First National Bank of Lexington was formally chartered by Hugh McCullouch, the Comptroller of the Currency on January 26, 1865. First National was the first national banking association established in the City of Lexington. The bank was granted charter number 760, which certified that having "compiled with all provisions of said act required to be compiled with before commencing business under said act . . . (that I) . . . do hereby certify that the First National Bank of Lexington, in the City of Lexington, in the County of Fayette and the State of Kentucky, is authorized to commence business of Banking under the said act."
In accordance with the National Banking Act of 1863 one third of First National's capital, or sixty thousand dollars, was invested in Government bonds. First National was authorized to issue one hundred eighty thousand dollars in banknotes, an amount equal to ninety percent of capital.
National Bank Note, Orginial Charter
Jacob Hughes issued a statement on February 15, 1865 that "we expect to be able to commence business March 1st 1865." The bank established a temporary office on Jordan's Row, in offices occupied by the bank's attorneys, Messrs. Buckner and Dudley. Jordan's Row was located on the east side of Upper Street, between Main and Short Streets. This office was located approximately where the original entrance was to the Fayette National Building (now the First National Building). After several mergers and consolidations, the bank would return to this locale in the 1930s.
First National formally opened its doors for business March 13, 1865 on Short Street, across from the Courthouse, in the former offices of the Lexington branch of the Bank of Kentucky. Upon opening, the bank assumed the operations of the branch bank. The bank was also appointed by the Secretary of the Treasury as a government depository and financial agent of the United States. In addition, the bank was appointed subscription agent for Jay Cooke & Company of Philadelphia to sell government securities. The Cooke concern was the sole marketing agent for Federal securities during the Civil War.
The bank advertised "we are prepared to receive subscriptions to the 7-3-10 Government Loan, buy and sell all kinds of Government Bonds, Quartermaster's Vouchers, Gold and Silver, and do General Banking and Exchange Business. We make collections on all accessible points."
Jacob Hughes and Thomas D. Mitchell were appointed President and Cashier, respectively. The founding Board of Directors consisted of Jacob Hughes, William R. Estill, William Warfield, Stanley F. Tebbs and Benjamin F. Buckner. Messrs. Hughes, Estill and Warfield were prominent farmers; raising cattle, sheep and thoroughbred horses on farms surrounding the City of Lexington. Messrs. Tebbs and Buckner were a businessman and local attorney, respectively.
The principal trade of the city at this time was hemp raising, groceries, dry goods, whiskey and livestock. The estimated value of property in the city was fifteen million and the county twenty five million dollars. The city's business concerns included two insurance agents, two agricultural implements dealers, twenty two attorneys, six bakeries, six banks (three private), eight blacksmiths, nineteen boarding houses, nineteen boot & shoe dealers, one brewer, seven carriage factories, four dentists, six druggists, fifteen dry goods dealers, sixty one groceries, twenty physicians and twenty nine saloons.
To promote their soundness, a national bank was required to maintain reserves equal to fifteen percent of its deposits. A minimum of six percent of these reserves were required to be in cash, while the remaining reserves could be held in another National Bank.
During the era, New York and Philadelphia were the principal commercial centers on the East Coast. After the Civil War, New York became the “money center,” where banks across the nation sent checks and drafts for collection. These banks established corresponded relationships with the major New York banks to act as their agents. A banker’s (or corresponded) account was set up to receive transfers and debits for payment. A substantial portion of national bank's liquidity to be accumulated in New York City. This accumulation would cause periodic shortages of currency, especially during the fall when farm crops were brought to the market in the South and West. First National set up its correspondent relationship with the Merchant National Bank of New York.
For additional soundness, national banks were restricted in the activities that they could legally be engaged in. Federal regulations prohibited granting credit to any single individual or total real estate loan in excess of ten or twenty five percent, respectively, of capital. Real estate loans were also limited to a maximum maturity of five years and could not exceed fifty percent of the appraised value. National banks were prohibited from establishing branch banks.
When First National commenced business on March 13, 1865, the institution's assets were listed at seven hundred thousand dollars - including cash of one hundred twenty thousand dollars and deposits of three hundred forty thousand dollars. By July 1865, First National surpassed the million-dollar mark and reported assets of one million forty thousand dollars. In October 1865, the bank reported net earnings for the first two quarters of approximately eighteen thousand dollars and declared a dividend of six percent. This was the first of an annual series of dividends declared by the First National, or its successors, until the merger with Bank One Corporation in 1992.
National Bank Note, Orginial Charter
Panic of 1873:
The economic expansion following the Civil War was unprecedented in the history of the United States. A number of the country's great fortunes were established or increased during this period, including the Rockefeller, Flagler, Carnegie and Vanderbilt families. The Lexington business community benefited from this prosperity, while escaping the effects Reconstruction had on the South. Some of the Lexington families that improved their financial standing during this period were Anderson (banking), Bassett (banking), Harting (brewing), Headley (banking, thoroughbreds and lumber), Hillenmeyer (nursery), Tilford (banking), Stoll (whiskey and banking) and Wilgus (banking and railroads). These families would dominate the local economy until the Great Depression.
This prosperity came to a quick end during September 1873 when a serious recession began. This recession was triggered by the failure of the prominent banking house of Jay Cooke & Company of Philadelphia. This bank underwrote all bonds issued of the Federal government during the Civil War. However, speculation in railroad securities forced the closing of that concern.
The panic quickly reverberated across the nation, causing a number of banking houses, brokerage firms and businesses to be swept away in disaster. Stocks and bonds became worthless overnight, farm produce rotted for the lack of currency to market it and thousands of workers were forced out of work. The New York Stock Exchange closed for the first time in its history.
In Lexington, a number of established businesses failed to meet their obligations and were forced to temporarily close. The city's banks conserved every available resource and curtailed lending activities. Nevertheless, by hard work, steady management and plain luck they were able to remain open and meet the bare necessities of the local citizenry. The fall crops were successfully marketed, providing breathing room for the local economy.
After the death of Mr. Hughes in early 1874, Silas P. Kenney, a Jessamine County farmer, was elected President of the First National Bank. Upon assuming the Presidency, Mr. Kenney found the bank still engulfed in the after effects of the Panic of 1873. Slowly during the next spring, the local economy began recovering.
In April 1874, the first recorded public sale of First National stock occurred when thirty-five shares traded at one hundred twenty five dollars and fifty cents per share. Bank stocks during this period were issued with an initial one hundred dollars par value. Four years later in October 1880 twelve shares traded hands at one hundred thirty two dollars per share and an additional eleven shares traded in June 1881 for one hundred thirty four dollars per share.
In 1879, Avery S. Winston became President after the death of Mr. Kenney. Mr. Winston was one of Lexington's leading hemp dealers.
In November 1882, the Lexington Board of Commerce was established to promote Lexington to manufacturers and businessmen. Avery S. Winston, President of the First National, was one of the organizers and first President of the Board of Commerce. The Board of Commerce is today known as the Chamber of Commerce.
National Bank Note, Brown Back, Series of 1882
Silver Panic of 1893:
The economic growth of the 1880s was ended abruptly in 1893 when another panic started on Wall Street. This panic, known as the Silver Panic, began with the collapse of the Western mining stocks and, once again, a number of banks failed, especially in the South and West. In New York City, the St. Nicholas Bank was closed the week before Christmas. The effects of this panic lasted until 1897 when the economy started a gradual recovery.
In the middle of the business downturn, the directors of the First National voted in 1894 to rebuild the bank's building on the same site, at a cost of twenty thousand dollars. In February 1905, an unsuccessful attempt was made to consolidate the First National Bank, Third National Bank and Central Bank. Avery S. Winston resigned because of ill health as President on December 31, 1905. Mr. Winston led the bank for twenty-seven years, through two major panics and several minor recessions. At the same time William Warfield, the last surviving founder, resigned as a Vice President but remained on the Board of Directors until his death in 1907.
National Bank Note, Red Seal, Series of 1902
Succession Contest:
The appointment of Mr. Winston's successor was scheduled for the board meeting following the stockholder's meeting on January 11, 1906. A group of stockholders, led by John M. Bell, the Cashier of the bank, plotted to take control of the bank from the "old guard," who had directed the bank's destiny for the past thirty years. Mr. Bell received as the bank's Cashier blank proxies from stockholders not planning to attend the meeting. Mr. Bell claimed the personal right to complete the proxies and appointed R. P. Hopple as master proxy.
The election of directors controlled by Mr. Hopple, selected John M. Bell, Henry M. Skillman, John H. Wilson and John M. Greenway as new directors. Messrs. Winston and Warfield were reelected directors, along with Thomas D. Mitchell, William B. Emmal and William K. Massie.
However, Ernest B. Drake, Henry P. Kinkead, Younger Alexander, Roger H. Smith, Hal Pettit Headley and William W. Estill were not reelected to the Board of Directors. Most of these gentlemen had served on the Board for a number of years and Mr. Estill's family was among the founders of the bank. These former directors protested the election results, to no avail, on the grounds that Mr. Bell had misused the blank proxies.
At the board meeting following the stockholder's meeting William K. Massie was elected President. Mr. Massie was a prominent stock, real estate and insurance broker and was closely associated with the Security Trust Company. In addition, the Board appointed Henry S. Skillman as Vice President and reappointed John M. Bell as Cashier.
In June 1906, an attempt was made to consolidate the First National and Lexington City National Banks. The respective bank's stock was valued at one hundred fifty five dollars and two hundred fifty five dollars in the preliminary agreement. Later during the month, these discussions were postponed.
On July 11, 1906, a syndicate of Lexington businessmen acquired controlling interest in the First National Bank's stock. The syndicate purchased roughly two thousand shares of stock accumulated for the City National merger for one hundred thirty seven dollars per share. This syndicate included John T. Shelby, John S. Skain, Thomas A. Combs, I. Newton Combs, Judge Frank A. Bullock, Joseph M. Morford, Harry K. McAdams, John McClintock, George R. Hunt, Thomas C. McDowell, William A. McDowell, Charles H. Berryman, William F. Klair, George K. Graves, John Gund, Jr., Fred Lazarus, Desha Breckinridge, Joseph W. Porter and Henry L. Martin of Midway.
Panic of 1907:
Once again, during the fall of 1907 another panic began in New York City. The panic started with the failure of several medium sized brokerage firms in New York City, heavily involved in the stock market speculation. With these failures, banks began withdrawing reserves from New York City, causing currency to again become scarce. The panic quickly spread across the nation.
Paper money became so scarce that the Lexington Clearing House Association prepared to issue scrip to temporarily replace currency. Clearing House members, as well as most businesses in Lexington, agreed to accept these certificates in lieu of cash. However, the Lexington banks were able to manage the panic without resorting to these certificates. Across the county, ninety-five percent of all banks were forced to rely on clearing certificates. The restricted money supply left over from this panic led to the creation of the Federal Reserve System in 1913.
In 1908, William K. Massie was replaced by John T. Shelby as President. In addition, Henry M. Skillman was replaced in 1908 by John Gund, Jr. and later in 1909 by Harry K. McAdams as Vice President. John M. Bell was also replaced in 1908 by Joshua P. Shaw as Cashier, while Joseph W. Porter was appointed as the Assistant Cashier. All of these new officers were associated with the syndicate.
In 1909, Mr. Shelby was replaced by Leonard G. Cox as President, while Messrs. Shaw and Porter were promoted to Vice President and Cashier, respectively. Management problems continued as rival factions struggled for control of the bank. These management problems would eventually be a prime consideration for the merger in 1913.
In July 1913, the assets of the First National Bank were acquired by the Lexington City National Bank, and operations continued as the First & City National Bank.
