First Tennessee National Corporation

1862–2000

One of the 50 largest bank holding companies in the United States, First Tennessee National Corporation has provided banking services to Tennesseans since the Civil War, when the company's oldest and primary subsidiary, The First National Bank of Memphis, was organized. By 2000, the firm was operating as a national, diversified financial services firm with interests in retail and commercial banking, investment and trust products, credit card products, securities, transaction processing, and mortgage banking. First Tennessee has over 400 bank branches in Tennessee, Arkansas, and Mississippi through its Regional Banking Group business division. Subsidiary First Horizon Home Loans provides home loans and short-term finance products in 136 offices in 31 states. Overall, First Tennessee serves over 1.1 million customers and 90,000 businesses across the United States.

Early History: 1860s-1920s

During the Civil War, many southern cities were negatively affected by the conflict. Once a bustling center of commerce, Memphis first suffered the destructive effects of war when in 1862 Union troops gained control of the city and placed it under military rule. Two years into this military occupation, a resident named Frank S. Davis decided to form a bank. Davis was convinced that Memphis would need additional banking and credit facilities once a national system of banks regulated by the federal government emerged, a prospect ensured by the passage of the National Banking Act of 1863. To that end, he organized a meeting to be convened on March 10, 1864 to discuss the possibilities of organizing a nationally chartered bank. That day, Davis and several other Memphis residents drafted the articles of association for such an enterprise and filed an application for a national charter. The charter was granted on March 25, 1864, marking the formal beginning of the city's new bank, The First National Bank of Memphis.

With Davis serving as the bank's president, and all of those who attended the first meeting selected as directors, First National began operations during the last year of the Civil War, operating initially out of one rented room, then moving, two months later, to larger space, for which the bank paid $75 in monthly rent. Despite the pernicious economic climate in which it emerged, the bank survived its first year, proving to be enough of a viable venture to merit the purchase of a two-story building in 1865.

The purchase of First National's new banking quarters coincided roughly with the end of the war and, it was hoped, a return to the economic vibrancy the city had once enjoyed. However, the resumption of a healthy business climate was slow in coming; Memphis reconstruction did not begin in earnest until the summer of 1866, when railroads leading in and out of the city were rebuilt and funding for public improvement programs was approved. During this time, many former Memphis residents returned home after relocating during the war. Thousands poured into the city over the next ten years, bringing the city's population to 45,000 and restoring economic prosperity to Memphis. First National, a fledgling banking concern, shared in the prosperity of the community it served. By the time Davis retired in 1882, after presiding over the bank for 18 years, the calamities engendered by war, and ensuing outbreaks of yellow fever, had come to an end, and the bank stood on solid ground.

Deposits at First National surpassed $1 million in 1897 by virtue of a rare acquisition completed that year, the purchase of the German Bank, which increased deposits from $700,000 to roughly $1.15 million. In 1913, the bank earned the distinction of being selected to execute the implementation of the Federal Reserve Act. Named as one of five banks in one of the 12 banking districts created by the Federal Reserve Act, First National assisted in the incorporation of the Federal Reserve Bank of St. Louis, of which the Federal Reserve Bank of Memphis was a branch.

First Tennessee's regional banking group, on the other hand, experienced significant growth, recording revenue of $767.8 million, up from $678.7 million in 1998.

1864–1981

In 1926, First National completed the first merger in its history, joining with one of Memphis' most respected banking institutions, the Central-State National Bank. According to the terms of the merger, First National would retain its name and charter, which by then had existed for 62 years, while the new bank's leadership would be drawn from Central-State. As a result, Central-State president S.E. Ragland became president of First National. The merger proved timely, occurring before the onset of the Great Depression, during which half of the nation's banks failed, and predating a period in which Memphis experienced a significant rise in population.

Postwar Expansion: 1950s-80s

Better equipped after the merger to handle the increasing banking needs of a rapidly growing population, First National used its new financial resources to expand the scope of its operations. While America's entry into World War II forestalled First National's plans for significant expansion until the 1950s, some physical growth was recorded, such as the establishment of a suburban branch, the Crosstown Branch, in 1942. During the 1940s, Memphis continued to grow, entering the decade as the nation's 32nd largest city and ranking 26th by 1949, commensurately increasing the bank's need to expand. By 1952, First National operated seven branch offices in the region surrounding Memphis, and the bank's leadership began to look for a new site for First National's headquarters, which were in need of expansion.

In 1961, plans were announced for the construction of a 25-story bank and office building to replace existing accommodations. Three years later, the building was finished, and First National moved in, opening six additional branch offices at the same time. While First National remained largely a regional bank, its area of service was wide enough to warrant further expansion, making it, by 1967, the largest bank in the Mid-South. In 1969, as First National was evolving into a statewide banking concern, a one-bank holding company, First National Holding Company, was formed. Two years later, the structure of the holding company was changed, becoming a multi-bank holding company to enable the bank to acquire other banks throughout Tennessee. Concurrent with the structural change of First National's holding company, a name change was made, and First National Holding Company became First Tennessee National Corporation.

First Tennessee, with its principal subsidiary, First National Bank of Memphis, began acquiring Tennessee-based banks at a rapid pace. Five banks were purchased in 1972, with more to follow throughout the decade as First Tennessee extended its presence outside of Memphis and into other regions within the state. In 1974, First Tennessee's management selected a common name for the banks absorbed by the holding company, naming each First Tennessee Bank, a process concluded in 1977, when First National Bank of Memphis, the name selected by Frank S. Davis and other Memphis residents in 1864, became First Tennessee Bank.

First Tennessee continued to acquire Tennessee-based banks throughout the 1980s. As it solidified its presence in markets outside of Memphis, the bank also acquired several non-banking financial institutions, gradually diversifying beyond its retail and commercial banking core. This diversification would become more important when First Tennessee made a strategic shift in the early 1990s toward a greater interest in bonds and mortgage lending, but by the early 1980s the holding company had already begun to invest its energies in business lines apart from retail and commercial banking. In 1981, First Tennessee established First Express, a nationwide check clearing service, and, the following year, First Tennessee became the first bank in the Southeast to offer discount brokerage services.

1987–1995

Focus on Bond and Mortgage Lending Business: 1990s

As it entered the 1990s, after restructuring its banking organization in 1987 to give its regional departments more autonomy, First Tennessee's leadership decided a more profitable future could be realized in nontraditional banking areas. The holding company's retail and commercial banking operations would continue to provide substantial earnings, generating, along with its credit card, trust services, check clearing, and transaction processing businesses, approximately 80 percent of its annual pre-tax income during the early 1990s. However, as bank acquisitions became increasingly expensive and First Tennessee's market share throughout the state became more entrenched, it became apparent that a greater return on investments could be achieved by strengthening its bond and mortgage lending businesses.

Between 1990 and 1993, First Tennessee's bond division, involved in purchasing and selling fixed income securities, more than doubled its volume of business, jumping from $66 billion worth of securities bought and sold in 1990 to $147.8 billion by 1993. This rate of growth, 30.8 percent compounded annually, was eclipsed by First Tennessee's mortgage expansion, an increase primarily realized through two important acquisitions in 1993. That year, the holding company purchased Maryland National Mortgage Corporation and SNMC Management Corporation, which added more than $6 billion to First Tennessee's mortgage origination total and positioned the company as one of the ten largest mortgage originators in the nation. The addition of Maryland National and SNMC (raising First Tennessee's mortgage origination total from $700 million to $7.2 billion) enabled the holding company to record an annually compounded growth rate of 55.3 percent in mortgage originations between 1990 and 1993.

Increased activity in the bond and mortgage markets also meant increased activity at the national level. By 1993, the company's First Express business was operating in 43 states, and its bond division was serving customers in every state. Moreover, the company became a member of several national and international automated teller machine (ATM) service programs in more than 100,000 locations.

In the mid-1990s, First Tennessee was the dominant retail and commercial banking institution throughout much of Tennessee, ranking as the leader in deposit share in three of the state's five metropolitan areas. The holding company looked to expand beyond Tennessee's borders and beyond the traditional banking arena, striving to become a more diversified, nationally-oriented financial institution. In January 1995, First Tennessee announced that the company had acquired Carl I. Brown and Company, headquartered in Kansas City, Missouri. With the completion of this acquisition, First Tennessee ranked among the top ten retail and wholesale mortgage originators in the country, with mortgage offices in 25 states.

Continued Success: Late 1990s and Beyond

1990–2002

As the company worked to position itself as a diversified financial services firm, First Tennessee watched--like most regional banking concerns--as large competitors grew even larger through takeovers and acquisitions. As the industry consolidated during the late 1990s, First Tennessee avoided entering the fray and instead focused on achieving revenue growth by manipulating existing operations. Indeed, from 1990 through 1998, the company had secured an average annual growth rate of 15.3 percent, which was higher than its regional counterparts. Ralph Horn, chairman of First Tennessee commented in a 1999 American Banker article that his goal was to achieve consistent, rather than flashy growth. "First Tennessee can increase market share without taking the risk of making a big acquisition and stubbing our toe," he stated.

During 1999, the company began to feel the negative effects of rising interest rates, which forced a slowdown in its mortgage business. Its capital markets division also faltered as a result of Y2K concerns. First Tennessee's regional banking group, on the other hand, experienced significant growth, recording revenue of $767.8 million, up from $678.7 million in 1998. That year the firm launched a new tagline--"All Things Financial"--to signal its shift from a traditional regional banking firm to a diversified financial services company.

As First Tennessee entered the new millennium, it failed to achieve the level of growth that it had been able to secure for the past ten years--between 12 and 15 percent. As such, the company made several strategic moves to strengthen its position in the industry. It sold its corporate and municipal trusts business, the MONEY BELT segment of its ATM business, and its co-branded and single-relationship credit card accounts. The firm's capital markets business segment acquired Midwest Research-Maxus Group Ltd., an equity research firm. First Tennessee's mortgage banking unit also adopted a single brand name--First Horizon Home Loans--in an effort to cross-sell a variety of First Tennessee products to existing customers.

The firm's repositioning efforts appeared to pay off, and in 2001 the company reported record earnings. During that year, the firm announced the acquisition of Synaxis Group Inc., a network of insurance agencies located in Georgia, Kentucky, and Tennessee, that would be integrated into its First Tennessee Bank subsidiary. First Tennessee's strategy for the future was focused on building and strengthening its regional banking, mortgage, capital markets, and transaction processing businesses. By 2002, First Tennessee had offered its shareholders over a century of consecutive quarterly dividends. With a longstanding history of success behind it, the holding company appeared to be well positioned to secure continued growth well into the future.