Root of U.S. Bank financial strength traces back to Lincoln

February 18, 2020

The national charter for predecessor First National Bank of Cincinnati was signed in 1863.

“The capital of a bank should be a reality, not a fiction ... Let no loans be made that are not secured beyond a reasonable contingency ... Pursue a straightforward, upright banking business.”

The first US Comptroller of the Currency penned those words of advice to bankers in late 1863 while managing a fledgling banking system in the midst of the Civil War. 

Earlier that year, the comptroller approved national bank charter No. 24, which provided First National Bank of Cincinnati its license to operate across the country. His words stuck with the bank, which more than a century and a half later has evolved into U.S. Bancorp – which today is one of the highest-rated banks in the world. 

The charter was signed as part of the National Banking Act, which was designed by the Lincoln Administration to unify the banking system, create a national currency and help the government with the financial needs of the war. In the decades prior, the industry had become rampant with financially dubious state banks. 

Of the new national system, the OCC accounts President Lincoln as saying it “will create a reliable and permanent influence in support of the national credit and protect the people against losses in the use of paper money.”

First National Bank of Cincinnati was among the first entrants into the system. The bank was founded by a group of business leaders in the city and, per the Cincinnati Business Courier, made its first loan to a local hardware dealer. That nuts-and-bolts approach to banking would drive the bank for decades to come. 

In the 1920s and 1930s during the Great Depression, regulators allowed banks to limit the percentage of deposits that customers could withdraw from their accounts. First National, however, had the financial soundness to forgo implementing such a limit.

Its number of competitors, though, dwindled as bank failures proliferated across the country. To stop the bleeding, the Roosevelt Administration stepped in and established the Federal Deposit Insurance Corporation, or FDIC, in 1933. President Roosevelt said of the situation, “We had a bad banking situation. Some of our bankers had shown themselves either incompetent or dishonest in their handling of the people’s funds. They had used the money entrusted to them in speculations and unwise loans.”

With the FDIC in place, the system stabilized and the number of banks grew in the years that followed. This trend continued until the 1980s, when the industry began to consolidate. This era of consolidation laid the foundation for the current day U.S. Bank, as First National Bank of Cincinnati merged with a number of large regional banks across the country – including its namesake U.S. National out of Oregon and its headquarters First Bank out of Minnesota.

Then, less than a century after the Great Depression, financial crisis struck again in 2008. Despite the challenging environment, the culture of financial discipline that U.S. Bank inherited in part from First National kept it profitable through every quarter of the recession – the only among its peer group of large banks to do so. 

In the wake of the recession, a Minneapolis Star Tribune columnist wrote of its transparent and predictable cash flows that “being boring is proving to be a sustainable competitive advantage through cheaper capital.”

In 2013, U.S. Bancorp celebrated its 150th anniversary by ringing the closing bell at the New York Stock Exchange. The CEO at that time, Richard Davis, and current CEO, Andy Cecere, were accompanied by a group long-tenured and military veteran employees.  

Among them was Gwyn Holland, who had joined the company 60 years prior in 1953. Of her career, Holland told her local Chattanooga Times Free Press at the time that, “I’ve seen generations of customers who have banked with us. There have been a lot of changes, but I still enjoy the people the most.”

Beside Holland stood Jared Belkey, a U.S. Army National Guard veteran who credits his role as a military intelligence officer in shaping his civilian career in data analytics at U.S. Bank. He calls ringing the closing bell at the American landmark a “once in a lifetime experience.”

In recent years, U.S. Bank has focused on blending the service of humans like Holland and Belkey with the digital elements that customers have come to expect in the age of Amazon and Netflix. 

Since becoming CEO in 2017, Cecere has led the bank in establishing Agile studios across the country for rapid product development, in launching a new built-from-scratch mobile app and in hiring its first-ever chief digital officer. 

Although the pace of change is accelerating, technological innovation is nothing new to U.S. Bank. Over the years, it has been among the first to offer mobile check deposit, online bill pay, drive-thru banking and much more.

Today, Cecere recounted at the company’s annual employee town hall, U.S. Bank is investing in the future from a position of strength, having recently been recognized among the Top 10 most financially sound companies in the world as part of the 2020 World’s Most Admired Companies list put out by Fortune.

“I would not trade places with anybody in the country,” Cecere told employees, adding, “And we are going to continue investing in the future, because I want [my successor] to inherit the same position of strength that I did.”

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