Fresh crop.

• Author: Mildenberg, David
• Position: Cover story

Out-of-state private equity plows billions into homegrown community banks. Why Rick Callicutt thinks his is such fertile ground.

In his senior year at High Point University, Rick Callicutt, who is 6-foot-3, cleared a bar 3 inches shy of 7 feet, which he says proves some white men can jump. Now, 34 years after he set a school record for the high jump that still stands, his BNC Bancorp might be positioned to leap from a small community lender to a regional powerhouse. It's an old story in North Carolina, where Charlotte-based Bank of America Corp. and Winston-Salem-based BB&T Corp. merged their way into the ranks of the nation's 10 largest banks. So did Charlotte-based First Union Corp.--which assumed the name of the Twin City's venerable Wachovia Corp. after their merger in 2001--until a tsunami of bad mortgages pummeled its once-pristine loan portfolio and forced a fire sale to San Francisco-based Wells Fargo & Co. in 2008.

Callicutt, 55, isn't alone in eyeballing expansion, with eight other North Carolina-based banks with $2 billion to $4 billion in assets considering ventures in new markets. As CEO from 1983 to 2001, Hugh McColl Jr. turned the amalgamation of community banks that was NCNB (nee North Carolina National Bank) into Bank of America, which for a time was the nation's largest consumer bank. But replicating that kind of growth won't be easy because getting big in banking is much harder to do than it was 20 years ago, McColl says. With more regulations and fewer banks with assets in the tempting $5 billion-to-$10 billion range remaining after waves of consolidation, deal-making as practiced by McColl, First Union's Ed Crutchfield, Wachovia's John Medlin and BB&T's John Allison has become tougher. "It's expensive, and it takes time," McColl, 78, says in an interview at his office on the 41st floor of Bank of America Corporate Center, the 60-story skyscraper commanding Charlotte's skyline that wags dubbed the "Taj McColl." He chuckles when learning that Callicutt's company will reach nearly $4 billion in assets when two recent purchases close. That's a mom-and-pop operation for McColl--NCNB had $13 billion (an inflation-adjusted $31 billion today) when he became its chief executive 31 years ago. "Maybe he can find a lot of $500 million-to-$l billion banks, or maybe the secret is if he buys somebody bigger through a merger of equals. I think it's going to be difficult."

High Point-based BNC Bancorp--the holding company for Bank of North Carolina --might surprise McColl under Callicutt, who had been the bank's chief operating officer since it opened in a trailer in Thomasville in 1991 and became chief executive in June of last year. One reason is his backing from Aquiline Capital Partners LLC, a New York investment firm that owns a 21% stake. The investment ties a promising community bank to ex-Wachovia CEO Ken Thompson, one of the industry's most controversial figures, and underlines the influence of private equity in determining which banks blossom.

Eight community banks that rank among the state's 13 largest financial institutions (page 51) have attracted a total of more than $2 billion from private-equity and institutional investors since September 2008, when things got so scary that U.S. Sen. Richard Burr told his wife to withdraw $500 from an ATM. Where politicians saw risk, some investors smelled reward, buying banks on the cheap with help from desperate federal regulators. Former BofA executives were at the forefront: Gene Taylor and Chris Marshall raised $800 million for Capital Bank Financial Corp., and Milton Jones and Charlie Williams secured $500 million for Certus-Holdings Inc. (Though both groups started in Charlotte, Capital moved to Coral Gables, Fla., and Certus--which ousted Jones and Williams in April after their private-equity investors complained about excessive spending and mounting losses--is headquartered in Greenville, S.C.) Former Wachovia bankers Brian Simpson and Bob Reid raised $310 million for Charlotte-based CommunityOne...