of low-income, minority and rural areas.

Several Texas small businesses have sued the bank, charging that it unfairly revoked loans. And the Atlanta City Council, unimpressed by the Olympian largesse, has barred NationsBank from doing business with the city because of a controversial branch-closing in a poor neighborhood.

After acquiring C&S;/Sovran, NationsBank announced plans to close the Stewart/Lakewood branch on the city's predominantly black Southside.

"What brought a lot of this on," says Southside Councilman Dozier Smith, who sponsored the resolutions that shut the bank out of the city's business, was "we tried to work with them, and they were claiming that their loan business was not enough to justify their being out there. They've never said they were losing money."

Even some stock analysts argue that NationsBank's profits come mainly through negotiating acquisitions and merging operations, rather than from running a bank. They say it's only a matter of time before the takeover express runs out of steam.

Mr. Lewis disagrees: "I would say that NationsBank is an entity with the muscle of a large company, but with the personality of a small company. We have a fundamental abiding principle that we can never lose that focus on the community."

He insists that NationsBank's business and consumer lending officers have more lending authority than most of their competitors.

And he says that the company's geographic diversity assures that economic problems in one region won't cause a cutoff of charitable donations, as Baltimore has faced with MNC and other local companies.

At the height of its power, MNC and its chairman, Alan P. Hoblitzell Jr., were unsurpassed in charitable and cultural contributions. The company donated more than $2 million a year, not counting special projects such as the Baltimore Symphony Orchestra's capital campaign.

But as MNC's commercial real estate lending binge in the late 1980s brought it close to failure, the company cut its work force and its community profile. Keeping up with its annual United Way commitment was about all the company could muster by 1991.

"I will assure the people in Baltimore . . . that we will be as or more active, both in terms of giving of our financial resources and our human resources, as the predecessor bank [ever was]," Lewis promises.

Mr. McColl echoed that theme in an interview in Washington Friday. Announcing a $100 million joint venture with the Enterprise Foundation to develop affordable housing, he said the program illustrates NationsBank's commitment to the communities it serves.

But according to some, the view of the community can get a bit fuzzy from 60 stories up. Jane Burts, the lead organizer for the Charlotte Organizing Project (CHOP), sits in a simple office in a drab low-rise building at the edge of downtown Charlotte. From her window, Ms. Burts can't miss NationsBank's tower.

NationsBank, according to CHOP, has failed to make mortgages available in the poor neighborhoods of Charlotte and elsewhere. In the 29 low-income census tracts that CHOP follows, the company's mortgage loans dropped from 85 in 1987 to eight in 1990.

And data from the federal Home Mortgage Disclosure Act show that throughout its entire domain, the predecessor company called NCNB Corp. in 1991 rejected minority mortgage applicants twice as often as white applicants.

NationsBank says the rejections were based on a lack of creditworthiness, not race. It has stepped up advertising in poor neighborhoods and created programs to teach minorities about improving their credit profiles. In several cities, including Baltimore, NationsBank has held "community loan days" in poor neighborhoods to provide credit counseling and take loan applications.

"I don't think Hugh McColl is an evil man," Ms. Burts allows. "He does what he thinks is best for the community. But I don't think he's vastly in touch with the part of the community that we deal with."

Inside the NationsBank tower, company officials can't figure out why they're drawing these arrows. Joseph B. Martin, executive vice president for corporate affairs, mentions the company's well-publicized commitment in 1991 to make $10 billion in community loans over the next decade.

In the elegant 59th-floor dining room, Mr. Martin walks to a huge picture window and points to nearby Johnson C. Smith University. NationsBank gave the mostly black college a $1 million gift and has worked with it to establish credit counseling centers for minorities.

"I happen to think that NationsBank is an extraordinary corporate citizen," says university President Dr. Robert L. Albright, who serves on the board of NationsBank of North Carolina. He concedes that NationsBank has some distance to go in lending to low-income borrowers, but says its record is improving.

At another window, Mr. Martin points out the 4th Ward neighborhood, a once-blighted area that NationsBank helped to revitalize with loans funneled through the city. In 1977 the company told regulators the goal of the project was "to develop housing integrated as to race, age, and income level."

Part of the project involved trucking several large, battered Victorian homes to the 4th Ward from other neighborhoods. Now the area is filled with "urban settlers."

Mr. Martin admits that few blacks or poor people have benefited from the project, but they have gained from a similar effort in nearby 3rd Ward, he says.

Ultimately, NationsBank argues, its own interests rest with the economic health of the cities in which it operates. Profitable customers mean a profitable bank.

And lately, NationsBank has posted fat profits -- more than $1.1 ++ billion last year. The company's stock, meanwhile, has generated a compounded annual return of 23 percent over the last 10 years. The stock, which pays a $1.60 annual dividend, closed at $53.50 Friday.

NationsBank executives say they aren't likely to make more major bank purchases -- unless they find a deal too good to pass up. Instead, they're concentrating on building business lines such as trust management and consumer finance.

But the company continues to expand. Last fall it announced a venture to sell stocks and bonds with brokerage Dean Witter Financial Services. And it has nearly finished the $2 billion purchase of Chrysler First Inc., the automaker's consumer finance and mortgage subsidiary.

The acquisition slowdown doesn't sit well with Charles Peabody, a New Jersey bank analyst and money manager who left Kidder, Peabody a year or so ago after criticizing NationsBank (and watching Mr. McColl cut the bank's business ties with Kidder). He says profits have come almost entirely from skillful acquisitions, such as the 1988 purchase of failed First RepublicBank Corp. of Dallas. The deal with the Federal Deposit Insurance Corp. essentially allowed NationsBank to retain the good loans, give the government about $8 billion in troubled loans and earn fees to manage them.

One result: Without the profits from Texas, the company would have lost money in 1990. But most of the Texas profits have come from the structure of the First RepublicBank deal and an estimated $500 million in tax breaks, Mr. Peabody and others argue, noting that those benefits expire after the first quarter of 1993.

Subsidiary bank reports show the company has done a mediocre job at running its banks in Florida and North Carolina, Mr. Peabody says. In fact, NationsBank's return on assets has stayed well below the industry's. And although most analysts still recommend buying the stock, its most recent earnings failed to meet Wall Street's expectations.

Mr. McColl dismisses such concerns, except to say that "we've been able to demonstrate conclusively that we can make money out of the franchise we have, but we're going to make a lot more."

The merger with MNC, certainly, has been widely hailed as a smart move, the best way to gain access to the lucrative Baltimore-Washington market.

Because NationsBank has little overlap with MNC in Baltimore, employees won't see much "fat-cutting," Mr. Lewis says.

But others say that all remnants of MNC's personality will be quickly replaced by the NationsBank culture. Employees will learn a philosophy that rewards hard work and talent, but regiments corporate life, even down to the plants and pictures on employees' desks.

Some employees say the no-nonsense approach makes sense. "The year that I spent with C&S;/Sovran was a year of tremendous drift," says Kemal Ahmed, a NationsBank assistant vice president for specialized business lending in Atlanta. He describes the NationsBank culture as "straightforward" rather than authoritarian.

For his part, Mr. McColl has high praise for MNC's staff, including Chief Executive Officer Frank P. Bramble Sr. and Executive Vice President Susan C. Keating.

"You will see that team coming together with our team in what will be a very proactive banking company to help Baltimore and Maryland grow and prosper," Mr. McColl says. "I think you are going to see good things come out of that partnership."

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