Union Planters Corporation

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Union Planters Corporation

6200 Poplar Avenue
Memphis, Tennessee 38119
Telephone: (901) 580-6000
Fax: (901) 580-2396
Website: http://www.unionplanters.coin

Public Company
Incorporated: 1869 as Union and Planters Bank of Memphis
Employees: 11,797
Total Assets: $34.14 billion (2002)
Stock Exchanges: New York
Ticker Symbol: UPC
NAIC: 522110 Commercial Banking

With more than $34 billion in assets, Memphis-based Union Planters Corporation is Tennessees largest bank holding company and one of the 30 largest in the country. It operates more than 760 banking offices, concentrated in the core states of Alabama, Arkansas, Florida, Illinois, Indiana, Iowa, Kentucky, Louisiana, Mississippi, Missouri, Tennessee, and Texas. The corporations largest subsidiary and main banking entity is Union Planters, National Association. In addition Union Planters owns Capital Factors, Inc., which offers receivable-based commercial financing, as well as fee-based credit, collection, and management information services.

Beginnings in the Aftermath of the Civil War

The driving force behind the founding of Union Planters was Memphis businessman William Farrington, who prospered during and immediately after the Civil War. In 1868 he decided to organize a bank, then turned to the DeSoto Insurance Company, on whose board he sat, and convinced his fellow directors to convert the company into a bank. Politically well connected, Farrington ushered through the necessary state legislation, which passed on February 12, 1869. It is uncertain whether it was Farrington, elected president of the new bank, or somebody else who was responsible for the name Union and Planters Bank of Memphis, but the reasoning behind it was clear. Two of the citys most respected banks in prior decades had been the Branch Union Bank and the Branch Planters Bank, both of which had their assets seized during the war effort and now ceased to exist. By combining Union and Planters, the new bank drew on the positive associations that Memphis citizens held for these former financial institutions.

Union and Planters sold $671,300 in stock and set up shop temporarily in an insurance office while a three-story brown-stone situated in the heart of the Memphis financial district was remodeled to serve as a permanent home. The bank opened for business on September 1, 1869. Union and Planters was plagued by large overdrafts in the first few years of its existence, but more importantly it held loans of more than $200,000 by Farrington and his partner in the troubled Memphis & Little Rock Railroad. In 1874 the bank directors outmaneuvered Farrington and voted him out of office. Nonetheless, he held onto his stock for the next two years, during which time he refused to pay off his loans and became a persistent nuisance, at board meetings reading rambling protests into the minutes, demanding detailed information on bank operations, and opposing even the most routine measures.

During difficult years for the Southern economy, Union and Planters was able to post profits, due largely to Wall Street contacts who provided sound advice on where to deposit the banks money. But it was the election of Napoleon Hill to the presidency in 1885 that would lead to an extended period of growth. With little formal education, Hill had established himself in the business world by running a combination grocery store and saloon in Sacramento, California, taking advantage of the gold rush of 1849. After accumulating a stake of $15,000 in gold he returned to the East and in 1857 established a cotton and supply business in Memphis, and like Farrington found a way to prosper during the Civil War even as the South was ruined financially. As the president of Union and Planters, Hill oversaw a period from 1885 to 1990 during which the bank reported consistent profits, from $80,000 to $90,000 a year, and deposits topped $1 million. He then steered the bank through the depression of the 1890s, but during the worst of this period, in 1894, he suffered a stroke, which left him verbally impaired. He stayed on as president, then a second stroke led to the 1997 transfer of power to Samuel Read, who had already assumed Hills day-to-day responsibilities.

Read started out his business career clerking in a West Tennessee country store before moving to Memphis in 1857 to work in the cotton and supply business. He then made his fortune in the dry goods trade during the Civil War. As a banker he developed a well earned reputation for being extremely conservative. New customers at Union and Planters, for instance, had to provide an endorsement from an established customer, who assumed personal responsibility for any defaults. Problems with overdrafts were now a thing of the past, as was growth. From 1896 to 1900 Union and Planters exhibited virtually no increase in deposits or loan activity, and as a result other Memphis banks surpassed it in size. This was also a time during which trust companies became extremely popular. In the years between 1898 and 1903, 38 trust companies opened in Tennessee alone. In 1906, to facilitate growth, Union and Planters merged with Tennessee Trust Company, originally formed in Memphis in 1886 as Security Bank of Memphis. The combined entity became known as Union and Planters Bank and Trust Company. By offering a wide range of servicesincluding mortgages, trusts, savings accounts, and a brokerage for stocks and bonds. It was the first Memphis institution to take a department approach to banking. Read continued to serve as president, although Union and Planters relocated to the Tennessee Trust Building. He remained in charge well into his 80s, until his health finally gave out in 1915 and he died.

Frank Hill: Leading Union and Planters into the Roaring Twenties

To replace Read the banks directors chose a man half his age, 41-year-old Frank Hill, son of former President Napoleon Hill. Union and Planters new president vowed to reinvigorate Union and Planters with young blood, enterprise, aggressiveness and modern ideas. The days of his predecessors safe and conservative stewardship of the bank was over. Hill encouraged new business and embraced innovation. In 1918 he established Union and Planters first branch, at a time when most banks operated out of a single location. This expansion was achieved by purchasing Mercantile National, a small and troubled institution, which was renamed the Franklin Savings Bank and soon experienced strong growth. By 1919, its 50th anniversary, Union and Planters had shown remarkable growth since Hill assumed the presidency. It was now the top bank in Memphis and one of the ten largest in the South, with deposits of nearly $20 million, a fourfold increase in five years, and assets of $28.4 million, a dramatic improvement over 1914s total of $7.4 million. In 1922 Union and Planters opened a second branch office, located at Main and Beale. A year later North Memphis Savings Bank was acquired and converted into yet another branch.

In 1924 Union and Planters was beset with scandal involving an officer, Robert S. Polk. During the banks decade of expansion, he stood out as a driving force. An orphan since he was 16, he came to the bank as a messenger in 1900 then rose through the ranks, his aggressive nature eventually catching the eye of Frank Hill. Polk became a vice-president at a young age and ran the bank while Hill summered in Cape Cod each year, and began operating as a virtual co-president. Moreover, he and Hill became business partners in a number of outside ventures financed by Union and Planters. There was no hint of any problems until Polk vanished in March 1924 and it was discovered that nearly $42,000 had been taken from a teller cage, replaced by Hills endorsed markers, an action that according to the teller had been repeated on a number of previous occasions. Additional inquiries revealed that Polk had also diverted nearly $20,000 in Liberty Bond accounts for his own use. A day after his disappearance was reported in the local press, Polk wired Hill that he was returning immediately from El Paso, Texas. Meanwhile, businessmen came forward claiming that Polk had recruited them to borrow money from Union and Planters and turn it over to him, assured that they would never have to actually repay the loans. A grand jury was convened to look into these irregularities, but upon his arrival Polk assured everyone that there was nothing to worry about and that he would soon rectify matters at the bank. On the morning that he was scheduled to meet with bank examiners, however, he had no answers other than a 38-caliber revolver, which he used to shoot himself in the head to end his life.

Company Perspectives:

The Corporation is the largest bank holding company headquartered in Tennessee and is one of the 30 largest bank holding companies headquartered in the United States.

The suicide of his associate ruined Hills credibility and he quickly retired from the bank, replaced by Frank Hayden as part of an acquisition of Guaranty Bank and Trust Company, which Hayden headed. Hayden inherited a tangle of problems that required immediate attention. Not only had Polks embezzlements drained $500,000 out of the bank, he and Hill were responsible for a number of questionable loans, worth $8.1 million. Numerous customers, in addition, claimed that Polk had defrauded them and were now demanding restitution. Hayden immediately wrote off more than $450,000 in loans, but more drastic action would have to be taken to rectify matters. In September 1924 Union and Planters engineered a reverse split, reducing its capital stock from $3.75 million to $1.87 million, and as a result cut shareholder equity in half. New shares were then issued and sold to boost the banks capital to $2.5 million. Over the next four years Hayden was able to further shore up finances by collecting on bonds that covered some of Polks theft, as well as successfully fending off lawsuits that claimed Polk had defrauded them and that the bank was therefore liable. In the summer of 1928, however, Union and Planters again faced difficult circumstances when an irrational bank run, initiated some months earlier, now threatened Union and Planters. In order to shore up its finances, the bank sought a merger partner, resulting in an unfortunate association with Rogers Caldwell, a Nashville investment banker who fancied himself the Morgan of the South. In 1917 at the age of 27, funded purely by credit, he began building an empire, as well as a reputation as a financial genius. Within ten years, riding the bull market of the 1920s, he controlled a network of 50 companies worth half-a-billion dollars. In reality it was a house of cards. In 1928 he and his associate, former U.S. Senator Luke Lea, bought a 51 percent stake in Manhattan Savings Bank and Trust Company in Memphis, then agreed to merge with Union and Planters. The parties developed a massive reorganization plan, raising new funds to transform Union and Planters into a national bank. Upon completion of the conversion in the spring of 1929 the bank changed its name to Union Planters National Bank and Trust Company. Almost immediately Caldwell and Company began siphoning funds out of Union Planters, almost $2.5 million before directors noticed and put a stop to it. An agreement was reached calling for Caldwell to repay the money, but with the stock market crash in the fall, restitution became impossible. Caldwell and Company went into receivership, resulting in numerous bank failures across the region. In fact, Union Planters was the only bank that survived its connection to the Morgan of the South.

Vance Alexander at the Helm: 1933-63

In the early years of the Depression Union Planters changed presidents three times before electing Vance J. Alexander, who would hold the post from 1933 to 1963. Although the bank survived the 1930s it was not until the economy was spurred by military spending during World War II that Union Planters resumed its growth. It opened new branches, which by the end of the 1940s totaled eight, twice as many as the next largest bank in Memphis. In the postwar housing boom, Union Planters issued numerous building loans and became aggressive in the area of installment lending, especially car loans. Deposits also expanded at a rapid pace, growing from $93 million in 1941 to more than $250 million in 1948. Under Alexanders leadership, Union planters followed a consistent strategy: open new branches and focus on retail banking and correspondent banking with rural institutions. By 1961 Union Planters operated 13 branches and boasted deposits of $400 million. As authority passed to Alexanders successor, John E. Brown, who assumed the rank of chief executive officer, the bank began to slip during the 1960s. With a decrease in correspondent banking, Union Planters overbuilt its branch system to make up the difference. In addition, Browns managerial style caused problems at the bank. He was reluctant to delegate authority, pay his staff competitive wages, or even invest in office equipment. In order to use the photocopier, for example, bank lawyers had to produce a permission slip signed by Brown himself. The result was a demoralized staff and the exodus of key executives. In 1967 Brown was replaced by C. Bennett Harrison, who struggled for the next seven years addressing the banks problems, only landing Planters Union in deeper trouble when in the 1970s higher interest rates turned many high-risk loans into money-losing propositions. Also of note, in 1971 Union Planters Corporation was formed as a holding company for the banks operations.

To save Union Planters from impending disaster, William M. Matthews, Jr., was brought in as the new president, replacing Harrison in 1974, but the extent of the banks difficulties was even greater than anyone suspected. Soon after he took charge it came to light that a number of senior officers, including Executive Vice-President Jesse Barr, had been involved in defrauding the bank, to some extent the result of Browns parsimonious ways. Barr and a score of other officers were convicted of criminal charges and sent to prison. To his credit, Matthews openly addressed all problems of the bank with the press. At the same time, he took steps to revitalize the bank, closing unproductive branches and cutting staff while raising salaries to redress the long-term problem of low pay. He also invested heavily in technology. Union Planters, which a decade earlier owned but a single electric typewriter, now became the most technologically advanced bank in the region, allowing it to operate with significantly fewer employees. Furthermore, Matthews all but eliminated commercial lending, preferring instead to focus on investment banking and fee-based products and services. Although he returned the bank to profitability and repaired its tarnished image, after ten years of his leadership Union Planters was at best a lackluster performer.

Matthews was asked to resign as CEO in 1984 and his replacement, Benjamin W. Rawlins, Jr., immediately vowed to return Union Planters to traditional banking services. Within two years the bank showed enough improvement that it began looking to establish a base for future growth, initiating a plan to acquire community banks, which by the end of the decade evolved into what bank officials deemed the Delta Strategy. In brief, it called for the purchase of community banks within 150 miles of Memphis and urban or suburban banks within 300 miles. Union Planters suffered a setback in the late 1980s when a number of bad real estate loans, coupled with losses from a broker-dealer unit, resulted in a $22 million loss in 1989. But Rawlins was able to improve the balance sheet over the next several quarters and renew Union Planters acquisition strategy. The pace was especially aggressive in 1993 when Union Planters picked up 13 banks, adding some $1.5 billion in assets. By now the bank caught the eye of Wall Street, as rumors spread over the next few years that Union Planters was either fattening itself up for the market, or that a larger player in the consolidating world of banking would find it a desirable addition. None of the takeover rumors panned out, however, as Union Planters continued to buy up smaller banks. Of particular importance was the 1998 $2.3 billion acquisition of Magna Group of St. Louis, which not only bolstered Union Planters position in Missouri but moved it into the new territories of Iowa and Illinois.

Key Dates:

DeSoto Insurance & Trust Company is converted to bank named Union and Planters Bank of Memphis.
Bank merges with Tennessee Trust Company.
First branch is established.
Bank merges with Manhattan Savings Bank and Trust Company.
Union Planters Corporation is formed as a holding company.
Benjamin W. Rawlins, Jr., takes over as CEO.
Rawlins dies, succeeded by Jackson W. Moore.

One evening in September 2000 Rawlins, so instrumental in the rebirth of Union Planters, was jogging on a treadmill at home when he suffered a heart attack. His wife discovered him unconscious and he subsequently died. During the 16 years he headed Union Planters, the bank grew from $2 billion to $34 billion in assets, operating 800 branches in 12 states, becoming one of the 30 largest banks in the country. Rawlins was replaced as chief executive by bank President Jackson W. Moore, a lawyer who joined Union Planters in 1989. Within months of taking over, he initiated an effort to cut costs and improve profitability during a period of falling interest rates. The bank closed or sold less productive branches, outsourced some back-office functions, and eliminated jobs. Moreover, it only acquired one bank, St. Louis-based Jefferson Savings Bancorp, purchased in February 2001. The addition was also in keeping with another key strategy of Moores, shifting the focus away from rural community banks to the core urban markets of Memphis, Nashville, Indianapolis, St. Louis, and Miami.

Principal Subsidiaries

Union Planters Bank, N.A.; Magna Data Services, Inc.; PFIC Corporation; Capital Factors, Inc.

Principal Competitors

Bank of America Corporation; Regions Financial; U.S. Bancorp.

Further Reading

Boraks, David, Gains at Union Planters Fail to Sway Wall Street, American Banker, October 30, 2002, p. 19.

, In Switch, Optimism over Union Planters Earnings, American Banker, April 12, 2002, p. 1.

Elstein, Aaron, Union Planters CEO Quietly Building an Empire, American Banker, April 3, 1998, p. 1.

Garsson, Robert M., New Union Planters CEO Eyes Strategy for Return to More Traditional Banking, American Banking, October 4, 1984, p. 16.

Longwith, John, Since Before the Yellow Fever: A History of Union Planters Bank, Memphis, Tenn.: Union Planters Corporation, 1994.

Ed Dinger

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Union Planters Corporation