Firstar Corporation

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Firstar Corporation

777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
U.S.A.
(414) 765-4321
Fax: (414) 765-6040

Public Company
Incorporated: 1853 as Farmers and Millers Bank
Employees: 8,720
Total Assets: $13.79 billion
Stock Exchanges: New York
SICs: 6712 Bank Holding Companies; 6021 National
Commercial Banks

Firstar Corporation is the largest bank holding company headquartered in Wisconsin. Much of its history has been dominated by acquisitions and mergers with other banks, often resulting in name changes. Founded in 1853 as a small, store-front bank, its original name was Farmers and Millers Bank. By 1919, it was known as First Wisconsin National Bank of Milwaukee, and, in 1929, the bank was placed administratively under the bank holding company Wisconsin Bankshares Corporation, which itself would be renamed First Wisconsin Bankshares Corporation in 1960, First Wisconsin Corporation in 1974, and Firstar Corporation in 1989. Aided by relaxed government regulations on interstate banking, Firstar had by 1994 become a regional power in the Midwest, boasting some 200 offices in Wisconsin, Illinois, Minnesota, and Iowa. It also maintained a small number of offices in Arizona and Florida.

Although regarded officially as part of the United States beginning in 1783, Wisconsin did not become a state until 1848. Most of the new settlers lived in the state’s southwestern corner, where large deposits of lead had been discovered. In the southeast, however, settlers had formed a small village on Lake Michigan at the site of an Indian trading post. Called Milwaukee, the village experienced rapid population growth, expanding from fewer than a dozen settlers in the early 1830s to some 25,000 in 1853. New industries included machinery, shoes, and beer, and soon the city became a center for farm products, in particular wheat and hogs. A city bulletin during this time, however, pointed out that “our moneyed facilities are by no means commensurate with our needs.”

During this period of great expansion and high hopes, Fanners and Millers Bank, the predecessor of Firstar, was organized. Founded by six stockholders and six bondsmen—led by New-comb Cleveland, a Milwaukee business leader—the bank opened its doors for business on June 2, 1853. With total capital of $50,000, the bank initially operated out of a rented storefront located on East Water Street that was equipped with a newly installed “strong box.” Four years later, the bank moved around the corner to a new location on Wisconsin Avenue.

With Cleveland as its first president, Farmers and Millers Bank helped provide financial stability for the new city. The 1850s were a difficult decade for banks, especially during the financial panic of 1857, which began after railroads defaulted on their bonds. Soon afterward, the Civil War brought great currency fluctuations, and, in 1861, bank riots occurred in Milwaukee. Despite these problems, Farmers and Millers Bank, according to one history of the city, had quickly become “a power financially, as well as a general favorite with the public.”

The bank underwent its first reorganization in 1863, when the federal government passed the National Bank Act. The Act provided for a national currency and implemented guidelines for establishing a network of federally supervised national banks, measures, it was hoped, that would calm the troubled financial times. Farmers and Millers, the first bank in Wisconsin to apply for a national charter, became a national bank on September 19 of that year and was renamed First National Bank of Milwaukee.

After the Civil War, Milwaukee would become increasingly an industrial center. Its population also continued to grow rapidly, in part from an influx of Italian and Polish immigrants in the 1890s. With the growth in the city’s industry and population came a corresponding rise in the bank’s assets, from just $1.5 million in 1873 to more than $29 million in 1913. Part of this increase was the result of its 1894 merger with Merchants Exchange Bank, which had been founded in 1870 as Home Savings Bank and had undergone two previous mergers before becoming part of First National. Growth also prompted First National to seek larger facilities. Construction began on a 16-story structure on the corner of North Water Street and East Mason in 1912. Opened two years later, the new building housed the bank’s main office until 1973.

It was not long before the bank made another huge jump in assets, this time through a merger with Wisconsin National Bank, which had been formed in 1892. Effective on June 30, 1919, the merger created an immense new organization, First Wisconsin National Bank of Milwaukee, with assets surpassing $100 million. This new bank then set about expanding across the city, in part through opening up branch locations, and, in 1928, it merged with yet another institution, Second Ward Savings Bank (founded in 1855), boosting assets to $177 million.

The following year, the directors of the bank founded Wisconsin Bankshares Corporation, a bank holding company (defined as a corporation owning at least two banks), which became the owner of First Wisconsin. This administrative change allowed for greater legal flexibility in acquisitions, and, by the end of 1930, this new corporation would acquire 23 additional Wisconsin financial institutions—such as Union National Bank in Eau Claire and First National Bank in Madison—giving the company a total of 16 national banks, 27 state banks, three trust companies, and seven other companies. All of Wisconsin Bank-shares acquisitions maintained their original officers and board of directors, and First Wisconsin remained the lead bank.

When the stock market crashed in 1929, sending the financial industry into a tailspin, Wisconsin Bankshares was in a strong position and, unlike many of its competitors, was able to maintain healthy growth throughout 1930 and 1931. As the Depression dragged on, however, the company would find its fortunes diminished. Many banks, in an effort to become more efficient and avoid closure, were merging, and Wisconsin Bank-shares soon found itself forced down the same path. By the end of 1932, it had reduced the number of national banks under its control to 11 and the number of state banks to 25. One piece of good news came from Wisconsin’s state government, which responded to the crisis by lifting the freeze on branch banking, in effect since 1909.

In the early months of 1933, the financial situation deteriorated even further as nervous depositors began to pull their money out of banks. On March 5, 1933, with financial collapse imminent, the newly elected U.S. President Franklin D. Roosevelt had little choice but to close all banks nationally for a “bank holiday.” Lasting ten days, this cooling-off period gave federal officials time to investigate banks and helped restore some confidence among consumers. Wisconsin Bankshares, meanwhile, continued efforts toward greater efficiency. It transformed some of its banks into branches of First Wisconsin, for example, eliminating their boards and reducing the number of officers in the process. Bookkeeping was also consolidated. The company, moreover, began to sell off some of its financial institutions, and, by the end of 1944, with World War II nearing an end, Wisconsin Bankshares had been streamlined to just five national banks, in addition to First Wisconsin Trust Company (founded in 1894 and the oldest trust company in the state) and five other institutions. Overall, these moves resulted in a stronger, more financially sound company, which was able to boost its bank assets from $301 million in 1931 to $666 million in 1944.

After World War II, Wisconsin Bankshares benefited from a robust economy. Also during this time, however, the state of Wisconsin decided to restore the freeze on branch banking. This move made it difficult for Wisconsin Bankshares to respond to a commercial trend in which shopping centers proliferated, drawing consumers away from the traditional shopping areas where most of the company’s banks and branches were located. New regulations imposed by the Bank Holding Company Act of 1956, passed by Congress, also limited the company’s flexibility. As a result, Wisconsin Bankshares, the largest bank holding company in the state, was prevented from both setting up branches and acquiring new banks, two of the most effective means of growth. It was, however, able to establish new banks (such as Southgate National Bank of Milwaukee in 1958), a slow and costly process, and to move some of its existing branches to more profitable locations.

In 1960, the company was renamed First Wisconsin Bankshares Corporation. Regulatory barriers, designed to protect small banks and to slow the consolidation of bank assets, would continue to frustrate the company until the late 1960s, when regulations began to be relaxed. In 1967, the company was allowed to acquire State Bank of Waunakee, and, in the next few years, it would start up new banks in such growing markets as Waukesha, West Green Bay, and Mequon. During the early 1970s, First Wisconsin became more involved in banking-related activities, forming, for example, First Wisconsin Financial Corporation (a commercial finance company) and First Wisconsin Mortgage Trust. It also established First Wisconsin International Bank, headquartered in New York. International loans would eventually produce a large percentage of its profits. In 1973, the company became even more prominent in Milwaukee with the completion of its new corporate headquarters, First Wisconsin Center, a 42-story facility near Lake Michigan and the tallest building in the state. The following year, because of its moves toward new types of services, the company decided to change its name to First Wisconsin Corporation.

In the late 1970s, Wisconsin’s state government agreed to allow branch banking on a limited basis, giving First Wisconsin additional options for growth. The company quickly took advantage of its new freedom, and, by the mid-1980s, it had opened 19 new branches, expanding its total to 33. The company also continued to acquire existing banks across the state, helping to boost total assets to $4.75 billion in 1982 and $7.1 billion in 1986. During the same period, however, its profitable venture in international loans began to sour, resulting in large writeoffs (especially for loans to developing countries) and in a net loss of $49 million in 1987.

Reset on a more conservative, steady course, First Wisconsin was given a boost by a new state law that took effect on January 1, 1987. Reflecting similar changes across the country, the law allowed Wisconsin banks to acquire or be acquired by other banks in eight neighboring states—Illinois, Minnesota, Ohio, Michigan, Iowa, Indiana, Missouri, and Kentucky—provided those states made similar laws themselves. First Wisconsin wasted little time in making its first out-of-state purchase, buying DuPage Bank & Trust Co. in Glen Ellyn, Illinois, on April 29, 1987. This was followed by additional purchases in Illinois, Iowa, and Minnesota (in the Twin Cities area), all states contiguous with Wisconsin. Among its most significant acquisitions were Naper Financial Corp. in Illinois (1987), Shelard Bancshares, Inc., in Minnesota (1987), and Banks of Iowa, Inc. (1991). By the end of 1993, total assets had reached $13.79 billion, $9.3 billion of which was in Wisconsin. The company’s share of bank deposits was 15.6 percent in Wisconsin, 6.7 percent in Iowa, and 2 percent in Minnesota. In Illinois, where it had about $1 billion in bank deposits, all in the Chicago suburbs, its share was only .55 percent. The company also had three offices in Arizona and two in Florida.

The company became Firstar Corporation in 1989. For the first time neither banking nor Wisconsin was mentioned in its name, reflecting its status as a multistate, diversified financial corporation. The banks themselves were also renamed Firstar, though this did not occur in Wisconsin until 1992. Similarly, its corporate headquarters became Firstar Center.

By this time, Firstar had left its troubles of the mid-1980s far behind, and it was being widely praised for its sound management, led from 1991 by Roger L. Fitzsimonds, chairperson and chief executive officer. In particular, Firstar had made great gains in its fee-generating services—such as credit cards, brokerage, check collection, insurance, and investment management—which tended to be less affected by economic downturns. These services were promoted not only through its numerous branches (some 200 by 1994), but also through more than 1,000 “correspondent banks”—generally independent banks too small to offer their own fee-based services.

On October 18, 1994, Firstar issued 1,801,577 shares of common stock to complete the acquisition of the $423 million First Southeast Banking Corp. First Southeast Banking Corp. is a bank holding company with two banks and 23 offices in the Racine/Kenosha area. The transaction was accounted for as a pooling of interests.

Ironically, the company’s success placed it in jeopardy of becoming a takeover target, a threat that would become even more serious with the introduction of national interstate banking, expected in the mid-1990s. Even so, Firstar appeared more preoccupied with its own plans for acquisitions and seemed to benefit from a clear statement of purpose, summarized in 1993 by Fitzsimonds: “Firstar is not in the banking business. We are in the financial services business.... We focus on the consumer, small business and commercial middle markets. We also provide operating services to the large corporate segment. There’s nothing that we can’t evolve to, acquire or change that won’t meet these customers’ needs.”

Principal Subsidiaries

Firstar Bank Milwaukee; Firstar Corporation of Iowa; Firstar Bank of Minnesota; Firstar Trust Company; Elan Insurance Services, Inc.; Elan Investment Services, Inc.; Elan Life Insurance Company; Elan Title Services, Inc.; Firstar Community Investment Corporation; Firstar Development Corporation; Firstar Home Mortgage Corporation; Firstar Information Services Corporation; Firstar Investment Research and Management Co.