Charlotte after the bank crisis: ‘Just fine, and you?’

May 15, 2012, 1:00 PM UTC

The skyline of downtown Charlotte is dominated by the Bank of America Corporate Center.

FORTUNE — Charlotte is a corporate town. Counting its suburbs, it’s still home to eight Fortune 500 companies, thank you very much. It’s still very much the country’s other banking center. But to make sense of what’s happened here in the past four years — the bust, the bottom, and what comes next — the best place to begin isn’t at the junction of Trade and Tryon streets downtown (the city’s Tigris and Euphrates) or even in the gleaming office parks a stone’s throw from the South Carolina state line.

Instead, let’s head down the scrappy jangle of Wilkinson Boulevard to the Hyatt Gun Shop, which calls itself the nation’s largest independent gun store. Larry Hyatt, the owner, is a friendly and perceptive man who is never without his cellphone or hammerless Smith & Wesson. In the go-go days before the economy went south, Hyatt had a booming trade selling high-end shotguns to the bankers who called, and still call, Charlotte home. When that business tailed off in 2007, he said it was the canary in the coal mine.

But a gun store that has thrived for 53 years is an adaptable business, and Hyatt soon found a big seller in gun safes. They weren’t just for storing rifles. This time they were for holding money. “People wanted something safer outside of the banks,” he says.

Outside of the banks. It’s a concept that was once unimaginable here. Like Detroit outside of cars. Or Vegas outside of gambling. Two big banks — Bank of America (No. 13) and Wachovia — put Charlotte on the map, creating a first-class, if not world-class, city out of a place without a harbor, a river, or a major research university. Then they stumbled, each dragged down by the recession and one deal too many. Wachovia was sold to Wells Fargo (No. 26). Bank of America may be too big to fail, but it’s an institution still under intense scrutiny from investors and regulators.

From the city’s financial heart, the pain and uncertainty spread like a stain across the region, from the working-class towns of China Grove and Gastonia to the McMansions that line Lake Norman. Unemployment soared. So did foreclosures. It was as if the whole land — the concrete and steel, the red dirt and the endless brick — was holding its breath, just waiting for the other shoe to drop.

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And then it didn’t. Charlotte isn’t fully recovered yet, but the bulldozers and cranes have returned. The great migration from the Rustbelt that helped fuel its growth has resumed. Even the Dean & Deluca is expanding. Maybe next year even Michael Jordan’s hapless Bobcats will win.

The gyrations have brought a dose of humility and new thinking to a swaggering region that had come to believe in the infallibility of its largest corporate citizens and perhaps relied too heavily on them for direction. Charlotte’s rebound is also part of the larger national debate taking place about the proper role of government in rebuilding the economy.

This is just the kind of narrative that fits in with President Obama’s bid for reelection, and it’s against this backdrop that 6,000 delegates and another 30,000 or so hangers-on will descend on Charlotte in early September for the Democratic National Convention. Obama carried the state by a mere 14,000 votes in 2008, and it’s hard to imagine a road to his reelection that doesn’t run through North Carolina. How much does he need the state? Enough that he’s willing to give his acceptance speech at Bank of America Stadium.

Given the comments that the President occasionally tosses around about the conduct of the big banks, there’s some irony in this, but Charlotte isn’t a particularly ironic place. It’s more transactional, as befits a community without any counterweight to commerce. Howard Levine, the chairman of Family Dollar (No. 301) (FDO), the big discount retailer whose headquarters are just beyond the city limits in Matthews, prefers to see the President’s decision as a symbol of reconciliation. “Maybe’s he’s signaling that we all need to move on as a country, not just the city of Charlotte, but as a country.”

The Hyatt Gun Shop

And there you have the essence of Charlotte. It is a city that knows how to move on.

There are a lot of theories about how this came to be, but Jim Rogers, the CEO of Duke Energy (No. 186) (DUK), says it’s rooted in the settlement patterns that have shaped the city. More than two-thirds of the population of Mecklenburg County, which includes Charlotte, was born outside North Carolina. Simply put, the past here has no constituency.

Rogers helped recruit the convention, bringing a partisan event to a stridently nonpartisan city. It’s an action that he insists has less to do with politics than with promoting economic development. He’s trying to create what leaders here call an “energy hub,” a critical mass of companies that would make Charlotte the center of the nonpetroleum power business. Siemens (SI) and Westinghouse, among others, already have big facilities in the area, and ABB (ABB) is building a massive cable factory north of the city. Manufacturing is a critical part of the regional workforce, and it’s still suffering, accounting for two-thirds of the 60,000 jobs lost in the region during the recession.

“This is a city that has reinvented itself from an early trading post to the second-largest banking center in the United States and now is on a journey to reinvent itself again,” says Rogers. “This is a story of resilience.”

This concept of critical mass is important in understanding Charlotte’s quiet rebound. Finance employment in Mecklenburg County peaked at nearly 54,000 jobs in 2007, dropped to 48,000 in 2009, and now is at just under 50,000. Wages for those jobs are rising again, although they are still below the peak average of $104,000. Two things happened. First, the massive layoffs feared at Bank of America (BAC) and Wells Fargo (WFC) never showed up. Second, other companies — Fifth Third Corp. (FITB) and Ally Financial among them — stepped in to fill the void.

Along with banking, NASCAR has been an engine and the symbol of Charlotte’s rise. Speedway Motorsports, which owns and operates eight tracks, is based here, part of the pedal-to-the-metal empire controlled by Bruton Smith, who also runs Sonic Automotive Group (No. 330) (SAH). Charlotte’s taxpayers built a $200 million NASCAR Hall of Fame downtown. It opened in 2010, and while it still isn’t hitting attendance marks, boosters say it can act as a loss leader in recruiting business and big events.

That brings us to the government and its hand in the recovery here. There is, of course, the TARP money that sheltered the big banks and gave them breathing room. Chiquita Brands (CQB), which said last year it was moving here from Cincinnati, liked the growing international community and all the direct flights from Charlotte-Douglas International Airport, but the company also received $22 million in incentives. ABB will get $2.5 million from the state if it meets hiring goals. Even the new gunsmiths employed by Hyatt received retraining with help from federal funds. The list goes on, underscoring the tight relationship between the public and private sectors that prevails here.

Mayor Anthony Foxx at the Convention Center

“That’s Charlotte’s culture. It’s one of inviting businesses in,” says Mayor Anthony Foxx.

Foxx was narrowly elected in 2009, becoming the first Democratic mayor in 22 years. He was easily reelected last year with strong support from the business community. His dual tasks are to make sure that the rising tide lifts all boats and that the region’s growth stays centered in Charlotte and doesn’t shift to the suburbs.

Even with a population of 730,000 in a metro area of 1.8 million, Charlotte can seem like a very big small town. The 10-mile light-rail line runs on what is essentially an honor system. City leaders care about rankings and reputation in a way that larger, more established cities don’t. Foxx won’t say that his city got cocky when it was on top, but he says the hardships have brought forth a new spirit. “We’re a little more compassionate, a little more sympathetic to people who are down on their luck,” he says. “We also recognize that even the Titanic got sunk. No matter how big or strong you are, you have to keep moving forward. You can’t be stagnant.”

The momentum that fueled the city’s boom years was essentially about large companies in established, old-line industries becoming larger. The industries of tomorrow — in medicine, biotechnology, and the web — so far haven’t made Charlotte the next great place to land. And in this city of relentless self-improvement, the focus is on how to change that. Cheryl Richards is the dean of Northeastern University’s new Charlotte campus, its first outside Boston, which opened last year as part of the scramble among universities to serve middle managers. She was part of a city delegation that visited Seattle to learn about development strategies for the new economy. The difference between the two cities, she says, is that “Seattle positions itself as growing talent. Charlotte positions itself as welcoming talent. We’re importers of that talent.”

Growing talent isn’t easy or quick. Charlotte lacks an academic medical center, and the tech community is still oriented toward the needs of the big companies. The city and region’s latest hopes for biotech are at the University of North Carolina at Charlotte’s well-regarded bioinformatics department and in the next county over, at the North Carolina Research Campus, which was the brainchild of billionaire David Murdock. He has poured more than $500 million of his own money into the center, which focuses on nutrition and is built on the footprint of the sprawling textile company he once owned in Kannapolis. There’s still a lot of empty space, but the goal is to create a research infrastructure — a critical mass — where none existed.

Efforts to bootstrap the region to tech cred are everywhere. There are formal undertakings, like the Packard Place technology incubator (built with a big assist from federal stimulus funds) and more informal get-togethers, like those at Hackerspace Charlotte and the twice-a-month gatherings at Skookum Digital Works, an app- and web-development firm.

Click on the map for more on the eight Fortune 500 companies in the Charlotte area.

Skookum had offices in the suburbs, but when the recession hit, it took advantage of the drop in commercial rents and moved downtown. “All the young guys get it. In Charlotte nobody under 40 needs convincing that the acute and accurate use of technology will solve the world’s problems,” says Bryan Delaney, who is 32 and one of the company’s founders. Recruiting talent is getting easier, he says. “Once people have figured out they’ve had enough ramen and late-night debauchery, Charlotte is a great place to come and just live.”

The Duke Energy Center was born as the Wachovia Center, prior to the bank’s sale. Wells Fargo still owns the building, along with about 5.4 million additional square feet in the Charlotte area. That’s up about 10% in the past three years, and employment is off only about 300 jobs.

Wells Fargo recently received approval from regulators to increase its dividend, a sign that some things here are returning to how they were. Bank of America’s quarterly dividend remains — as many people note with regret — at only a penny a share.

Nearly 15,000 people in the region work for Bank of America, about the same as before the recession, and Charles Bowman, the bank’s president for North Carolina, says Charlotte is still the bank’s heart. The market is growing, and the golf and good weather here continue to be powerful recruiting tools. Still, none of that stops the endless parlor game of guessing the long-term intentions of CEO Brian Moynihan, who lives in Boston and shuttles between there, New York, and Charlotte. It’s not a schedule that gives comfort that the ways things are drive the way they have to be. Even in forgetful Charlotte, the way things are draped in the soft focus of a past when anything seemed possible and when a two-bank rivalry did much more than hold down the cost of a loan.

There is still a hand grenade in Hugh McColl’s office, although these days it is perhaps less a warning than an artifact of a bygone era. McColl, 76, retired 11 years ago from Bank of America and now runs an investment house called Falfurrias Capital Partners. Its offices are on the 51st floor of the Bank of America Center — not the top, but high enough to give him a sweet view of the city he helped create.

“We are not looking back on the banks,” he says. “We can’t keep wringing our hands over that. The bank’s still very strong, and it will come through all of this, but I don’t think ever again will the city be dependent on the two rich uncles it used to have.”

Retired Bank of America CEO Hugh McColl has a panoramic view of the city he helped create.

The dependency extended beyond skylines and United Way fund drives. In the late 1990s Charlotte received national attention for the wrong reasons, when the local arts council had its funding cut because it staged the play Angels in America. The move made Charlotte look provincial, and its business class, led by McColl and Ed Crutchfield, his counterpart at Wachovia’s predecessor, First Union, got busy. “We said, ‘Okay, fine, we’re going to beat you,'” McColl says. “And we did. We helped get more open-minded people elected. We didn’t do that often, but we did that.”

Charlotte’s way, which is McColl’s way, is moderation and stability. He says politics at the extremes gets in the way of business, of making money, which he believes is the way to build a city.

I asked McColl his definition of a successful convention, and not surprisingly, it has little to do with President Obama’s quest for a second term. It has to do with respect. What gripes the power players in Charlotte is that the letters N.C. stick to the city like a rash in the datelines of out-of-state newspapers and on national broadcasts. The idea that somebody doesn’t know where Charlotte is, that it could be confused with Charleston, S.C., or Charlottesville, Va. — well, it’s just unfathomable to McColl, and if it takes a political convention to finally change that, then that’s worth the effort.

This story is from the May 21, 2012 issue of Fortune.