First Tennessee Celebrates 150 Years

It hardly seemed the best time to start a new business in Memphis. The Civil War was raging, and after a 90-minute naval battle our city had been captured by the Union forces. But that uncertain economic climate didn’t dissuade Ohio businessman Frank Davis, who came here in 1864 to open a bank. It would, in fact, be the first federally chartered bank in Memphis, and shortly after obtaining charter #336 from the U.S. Department of the Treasury, the First National Bank began operations in a two-story building on Madison, just a few blocks from the Mississippi River.

Earlier this year, Contemporary Media, Inc., worked with officials of First Tennessee Bank to produce The First 150: The First Tennessee Story. What follows are excerpts from that book, to convey a general sense of the bank’s uncertain beginnings, its survival during turbulent times, and its progress towards the future.



The Beginning

The year was 1864. The country was in the throes of a Civil War, and Memphis had been captured by Union forces:

Although Memphis wasn’t burned to the ground like Atlanta or suffered the deprivations of Vicksburg or New Orleans, it was still an “enemy” city under martial law for the duration of the war. Many business leaders fled the city; even the town’s newspaper, the Memphis Appeal, loaded its presses onto a boxcar and escaped to Mississippi, always staying just ahead of the Union forces, it seems, and continuing to publish until the war ended. Many businesses here closed, and those that remained open had to do with dwindling supplies.

“In contrast to the feverish activity of the previous autumn,” wrote Gerald Capers in The Biography of a River Town, “trade was now dull and confined chiefly to traffic in sugar and molasses. Prices were soaring, luxuries had disappeared, and the shortage of necessaries was becoming serious. Prices were dictated by a provost marshal, and days passed without the receipt of a pound of freight.”

An article from the daily newspaper described conditions in the wartime city in 1864:

“The sun of the ill-fated Southern Confederacy is beginning to set as the full meaning of the ragged rebel army’s crushing defeat at Gettysburg, only a few months before, is realized. Abraham Lincoln is president of the United States. For two years, Memphis has been a conquered city, controlled by federal officers and patrolled by federal troops. Main Street is merely a streak of mud between rows of low buildings, most of which are illuminated at night by oil lamps. The town, numbering perhaps 25,000 inhabitants, extends only as far east as Dunlap.”

Into this chaotic scene came Frank Davis, the businessman from Cincinnati. Although the Commercial Appeal had observed, “Memphis could hardly be called an inviting background for a new business venture,” Davis had other ideas. He had seen firsthand the opening of several banks in his Ohio hometown and — sensing that the war would end soon — was determined to open a new bank here. But not a local or state bank. Memphis already had plenty of those, and most of them were struggling to survive. Davis had the vision to see a need for a national bank, chartered by the federal government.

He wrote back to his wife, “I like Memphis one hundred per cent … the business men are very cordial, the weather is pleasant, and the hotel quite good. I have seen the Treasurer’s agent here who is very kind, and who said he should certainly deposit with us. Many others say the same, so we can’t help doing well.” [446 words]


The Early Days

First National Bank opened on Madison, a street where it would continue to do business for the next 150 years:

With their new charter in hand, the directors of First National Bank were eager to commence business in Memphis. One challenge was finding a building for their establishment. Practically every location in the downtown area was filled to capacity, but after weeks of eager searching, they came upon a two-story structure at 9 Madison Avenue, a two-story brick building formerly occupied by the Union Bank of Memphis, and arranged a lease of $75 a month.

The building wasn’t empty, but bank records indicate that Frank Davis paid the occupant a bonus of $1,500 to vacate the premises. It was a prime location, in the heart of the business district, between Main Street and Second Street. The new bank’s neighbors included the Bank of Memphis, the Jackson Insurance Company, and the Nashville and Memphis Telegraph Company. …

Perhaps the directors sensed the enduring success of their new firm when, just one year after they opened, the bank doubled its capital — to $200,000 — and with growing numbers of customers and accounts, Davis and the board of directors decided they needed more space. So for $37,000 they purchased a larger, more impressive building just a few doors east, at 14 Madison. Vintage photographs show an impressive two-story brick building, its entrance flanked by four broad pilasters, and windows shaded by brightly striped awnings. Newspaper accounts claim the building was made of bricks that were made in Philadelphia and brought to Memphis by boat. Across the pediment, carved in stone were the words FIRST NATIONAL BANK.

“The pride felt by the bank’s Officers and Directors in ownership of this building would probably bring a smile to the faces of those who are familiar with First National’s banking room of today.” That’s according to a bank history, which described the early building’s three fireplaces for heat, rows of oil lamps for light, and a pail of water kept in the lobby for thirsty customers. “Lacking our present-day impregnable vaults, the bank was forced to keep its cash in an old-fashioned box-like safe, which was opened by an enormous iron key. This safe, impressive in those days, would have offered slight resistance to modern burglary tools of today.” [385 words]


A Matter of Survival

Yellow Fever almost destroyed Memphis, but thanks to the bravery of one man, the bank endured:

In the summer of 1878, a Memphis newspaper, the curiously named Daily Avalanche, reported grimly, “We are doomed. The King of Terrors continues to snatch victims with fearful rapidity. Three short weeks ago our city was active with business of all classes. Now our streets are deserted, our stores and residences empty.”

Not all stores. During this bleak period in our city’s history, First National Bank remained open. The bank not only transacted business for the few thousand citizens who remained behind in Memphis, but it handled relief funds sent here from people in other cities. Much of that money went to the Howard Association, a group of volunteers who went door to door in the stricken city, bringing food and medicine to suffering families — many of them losing their lives as they did so.

One man has gained everlasting fame in First National Bank’s history for his bravery during the epidemic. Most of the bank’s officials left the city with their families, but two bank employees, cashier W.W. Thatcher and bookkeeper Charles Q. Harris, remained behind to run the bank, though it opened for only three hours each day. Within a few days, Thatcher was stricken with the fever, and Harris worked alone to run the bank during the epidemic. Although it was deemed dangerous to venture outside, newspaper accounts report that Harris regularly visited the shipping offices in Court Square to collect cash — one time as much as $75,000 — sent here for the relief organizations.

Newspapers continued to warn everyone to stay away from the stricken city: “We know that our businessmen are impatient to get home and renew business. We say to them there is no business being transacted here. … Memphis is now dealing in death, and not in the goods which go to make up the business of the commercial season.” If any readers were still not convinced, the newspaper concluded, “Those who come from a healthy clime to our fever-scorched city can only be termed deluded victims of the beckonings of an invisible but murderous monster.”

This was the situation that Charles Q. Harris found himself in as the months crept by. All anyone knew about yellow fever was that cold weather brought an end to it — never dreaming that the cold killed the mosquitoes carrying the virus. But eventually a cold spell did come, in late October, and yellow fever was gone. For his bravery during these difficult times, it is reported that Harris was given a substantial bonus when the bank resumed normal business, and when he retired in 1918, he was given the title of Honorary Vice President. [457 words]


Years of Growth

As the bank expanded its presence in Memphis, it witnessed some of the greatest changes in its history:

The next president of the bank was Presley S. Smithwick, who started his business career as a bookkeeper in a hardware store. He guided the acquisition of an older Memphis bank, Central State National, that would give First National yet another new, and larger, home downtown. Central State had been organized in the late 1800s and had prospered to the point where it was able to erect an 18-story skyscraper — the tallest building on Banker’s Row. The quite beautiful red brick tower was capped with ornate terra-cotta ornamentation on the top floors and featured rows of arched windows faced with white stone at the street level — a very handsome and substantial building (and still standing today, converted into apartments).

In 1926 the older bank merged with First National, which acquired the larger building and retained the First National name. The Memphis Press-Scimitar reminisced, “Its daily clearances were once listed with a lead pencil on a single sheet of paper. Now a million dollars a day passes through its books.” Admiring the bank’s new headquarters, The Commercial Appeal wrote, “This modern bank and office building is a fitting monument to the progress of one of the most stable financial institutions in the South.” Along with the merger came a change in leadership. Smithwick became chairman of the board of First National, and Samuel E. Ragland, the former president of Central State, was named president of First National.

Just as it was when the bank first opened in 1864, once again it seems First National had taken a large step at just the wrong time. Just three years after the merger, the stock market crashed and the country sank into the Great Depression. Across America, factories were shuttered and farmers were driven to ruin by relentless drought.

But as in the past, Memphis seemed to escape the full brunt of these economic forces. A bank history noted, “Despite the unstable economic conditions prevailing after 1929, First National showed a remarkable growth record; its deposits tripled during the 13-year period between 1926 and 1939, and total resources climbed from $19 million to more than $46 million.”

Indeed, the 1930s were something of a golden age for Memphis. The city added more than 500 manufacturing facilities to its list of industries. Memphis factories produced or refined rubber, tires, paper, lumber, cotton, furniture, chemicals, and textiles. Most streets were now paved, the city was served by more than a dozen railroads, and a new municipal airport opened up the skies for the transport of passengers and freight. [443 words]


Branching Out

In the 1940s, First National made a bold move — way out to the “suburbs” of Union and Cleveland:

For its entire history, First National had focused its attention on downtown. In 1941 it embarked on yet another venture — a branch bank in the Memphis suburbs. Today, it’s amusing to think that a bank at Union and Cleveland would be considered “suburban,” but bank histories record that “there were some misgivings as to the ability of the branch to succeed in a location so far removed from the downtown business district.”

Bank president Ragland sought to reassure everyone about the new venture. “Contrary to what seems to be a widespread opinion, we are not going into the branch banking business,” he told reporters. “That’s not the idea at all.” At the same time, he explained that the Crosstown branch would conduct the same kinds of business as the main office downtown, with added emphasis on personal loans and automobile financing.

The Crosstown branch has served thousands of customers for more than 70 years now, but bank officials revealed later that if the “branch banking” concept hadn’t caught on, the building had been specially designed for easy conversion into a Piggly Wiggly grocery store.

Then the company embarked on something that would begin to change the way customers used banks. In 1950 First National purchased a parking lot at 224 Madison and opened the city’s first “motorbranch bank.” Newspapers explained the new concept: “On the parking lot will be an island with two drive-in windows to accommodate those who want to make deposits without leaving their cars. An intercommunication system permits conversation between teller and customer.”

If anyone was nervous about this new method of banking, The Commercial Appeal reassured them that the branch “was equipped with the latest developments in safety features. …”

Despite the initial concerns about branch banking, First National’s neighborhood banks did catch on, and by 1955, the company operated “eight strategically located branches in widely separated sections of the city.” According to the annual report published that year, “These offices account for approximately 32 percent of the bank’s total deposits (excluding those of correspondent banks) and 60 percent of its installment credit loans. The branches are spacious, attractively designed, and modern in every respect.” [380 words]


Celebrating the Centennial

One hundred years after Frank Davis opened a small bank downtown, First National embarked on a project that would change the Memphis skyline:

As it approached its 100th anniversary, First National Bank had outgrown the space in the building at Second and Madison. In July 1962, board chairman Norfleet Turner told the Memphis Press-Scimitar, “Last year witnessed the greatest growth in the bank’s history, and the potential for growth is such that the bank will require additional space for the expansion of its own operations within a few years.”

Looking around for a new place to call home, bank officials didn’t have to search very far. They found an ideal site just one block east, at the southwest corner of Third and Madison. …

Renderings revealed a stunning steel and glass tower, ultra-modern in every detail. It would include two sub-basements, soar 24 stories tall, and contain more than 370,000 square feet of office space. First National would occupy about half of that — taking the first seven floors and the top floor, with intervening floors leased to various businesses.

From the beginning, First National made sure to employ only the best architects, engineers, designers, contractors, and consultants. William H. Mueser of New York City, who had designed the foundations for the Golden Gate Bridge, consulted with builders about the bank, which sat on steel piers driven 40 feet below the surface, reaching a hard sand strata “as solid and secure as bedrock.” The building contractor for the project was J.A. Jones of Memphis and Charlotte, which was in the process of building the new terminal building for Memphis International Airport.

The excavation itself was enormous; First National would have the largest underground parking lot in the city, with space for more than 200 cars. The bank lobby was described as “the most spacious building entrance area of any office structure in Memphis.” The bank of high-speed elevators would be electronically controlled … and the building’s central air-conditioning system was the largest in Shelby County. Most impressive of all would be the rooftop-mounted sign, “the largest illuminated sign in Shelby County.”

The topping-out ceremony took place on May 16, 1962, with an evergreen tree raised to the highest point of the building, some 300 feet above the sidewalks. The last structural steel column, painted gold and signed by bank employees, was hoisted in place. Finally, hundreds of helium-filled balloons were released, some of them filled with gift certificates that would allow the finder to open a First National savings account.

First National Bank officially opened its 165 Madison Avenue headquarters on March 23, 1964 — almost 100 years to the day since the bank’s founding during the Civil War. City and county officials stood by as Mayor William Ingram, noting that “First National Bank is building a new image,” snipped a blue ribbon across the entrance. Newspapers reported, “The First National Bank choir stood on steps on the plaza against the building and sang a number of selections.” After brief remarks by Norfleet Turner and Allen Morgan, the new bank was open for business. [515 words]


The Modern Era

With a brand-new name, First Tennessee Bank began to expand beyond the horizon:

Next came plans to acquire more “brick and mortar” establishments. In 1969 the First National Holding Corporation was formed, setting the stage for acquisitions throughout the state. Banking laws had previously limited any First National mergers and acquisitions (and other banks too, for that matter) to banks within Shelby County, but new laws eliminated those restrictions.

First, however, came a new name: First Tennessee. In its 1971 report to stockholders, bank officials explained, “If we had to sum up our operating philosophy, it might be done in three words: Never Stand Still.” Although First National Holding Corporation had been formed just two years before, the company realized, “There were already other First Nationals, and we decided that we should be special. We decided on First Tennessee National Corporation for the new name. It told the world where we’re from. It pinpointed the nerve center of our expanded international operations. And still we retained the momentum of First National — the flagship that made it all possible.” …

First Tennessee had a new face at the helm in 1973. Replacing Allen Morgan as chairman and CEO was Ron Terry, who had joined the bank in 1957 as a management trainee. As part of what Terry described as an “active acquisition program,” First Tennessee quickly added six more banks, with plans to acquire others. By the end of 1973, First Tennessee’s 14 banks served customers in the state’s six largest metropolitan areas. The bank now had more than 150 offices — including an international office in Nassau in the Bahamas.

First Tennessee was now serving some 15 percent of the state’s banking market. Under the umbrella name of First Tennessee Bank, the firm was now the state’s largest banking organization, with combined assets exceeding $2 billion. “First Tennessee’s goal,” said Terry, “is to provide a geographic breadth of banking services unparalleled in Tennessee’s history.” [327 words]


FTN Financial

From a one-room bond department, First Tennessee developed a trading center with an international reputation:

Frank Gusmus joined the bond division as the chief financial officer in 1982, back when the group had less than 40 employees. “We were a small local firm at that point and did business primarily with banks in the surrounding three or four states,” he recalled. “But we gradually grew our organization, selling more and more bonds to different banks.”

Gusmus remembered when the firm bought its first two computers: “We had two little Apple or Compaq computers. That was it. When we bought and sold bonds, it was all verbal.” That was pretty much the extent of the technology back then, which still relied on phones and fax machines for communicating with clients. “We did a lot of faxes,” said Gusmus. “If a customer needed information about a bond, we’d fax it to them. That’s all we had.”

So the bond division resorted to what had worked so well for the bank: building personal relationships and understanding what customers wanted and needed.

“Everybody sold the same bonds, right?” Gusmus explained. “To differentiate ourselves, we added a level of expertise so that people would rely on First Tennessee for their business.” The capital markets group brought in CPAs to consult with banks “to help them with their bond portfolios, to help them with their taxes, to help them with regulatory issues. In return for providing that service to those institutions, the banks would do their bond business with us. They felt aligned with us.”

By the early 1990s the bond division was one of the fastest growing departments of First Tennessee, and it wasn’t confined to the Mid-South. In his annual letter to shareholders, Chairman Ron Terry reported, “The most dramatic example of growth on an international scale has been in investment banking. Through an expanded sales force, we now have customers in all 50 states. During 1992, we underwrote, as senior manager, a total of $4.4 billion of direct debt of U.S. government agencies, ranking us fifth in the country and above many of the Wall Street securities dealers.”

The First Tennessee bond division worked directly with more than 25 percent of the largest banks in the United States. Within a few years, the department was ranked as the second largest underwriter of agency securities in the nation, just behind the national firm of Merrill Lynch and above Salomon Brothers, Morgan Stanley, and Goldman Sachs, among others.

In 2004, as the bank holding company changed its name to First Horizon, the capital markets group gained a new name as well: FTN Financial, one of the two major business divisions of First Horizon, the other being First Tennessee Bank itself. [459 words]


Facing the Future

First Tennessee expanded into the Mid-Atlantic region with banks in Virginia, North Carolina, South Carolina, and Florida, other changes may be just over the horizon:

Bryan Jordan was named president and CEO of First Horizon National Corporation in 2008. Formerly chief financial officer with Regions Bank before joining First Horizon as CFO in 2007, Jordan was the first president who didn’t move to the top job without long tenure within the First Tennessee ranks. Jordan began his tenure by announcing, “We have exited our national lending business.” For years, First Horizon had serviced loans in more than 40 states. That came to an end on August 21, 2008, when the bank sold all of its mortgage businesses outside the state of Tennessee.

Other cost-cutting and “right-sizing” measures were put in place across the board — across the state, in fact — and today First Horizon faces the future with optimism.

In a recent Chairman’s Letter, Jordan told shareholders, “In challenging times, the successful company adapts and strives to excel. During the last few years of recession and slow recovery, First Horizon has worked to become leaner, more flexible, and more responsive — better suited to navigate rough terrain. We controlled what we could control and prepared for what we could not.” …

More than anyone else, Bryan Jordan knows that customer behaviors and attitudes are evolving, and First Tennessee will need to adapt to these changes.

“In the future, my guess is that bank branches will not look anywhere like we are accustomed to seeing today,” said the First Horizon chairman. “They might be on the second floor of a building, or tucked away in an office park somewhere, instead of located on the corner of a busy intersection. Customers might only go there every six months or so, maybe only once a year.”

As the brick-and-mortar structures evolve, one constant will be the human presence. “If you sit with me and hear people say why they love our bank, it’s never because our money is any greener than any other bank’s,” he said. “It’s always about people — because we have built these relationships with people over a long period of time. So people, and the role they play in our business, will always be important.”

So what’s on the horizon for First Tennessee, from Jordan’s perspective?

“Banks have obviously been around a long time. They are the circulatory system for the economy, so there’s always a role for the banking business,” he said. “I don’t see First Tennessee diversifying away from the banking business. That is our core competency. In fact, I think in the next five to 15 years, we could grow from a $25 billion operation to a $100 billion operation,” he said. “We have intentionally tried to build the infrastructure and the team for allowing us to do that.”

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