First Interstate Bancorp

First Interstate Bancorp was a bank holding company based in the United States that was taken over in 1996 by Wells Fargo. Headquartered in Los Angeles, it was the nation's eighth largest banking company.[1]

First Interstate Bancorp
First Interstate Bank
Formerly
  • Firstamerica Corporation (1958–1961)
  • Western Bancorporation (1961–1981)
Public
Traded asNYSE: I
FateAcquired by Wells Fargo
Predecessorspun off from Transamerica Corporation in 1958
SuccessorWells Fargo
First Interstate BancSystem
FoundedJuly 1, 1958 (1958-07-01) in Los Angeles, California
DefunctApril 1, 1996 (1996-04-01)
HeadquartersLos Angeles, California

The name (along with the company logo) has continued to be used in the banking world after the merger by First Interstate BancSystem who had been using the name under a franchise agreement since 1984.

History

In 1928, Amadeo Giannini, born in California to Italian immigrant parents, formed a holding company, the Transamerica Corporation, to consolidate his existing financial ventures, which began business with $1.1 billion in assets and both banking and non-banking activities. From the 1930s through the mid-1950s, Transamerica made a number of acquisitions of banks and other financial corporations throughout the western United States, creating the framework for the later First Interstate system.

In 1953, regulators succeeded in forcing the separation of Transamerica Corporation and Bank of America under the Clayton Antitrust Act. Transamerica Corporation, a Delaware corporation, petitioned this court to review an order of the Board of Governors of the Federal Reserve System entered against it under Section 11 of the Clayton Act, 15 U.S.C.A. § 21, to enforce compliance with Section 7 of the Act, 15 U.S.C.A. § 18.[2]

The Bank Holding Company Act of 1956 placed new restrictions on companies such as Transamerica. Thus Transamerica's banking operations, which included 23 banks in 11 western states, were spun off as Firstamerica Corporation in 1958.[3] Transamerica continued to pursue its insurance and other operations.

Firstamerica (doing business as First Western Bank and Trust Company) changed its name to Western Bancorporation in 1961, and the retail operations were renamed United California Bank (UCB), after the acquisition of Los Angeles-based California Bank, which operated primarily in Southern California. In large part to compete with Bank of America (by far the largest bank in California at the time), Western expanded steadily in the 1960s, both domestically and overseas, ending the decade with assets of more than $10 billion. The bank's financial services network grew through the 1974 founding of the Western Bancorporation Mortgage Company and the 1979 formation of Western Bancorp Venture Capital Company.

During the 1960s, 1970s, and 1980s Western Bancorporation operated in California under the UCB brand. In the early 1970s, noticing Bank of America's (BofA) successful credit card BankAmericard, UCB decided to offer its own card which would be issued locally by individual banks under the name "Master Charge," Later, when BofA spun off its franchised credit card operations to a separate organization named Visa International and changed the card's name to "Visa," UCB did the same thing, spinning off Master Charge to Master Card International and changing the name to MasterCard.

In 1970, their affiliated bank, United California Bank of Basel, Switzerland collapsed after unauthorized trades in cocoa and silver futures. Several of the bank's officers, including President Paul Erdman spent time in jail on fraud charges.[4]

In June 1981 the company changed its name to First Interstate Bancorp.[5] The First Interstate name became a systemwide brand for most of the company's banks, thus promoting greater public recognition of the company and internal consistency. During the 1980s, in addition to acquiring more banks, First Interstate jumped into new areas of financial services as the deregulation of the banking industry progressed. In 1983 the First Interstate Discount Brokerage was set up to provide bank customers with securities and commodities support. In 1984 the bank branched into merchant banking with the purchase of Continental Illinois Ltd. and equipment leasing with the acquisition of the Commercial Alliance Corporation of New York, and broadened its mortgage banking activities by acquiring the Republic Realty Mortgage Corporation. In 1986 and 1987, First Interstate attempted a bold $3.2 billion hostile takeover of the ailing Bank of America, but the bid was successfully defeated.

First Interstate ran into its own troubles in the late 1980s and early 1990s stemming from bad real estate loans and the severe recession in California. The bank posted losses in the hundreds of millions for 1987, 1989, and 1991. Consequently, First Interstate concentrated on rebuilding and rejuvenating its existing operations rather than acquiring new ones. A number of noncore unprofitable subsidiaries were jettisoned, including the equipment leasing unit, a government securities operation, and most of the wholesale banking unit. Rumors of a takeover of First Interstate were rife in the early 1990s before the bank recovered fully by mid-decade under the leadership of Chairman and CEO Edward M. Carson (1929–2010).[6][7]

Despite First Interstate's healthier condition, and with the banking industry consolidation in full swing, Wells Fargo made a hostile bid for First Interstate in October 1995 initially valued at $10.8 billion. Other banks came forward as potential 'white knights,' including Norwest Corporation, Bank One Corporation, and First Bank System. The latter made a serious bid for First Interstate, with the two banks reaching a formal merger agreement in November valued initially at $10.3 billion. But First Bank ran into regulatory difficulties with the way it had structured its offer and was forced to bow out of the takeover battle in mid-January 1996. Talks between Wells Fargo and First Interstate then led within days to a merger agreement for $11.3 billion in stock.[8] Wells Fargo completed the acquisition on April 1, 1996 and announced the elimination of 7,200 jobs.[9]

First Interstate Bancorp's stock was traded on the New York Stock Exchange under the stock symbol "I".[10]

In 1984, First Interstate BancSystem of Montana entered into a franchise agreement with First Interstate Bancorp of California to use the First Interstate Bank name and logo. In 1996 when First Interstate Bancorp was split up, the Montana organization successfully negotiated to retain the well known First Interstate name and logo. First Interstate BancSystem continues to offer banking in Idaho, Montana, Oregon, South Dakota, Washington, and Wyoming.[11]

1986 bank heist

In June 1986, a highly trained group, called the "Hole in the Ground" crew by the media, tunneled under the First Interstate Bank in Hollywood at Spaulding Avenue and Sunset Boulevard through an extensive network of tunnels over the course of several months and took about US$270,000 (equivalent to $630,000 in 2019) in cash and the contents of 36 safety deposit boxes valued at US$2,500,000 (equivalent to $5,800,000 in 2019). The group rode all-terrain vehicles through the underground storm drain system of Los Angeles, and used gas-powered generators, hammer drills, power saws, and digging equipment to tunnel 100 ft (30 m) up into the bank's vault.[12][13]

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See also

References
  1. Adelson, Andrea (1988-09-23). "First Interstate Plans To Spin Off 'Bad' Bank". The New York Times. Retrieved 2008-10-03.
  2. "206 F.2d 163 Transamerica Corp. v. Board of Governors of Federal Reserve System. No. 10768". United States Court of Appeals for the Third Circuit. Public.Resource.Org. 16 July 1953. Archived from the original on 30 August 2009. Retrieved 15 May 2009.
  3. "Firstamerica Corp. Now an Independent Company". Los Angeles Times. July 2, 1958. p. 19. Firstamerica Corp. today announced itself in business as an Independent bankmg holding company, taking over the 3·billion-dollar banking empire of Transamerica Corp... Oscar H. Keller, president of Firstamerica, said the 23 banks in which it owns majority interest have 329 hanking offices in 11 Western States. Alternate Link via ProQuest.
  4. Smith, Adam (September 4, 1972). "How My Swiss Bank Blew $40 million And Went Broke". New York Magazine. pp. 23–32 – via Google Books.
  5. "Western Bancorporation officially became First Interstate Bank Monday with...". United Press International. June 1, 1981. Western Bancorporation officially became First Interstate Bank Monday with new signs going up to replace subsidiary names such as United California Bank. First Interstate replaces Western Bancorporation which held 21 banks in 11 Western states with 900 branches. It is the first interstate banking group. Commercial banks are prohibited from crossing state lines, but First Interstate's charter goes back to the Firstamerica Corp. Firstamerica resulted from the split of Transamerica's insurance and bank interests. Firstamerica was an 11-bank holding company which changed its name to Western Bancorporation.
  6. Nelson, Valerie J. (March 24, 2010). "Edward M. Carson". Chief Executive magazine. Retrieved August 20, 2015.
  7. "Edward Carson dies at 80; former head of First Interstate Bancorp". Los Angeles Times. March 24, 2010. Retrieved August 20, 2015.
  8. "First Interstate Decides To Talk To Wells Fargo -- First Bank's Bid Suffers Second Blow". The Seattle Times. Bloomberg Business News. 1996-01-22. Retrieved 2008-10-03.
  9. "Plus Business: Wells Fargo to Cut 7,200 Jobs". Chicago Sun-Times. April 1, 1996. p. 4. Wells Fargo & Co. completed its acquisition of one-time rival First Interstate Bancorp today and said 7,200 jobs will be lost as a result of the $11 billion merger. In a statement announcing completion of the merger, Wells said 1,750 employees will be laid off within the next 30 to 90 days and it expects to cut another 5,450 jobs before the end of the year.
  10. "First Interstate Gives Up Its 'I' For A Ride With Wells Fargo". Orlando Sentinel. February 16, 1996.
  11. "First Interstate Bank Locations". First Interstate Bank. First Interstate BancSystems. Retrieved 10 May 2009.
  12. Harvey, Steve (27 December 2009). "Boring thieves had tunnel visions". The Los Angeles Times. Retrieved 8 November 2013.
  13. Manaugh, Geoff (Spring 2013). "Forensic Topology". Cabinet. Death. Immaterial Inc. (49). Retrieved 8 November 2013.
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