First Security Corporation
First Security Corporation
Sales: $7.50 billion
Stock Exchanges: NASDAQ
SICs: 6712 Bank Holding Companies; 6021 National
Commercial Banks; 6022 State Commercial Banks
First Security Corporation, the oldest multistate bank holding company in the United States, operated 245 full-service banking offices in six states—Utah, Idaho, New Mexico, Oregon, Nevada, and Wyoming—and owned various non-bank subsidiaries during the mid-1990s. Based in Salt Lake City, Utah, First Security possessed $10.21 billion in consolidated assets in 1993, derived primarily from the company’s three largest bank subsidiaries, First Security Bank of Utah, N.A., with $2.34 billion in deposits, First Security Bank of Idaho, N.A., with $1.18 billion in deposits, and First Security Bank of New Mexico, with $294 million in deposits. Through these subsidiary banks and those located in Oregon, Nevada, and Wyoming, combined with its non-bank subsidiaries, First Security represented a powerful force in the intermountain West.
First Security wielded considerable economic influence throughout Utah and its neighboring states for much of the 20th century, first by organizing a consortium of banks under the then-novel concept of a holding company, and later by expanding this assortment of financial institutions into one of the leading economic empires in the region surrounding the Rocky Mountain range. Early in its history, the influence exerted by First Security’s leaders extended well beyond the confines of the intermountain West. These leaders, the principal figures responsible for the formation of First Security, assumed much larger roles, roles that would contribute significantly to the design and administration of several key federal departments that, in turn, would shape much of the nation’s economic policy and structure for the 20th century. These men were Marriner S. Eccles, Elbert G. Bennett, and George S. Eccles.
The roots of First Security stretch back to the father of Marriner and George Eccles, David Eccles, who arrived in Utah with his parents, after emigrating from Glasgow, Scotland, in 1863. Converted to Mormonism, the Eccles clan settled in Utah, with David emerging as the most financially successful of the seven Eccles children. By the time of his death in 1912, David Eccles had amassed a small fortune through several investments, including a founding interest in Utah International, a portion of Amalgamated Sugar, and two banks. These investments and the two banks were bequeathed to his nine children, the eldest of whom, Marriner, then 22 years old, immediately ascended to the position of family patriarch and oversaw the family’s business interests.
Over the course of the next 13 years, the family’s banking interests became intertwined with another family’s investments, the Browning family. In 1925, a watershed year for the future First Security Corporation, Marriner and George Eccles, together with Marriner A. Browning, the Browning family’s representative, decided to increase their investments in banking, which at this point totaled six banks. To accomplish this, the three partners solicited the assistance of Elbert G. Bennett, a businessman from Idaho Falls, Idaho, who proved to be the correct addition for the task at hand. By 1928, the Eccles-Browning banking organization comprised 17 banks and one building and loan company, largely through the acquisitive talents of Elbert Bennett. In June of that year the Eccles made another fateful decision, organizing the 18 financial companies under a holding company, naming it First Security Corporation.
Because it emerged on the eve of the nation’s greatest financial disaster, First Security almost immediately faced formidable challenges. The Great Depression would claim as victims scores of the country’s businesses and, during its first four years, would cause the collapse of nearly 11,000 of the nation’s banks, but First Security would not be one of them. In fact, to a certain extent, the fledgling banking concern prospered during the Depression’s most deleterious years: it acquired failing banks, staved off runs at its banks, and, surprisingly, helped rival banks to keep their customers from withdrawing funds, thereby forestalling a run on the banks’ deposits.
Marriner Eccles, First Security’s chairmen and chief executive officer, was chiefly responsible for mitigating the financial situation in Utah and guiding First Security through the first years of the Depression. His achievements in Utah, combined with his innovative ideas concerning the restoration of the nation’s economy, caught the attention of federal officials in Washington, D.C., and Eccles was offered the temporary appointment of Special Assistant to the Secretary of the Treasury. He left Utah in early 1934 to accept the position, then later that year was appointed to the Federal Reserve Board and designated its chairman by President Franklin D. Roosevelt. Eccles played a key role in designing and implementing several New Deal programs and departments, most notably the establishment of the Federal Housing Administration.
Marriner Eccles was not the first First Security official to leave the bank’s base of operations in Ogden, Utah, for Washington: Bennett had left a year earlier, in 1933, to help establish the Federal Deposit Insurance Corporation (FDIC). One of three men appointed to such a post, Bennett eventually became responsible for ascertaining the solvency of 8,000 of the nation’s banks to determine their suitability for FDIC membership.
With the elder Eccles and Bennett in Washington, leadership of First Security devolved to George Eccles. Before the two men left, however, they had bolstered First Security’s position by acquiring Deseret National Bank during a 1932 bank panic in Salt Lake City. Founded in 1871 by Brigham Young, who led an exodus of the Mormons from Illinois to their permanent home in Salt Lake City, Deseret National not only strengthened First Security’s ties to the Mormon community, but also extended First Security’s presence into Salt Lake City, where the company would be headquartered for the next sixty years and beyond.
Marriner Eccles and Elbert Bennett would eventually return to First Security after their work in Washington was completed—Eccles remained chairman of the Federal Reserve Board until 1948, then continued as a governor for another three years—but dating from their departure forward, for roughly the next half century, the banks included under First Security’s umbrella would be led by Marriner’s younger brother, George Eccles. During his long tenure, George Eccles left an indelible mark on First Security’s history, presiding over the bank with an authoritative air, delegating little responsibility to his branch managers, and slowly transforming First Security into a network of banks that concentrated heavily on providing real estate loans. Despite, or perhaps because of, his omnipotent grip on the daily operations of First Security, George Eccles earned the reverence of his employees. A looming, respected figure, he was responsible for the bank’s emergence as one of the largest financial institutions of its kind in the United States. Although he remained in Utah while his brother and Bennett gained national prominence in Washington, George Eccles would assume leadership roles in arenas broader in scope than First Security as well. He later headed the Association of Reserve City Bankers and the Association of Registered Bank Holding Companies and served as a financial consultant to the Economic Cooperation Association, which gave him a contributing role in the implementation of the Marshall Plan.
Early in his career, however, George Eccles’ greatest achievement was guiding First Security through the Depression, a decade-long span of financial trials for a bank in its first decade of existence. Through the strength of centralized management and credit controls inherent in First Security’ corporate structure, the company withstood several runs on its deposits and survived the most economically pernicious decade in U.S. history. By the end of the Depression, First Security had acquired two additional banks in Salt Lake City and combined them with Deseret National to form First National Bank of Salt Lake. With strong lead banks in Ogden, Utah, and Boise, Idaho, First Security entered the 1940s as a healthy consortium of financial institutions prepared for the economic expansion and population growth following World War II.
By the conclusion of World War II, the western United States had been settled for approximately a century, but many regions remained sparsely populated. As the population expanded after the war and more Americans possessed the financial means to relocate, these regions would become more densely populated. The area surrounding First Security’s growing empire of banks was such a region, a prime location for the infusion of a new generation of Americans. Although the effects of population expansion in First Security’s region would not appear overnight, the economic force of a burgeoning population, more people in the region seeking real estate loans, would fuel the company’s growth during the latter half of the 20th century.
By 1965, roughly 15 years into the post-war economic expansion, First Security maintained $650 million in deposits, nearly double what it held in the previous decade. In addition to the general economic forces that combined to bolster First Security’s position, the area served by First Security’s banks proved to be rich in natural resources, drawing agricultural, mining, and energy companies to the region.
Five years later, in 1970, the bank’s deposits had increased to $865 million. George Eccles nephew, Spencer F. Eccles, who later would become First Security’s chairman and chief executive officer, moved from Idaho that year to become executive vice-president of First Security Company. The position gave him responsibility for the development of the bank’s non-banking subsidiaries and a key role in enhancing the bank’s operational programs. At that time, First Security was the only bank system in the area to possess computer operations and the first to participate in a credit card program, adding to its already considerable strength in the region. Through four banks and 108 branch offices, First Security controlled approximately 32 percent of the total banking resources in Utah and Idaho, and stood poised for further growth. Its loan portfolio described a company still heavily invested in the real estate growth of the area and benefiting from the commercial and industrial growth pervading Utah and Idaho, growth partly attributable to the region’s oil and natural gas reserves. Commercial loans totaled $225 million, real estate loans accounted for $202 million, mortgage loans a robust $273 million, and installment loans an additional $181 million.
During the 1970s, the region’s natural resource-related boom period reached its peak, driving First Security’s growth. By the end of the decade, First Security Corporation comprised 13 banks and 153 branch offices scattered throughout Utah, Idaho, and Wyoming, and possessed $3.4 billion in assets, making it the 59th largest bank in the nation. Oil and natural gas development, combined with copper and silver mining, predicated economic growth in Utah, Wyoming, and Idaho, which was further buoyed by the opening of aerospace and electronics manufacturing plants in the area. Quickly though, First Security’s fortunes were reversed, engendered by the collapse of the region’s natural resource-based economy and brought to light by the death of George Eccles in 1982.
George Eccles 48th year of leading First Security, his last, was concurrent with the rapid decline of the agriculture, mining, and energy industries in the region. Land values plummeted as a consequence, making many First Security customers unable to stay current on their real estate loans, the payments for which the bank was heavily dependent upon. The economic collapse of First Security’s service area rocked the foundation on which the bank had rested for the previous half century, and now, with the autocratic presence of George Eccles gone, the bank’s future appeared suddenly uncertain.
The inheritor of this precarious situation was Spencer Eccles, president of First Security before his uncle George’s death, and now the person entrusted with transforming First Security into the healthy financial institution it had once been. In addition to handling the instability of the bank, Eccles also had to restore First Security’s vitality in the tall shadows cast by the bank’s former leaders, the nationally known and highly reputable triumvirate of Marriner and George Eccles and Elbert Bennett. Spencer Eccles’ approach was significantly different than the approach employed by his uncle, indeed the only approach known in First Security’s history. Spencer Eccles immediately ceded more authority to First Security’s branch managers, imploring them to spend less time managing and spend more time selling, and began to steer the bank away from real estate loans toward consumer and small commercial loan business.
Four years later, in 1986, First Security’s rebound still had not materialized, and, if anything, the bank’s financial condition had worsened. The region’s natural resource market reached its nadir that year, the state of Utah ruled that out-of-state banks could purchase troubled Utah banks, and financially powerful Citicorp entered First Security’s service area. Against this backdrop, Spencer Eccles announced First Security’s 1985 earnings, yet another disappointing result. However, the bank’s earnings finally began to rise in the late 1980s, primarily as a result of the measures put into place by Spencer Eccles.
A return to more financially robust times enabled First Security to increase the number of banks operating in the First Security system, something the bank did with considerable speed in the late 1980s and early 1990s. From 1989 to 1993, First Security acquired 18 financial institutions in five states, adding nearly $3 billion to its assets. In 1993, the most prodigious year of First Security’s acquisitive activity, it completed nine bank purchases, setting the tone for the bank holding company’s future in the 1990s. In August of that year, First Security bought Nevada Community Bank, then in November completed the largest acquisition in its history, purchasing the First National Bank in Albuquerque for $193 million. With deposits totaling $1.18 billion, First National added 26 branch offices, including 3 in New Mexico, to First Security’s rapidly growing empire. Later that same month, First Security acquired Continental National Bank, with deposits of $264.5 million, then merged it with Nevada Community Bank to form First Security Bank of Nevada.
Entering the mid-1990s, First Security continued to search for additional financial institutions to add to its banking system, fully recovered from the ills that afflicted the bank holding company during the early 1980s. The pace of the company’s expansion and the price paid for it, particularly the $193 million paid for First National Bank in Albuquerque, led some critics to contend that it was too rapid and potentially damaging to First Security’s financial resources. Whether this evaluation bore any validity or not stood as the pivotal question as First Security and the Eccles family moved toward the 21st century.
First Security Bank of Utah, N.A.; First Security Bank of Idaho, N.A.; First Security Bank of Oregon; First Security Bank of Rock Springs, Wyoming; First Security Investment Management, Inc.; First Security Investor Services; First Security Insurance, Inc.; First Security Life Insurance Co. of Arizona; First Security Leasing Co.; First Security Mortgage Co.; First Security Information Technology, Inc.; First Security Service Co.; First Security Business Investment Corp.
“Bank and Insurance Stocks,” The Commercial and Financial Chronicle, May 27, 1965, p. 22.
Button, Graham, “Strong Genes,” Forbes, May 25, 1992, p. 12.
“First Security Corp.,” The Wall Street Transcript, November 16, 1970, pp. 22, 325.
Heins, John, “The Decline and Fall of the House of Eccles,” Forbes, March 10, 1986, p. 75.
Weberman, Ben, “Letting George Do It,” Forbes, July 7, 1980, p. 49.
—Jeffrey L. Covell