How North Carolina colonized Florida's banking industry

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Two of the Final Four March Madness basketball teams in three of the last four years were from Florida or North Carolina, with my Gators winning the championship this year.

Before those hoopsters were born, these same two states competed in a high-stakes interstate banking battle in the 1990s. Despite Florida being the larger and more rapidly growing state, North Carolina won out.

The result is that my home Sunshine State is the nation's biggest banking colony, a term I coined in the early 1990s referring to any state with more than 50% of its deposits, and ultimately credit decisions, controlled by out-of-state banks.

How could this happen to the nation's third largest, fastest growing, and arguably now the most powerful state with the Waterfront White House and many of the most influential people in the Trump administration?

Putting aside the post-COVID migration of Wall Street firms, big businesses and wealthy northerners to Florida for low taxes and other reasons, inquiring banking minds want to know why the state with the best weather, beaches, fishing and so much else does not have one big homegrown retail bank among the nation's top 50 and only three in the top 100?

The answer is that Florida has the nation's largest swamps, not just the Everglades but the undrained political kind in Tallahassee. "Pork-chop" politicians did everything they could to protect the banking interests of their friends and families for most of the last century by prohibiting branching. Florida's unit banking status did not allow limited branching until 1977 and statewide branching until 1988.

Meanwhile, forward-thinking politicians in states like North Carolina and California allowed statewide branching early in the 1800s and 1900s, respectively. This resulted in many homegrown big banks in those states having the scale and branching experience to take advantage of interstate branching in the early 1990s.

As a former basketball coach, I should be thankful Florida's backward thinking "panhandle" politicians didn't ban basketball courts during the last century. Did I mention that California and North Carolina lead all other states in college basketball titles?

Bad public policy decisions result from politicians putting personal interests over public ones.

Bankers put other people's money to work to serve their local community and make money for shareholders. Politicians live off other people's money, our taxes, all too often serving family and friends instead of their constituents, unfortunately with some fraud, waste and abuse.

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Fact check: The ten biggest states by population in 1990 were California, New York, Texas, Florida, Pennsylvania, Illinois, Ohio, Michigan, New Jersey and North Carolina.

Of the ten biggest banks in 1990, six were in New York, three in California and the seventh largest, the former North Carolina National Bank, or NCNB, was in North Carolina.

What happened to Florida banking after 1990 was very simple: Two giant North Carolina banks, NCNB and First Union, ate Florida. Kind of like Duke and UNC eating March Madness.

By 2000, those two banks controlled nearly 40% of Florida's deposits, representing the two largest banks in both Florida and the nation. North Carolina was second only to New York as the nation's banking capitol.

How did these two Tar Heel banks dominate Florida?

First Union, affectionately known by disenchanted locals as the "FU Bank," bought Florida National Bank in 1990 and then Southeast Bank, South Florida's biggest bank, in 1991. Southeast was one of two Miami banks surviving the Great Depression, but real estate loan problems put it on a fast takeover track.

Politically connected First Union, whose former vice chair was later appointed to the FDIC board, bought the $11 billion bank at an $81 million fire-sale price. I believe Southeast could have been saved, considering it was one of the few failed banks that cost the government nothing, a DOGE dream-come-true. First Union continued growing by acquiring and rebranding to Wachovia Bank. However, like Southeast, Wachovia had problems. Things got so bad that at one point my local Miami branch ran out of cash during the financial crisis, resulting in Wachovia being acquired by Wells Fargo.

NCNB, sarcastically interpreted as "No Cash for NoBody," later became NationsBank and then Bank of America. The fate of Florida banking, which would henceforth be decided in Charlotte boardrooms, was sealed when it purchased Barnett Bank, aka "Florida's Bank" in 1997. While $3 billion of divestitures were proposed for regulatory approval, my independent antitrust analysis argued for $5.6 billion, but DOJ split the difference at $4.1 billion. The $41 billion Barnett was the last big Florida bank.

By the end of 1992, Florida was the only banking colony among the biggest states according to a 1993 GAO study on which I consulted. Life in a banking colony is mainly a problem if what I call "carpetbagger banks" harvest our seniors' deposits to lend in their home states and elsewhere. By depriving us of capital for affordable housing and small businesses, these invasive banks are like lionfish, pythons and other exotic fish, wildlife and plant species that expand and gradually take over our local native banks.

The number of Florida banks and thrifts decreased from over 550 in 1990 to just 311 in 2000, 247 in 2010, 98 in 2020 and only 86 as of Dec. 31, 2024. Today, all seven of the largest retail banks operating in Florida are nonlocal, controlling nearly 60% of statewide deposits, with Bank of America, Truist and Wells Fargo, all with North Carolina roots, controlling about 40%.

Free market capitalists see nothing wrong with banking colonies or even carpetbagger banks, arguing that capital should flow to its highest return. Socially responsible capitalists like myself counter that money should flow to its highest and best use, considering its social impact on low- and moderate-income people and communities, including those of color. This is very important in my home Miami-Dade County, which is 86% minority.

Florida welcomes newly chartered and nonlocal community banks, whether via branching or M&A deals, as long as they serve the affordable housing and small-business needs of our entire community.