Deposit Guaranty Corporation

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Deposit Guaranty Corporation

2100 East Capitol Street
P. O. Box 1200
Jackson, Mississippi 39215-1200
U.S.A.
(601) 354-8564
Fax: (601) 354-8192
Internet:http://www.dgb.com

Public Company
Incorporated: 1968
Total Assets: $6.03 billion (1995)
Employees: 2,613
Stock Exchanges: NASDAQ

SICs: 6712 Bank Holding Companies; 6021 National Commercial Banks

Deposit Guaranty Corporation (DGC) is a bank holding company formed in 1968 to provide its predecessor and principal subsidiary, Deposit Guaranty National Bank, with greater flexibility within the banking industry and a means to expand into new banking services. In 1996, DGC—the 115th-largest bank holding company in the United States—consisted of four banking operations: Deposit Guaranty National Bank, the second-largest bank in Mississippi; Commercial National Bank (of Shreveport, Louisiana), the fifth-largest bank in Louisiana; Deposit Guaranty National Bank of Louisiana; and Merchants National Bank of Fort Smith, Arkansas. Through its subsidiaries, DGC offered banking, trust, mortgage, insurance, and investment services to individual, commercial, industrial, and agricultural customers primarily in Mississippi, Louisiana, and Arkansas. Real estate mortgage loans comprised nearly half of DGC banks’ outstanding loans in 1995, followed by commercial, financial, and agricultural loans (28 percent); consumer loans (24 percent), and real estate construction loans (three percent). In 1996, DGC’s core institution, Deposit Guaranty National Bank, maintained 146 branches in 18 of Mississippi’s 20 largest markets, and Commercial National Bank operated 24 branches in the Shreveport area.

“Grow with Us”: 1925-65

The forerunner of Deposit Guaranty Corporation was the brainchild of 14 prominent Jackson, Mississippi, businessmen who in 1925 decided to break into the city’s traditionally tight banking community by establishing a new thrift as a vehicle for investing in bank stock. The name Deposit Guaranty Bank and Trust Co. was chosen because, its originator argued, * “any name long enough to learn is good enough to be remembered always.” The state collector of internal revenue, a Spanish-American War veteran named Major George L. Donald, was enlisted as the bank’s first president, and in mid-1925 1,000 shares of stock and the following newspaper ad were offered to Jackson’s banking public: “On June 15th this bank, headed by executives of many years experience in business and banking, will formally open with ample capital and surplus to carry out a policy of positive safety and to take care of its patrons, large and small, at all times.... Our service will be general banking, including checking accounts, savings accounts, trust department, real estate loans, and renting safe deposit boxes.” The announcement struck a chord, for by the end of its first year in business, Deposit Guaranty was claiming deposits of $739,000 and assets of almost $900,000.

By 1929 and the onset of the Great Depression, Deposit Guaranty had paid off its startup debts, opened a full-time trust department, and issued its first stock dividend. Moreover, more than two months after the stock market crash, Deposit Guaranty’s assets were still climbing toward the $2 million mark and, more urgently, the bank had managed to stave off a run on its deposits by panicked customers. But stockholder worries forced Deposit Guaranty to cancel its annual meeting in 1930, and as the nation’s financial climate worsened management reluctantly imposed salary cuts (ten percent for employees making more than $100 a month and a full 15 percent for the bank’s officers).

At the gloomy 1933 shareholders’ meeting Major Donald entreated his employees to trust in “counsel, courage, and common sense” to see them through to the inevitable economic turnaround. Deposit Guaranty itself meanwhile seemed almost impervious to the forces claiming hundreds of other U.S. banks, including Mississippi’s largest thrift, Merchants Bank: Deposit Guaranty had close to 4,800 depositors by 1933 and deposits of almost half a million dollars. A $250,000 stake Deposit Guaranty had purchased in 1929 in the Canal Bank and Trust Co. of New Orleans finally brought the Depression unambiguously to the bank’s doorstep. The failing economy had forced Canal Bank into receivership, immediately freezing more than half of Deposit Guaranty’s cash reserves. With the help of Mississippi’s bank commissioner, Deposit Guaranty’s executives convinced some of Canal Bank’s Mississippi bank correspondents to unfreeze their holdings in the doomed New Orleans bank, enabling Deposit Guaranty to purchase the remainder of the frozen assets and free itself from the debacle.

As Franklin Roosevelt’s New Deal legislation was beginning to pull the economy out of the worst phase of the Depression, Deposit Guaranty applied for membership in the new federal Temporary Deposit Insurance Fund and agreed to comply with all the requirements of the Banking Act of 1933. It then picked up where it had left off before the Canal Bank crisis: doubling its assets to $7.3 million in 1934 and opening a new personal loan department to offer “Banking Credit for Everybody” in the form of $50 to $500 loans. In 1937 the 17-story headquarters of the now defunct Merchants Bank was purchased for Deposit Guaranty’s new offices, and by the onset of World War II Deposit Guaranty had become the largest bank in Mississippi with more than 10,500 customers and assets of $15 million.

When Major Donald died in early 1941, William M. Mounger, an associate officer and director of the bank, was named Deposit Guaranty’s second president. With America now in the war, the bank guaranteed the jobs of employees leaving for military service, and as assets spiraled past $50 million in 1944 Deposit Guaranty began preparations for financing the local construction projects expected to accompany the postwar boom in consumer demand.

In Jackson and the nation at large that boom lasted longer than anyone had anticipated, and by 1948 Deposit Guaranty had made its first acquisition, purchasing the Bank of Clinton, Mississippi, amending the bank’s charter to allow the new addition to become a full-fledged branch of Deposit Guaranty. As it approached its 25th anniversary year, Deposit Guaranty instituted an employee profit-sharing program and opened its second branch office in Jackson. That branch’s profitability and a 1953 merger with the Commercial Bank and Trust of Jackson helped Deposit Guaranty become Mississippi’s first $100 million bank by the end of the year, and the traditional claim of New Orleans and Memphis to dominance of the deep South’s banking community suddenly seemed less certain. Following William Mounger’s death in 1957, W. P. McMullan became Deposit Guaranty’s new chairman of the board and CEO, and the bank celebrated its new leadership, $170 million in assets, and the opening of its expanded downtown headquarters by inviting Miss America of 1959, Mississippi native Mary Ann Mobley, to preside over the ribbon-cutting ceremony of the “new” Deposit Guaranty.

Although in 1959 the widespread reliance on computers to process large volumes of business data was still several years away, Deposit Guaranty’s management authorized the establishment of an electronic data processing department, anticipating the day when all banking transactions would be routinely processed by automated technology. Deposit Guaranty’s record growth continued into the new decade. A $23 million increase in assets in 1961 was surpassed by a $38 million leap in 1964, and throughout the early 1960s Deposit Guaranty extended its reach into untapped Jackson-area markets with a series of new branch openings.

Statewide: 1965-87

In September 1965, Deposit Guaranty’s board of directors voted to change the bank’s charter from that of a state bank to a national bank, shifting the bank’s regulatory framework from the state of Mississippi to the federal Comptroller of Currency. Among other benefits, the new federal charter enabled the renamed Deposit Guaranty National Bank to establish branch offices and involve itself in such lucrative fields as real estate and government securities. Deposit Guaranty launched an expansion drive that within six months included the acquisition of Greenville Bank and Trust Co. of Greenville, Mississippi; Mechanics State Bank of McComb; and Lawrence County Bank of Monticello. Energized by these new sources of income, Deposit Guaranty’s assets rose from $338 million at the end of 1966 to $395 million a year later. Management’s early decision to embrace computer technology was vindicated in late 1967 when its new automated Operations Center began processing the bank’s financial transactions. An intense promotional blitz led to the successful launch of Deposit Guaranty’s first credit card product, the Bank Americard, in mid-1968, and the acquisition of City Bank and Trust Co. of Natchez (1967) and Rightway Travel Agency (1968) signaled Deposit Guaranty’s intention to continue expanding in new directions.

Company Perspectives:

Deposit Guaranty continues to be very much a network of community banks providing friendly, personal service for our customers who value face-to-face relationships and want to use traditional channels to access financial services. We will continue to stress this approach and are focusing on sales and service skills throughout our system of community banks. We also recognize that a growing number of our customers are not only more comfortable with technology but are, in fact, demanding it to make their lives easier. For them, good customer service means offering technology to handle their banking. The challenge for all financial institutions is to operate in both worlds simultaneously, providing a balanced mix of both “high-tech ” and “high-touch ” services. We are committed to meeting this challenge.

In October 1968, the bank’s board voted to establish a bank holding company, to be named Deposit Guaranty Corporation, that would exchange its stock for Deposit Guaranty’s on a share-by-share basis. Reconstituted as a bank holding company and its subsidiary, Deposit Guaranty would now be able to operate with greater flexibility in the banking industry while venturing into new services and activities. In 1969, Russ M. Johnson, who began his career with Deposit Guaranty as a teller in 1933, was named chairman and CEO, inheriting an enviably prosperous institution; by the end of the decade Deposit Guaranty had expanded to 14 locations, and in the 1960s alone assets had grown from $169 million to almost $500 million, making it the richest bank in Mississippi.

Since its inception, Deposit Guaranty had identified itself closely with Mississippi’s economy, loaning businesses and consumers the capital that helped transform the largely agricultural Mississippi economy of the 1920s into one of the fastest-growing manufacturing regions of the New South. Acknowledging the energy of the state’s business climate in the early 1970s, in 1973 Deposit Guaranty established the first industrial development department of any Mississippi bank. While continuing its expansion strategy through such acquisitions as Bridges Loan and Investment Co. (1972) and Leflore Bank and Trust Co. (1973), Deposit Guaranty also demonstrated its readiness to exploit new banking products coming to market. It introduced its “Mini-Bank” automatic teller machines (ATMs) in 1972—Mississippi’s first 24-hour ATMs—and beefed up its data processing operations center by merging it with a recently acquired computer company to form Bankers Data Processing Center, which marketed its services to other Mississippi banks in addition to handling Deposit Guaranty’s data processing work. In 1972 Deposit Guaranty formed DGC Services Company to provide management services to the bank and the holding company as well as the larger bank market. And in the same year a full-time bank officer was brought aboard to oversee Deposit Guaranty’s international department, which quickly began establishing correspondent relationships with several overseas banks.

Despite the recession of the early 1970s, Deposit Guaranty’s assets vaulted past the $800 million mark in 1973 and by its fiftieth anniversary year in 1975 were closing in on $1 billion. J. H. Hines replaced the retiring Russ Johnson as chairman of the board and CEO in 1974 and soon began implementing a new corporate and management structure to reflect the new realities of the U.S. banking industry. When Deposit Guaranty moved into its newly completed 22-story headquarters three months before the anniversary celebrations began, it had been decentralized into eight major divisions—administration, corporate, investment, marketing, operations/finance, retail banking, state banking, and trust—each empowered to manage its affairs without continual oversight from above.

Less than ten years into its second half century, Deposit Guaranty’s total assets had passed $2.5 billion, and its mid-1970s reorganization had given way to periodic restructurings that sought to maintain continually streamlined operations in a banking environment that seemed to be changing almost month to month. In 1985, Deposit Guaranty, now under the dual leadership of President Howard L. McMillan Jr. and chairman of the board and CEO E.B. Robinson Jr., assumed sponsorship of Mississippi’s only PGA-sanctioned golf tournament, and the rechristened Deposit Guaranty Golf Classic was soon generating $15 million annually for Jackson’s economy. A new business banking department was formed in 1983 to provide business and personal financial services to companies with over $1 million in annual sales, and new products unveiled in mid-decade included home equity loans, a “phone-a-loan” rapid loan approval service, and a new personal credit line program.

Then in 1986 Deposit Guaranty’s dogged efforts to convince the Mississippi legislature to revise the state’s restrictive banking laws finally paid off when the state announced that, beginning in 1987, Mississippi banks would be permitted to merge with other banks anywhere in the state. One year later the state’s thrifts would be permitted to acquire banks in the bordering states of Arkansas, Louisiana, Tennessee, and Alabama, and on July 1, 1990, the entire south-central and southeastern portion of the United States—from Missouri to Florida—would be opened to Mississippi’s banking industry. Deposit Guaranty immediately moved to capitalize on the new banking climate, merging with banks in DeSoto County, Mississippi, near Memphis, as well as Tupelo and Starkville and breaking ground on a new branch in the vital Gulf Coast region. By the end of 1987 Deposit Guaranty could claim 111 locations in thirty-eight Mississippi communities.

Regionwide: 1988-96

Deposit Guaranty entered the new era of interstate banking with assets of more than $3.2 billion and only some lingering—and soon-to-be-eliminated—bad loans to Latin America from the 1970s blemishing its balance sheet. After a 1987 U.S. Supreme Court decision vindicated its claim that the principle of “competitive equality” allowed it to challenge Mississippi’s banking laws by establishing a branch on the Gulf Coast, the bank moved to exploit the opportunities offered by the increasingly deregulated U.S. banking industry. New product lines were developed to capitalize on the youth, mature (50 years old and up), upscale, and small business markets; branch automation and integrated banking software systems were implemented to, in the words of one Deposit Guaranty vice-president, “turn a hog into a more sleek animal”; a “Shop ‘N’ Bank” agreement was reached with a major Mississippi grocery chain to operate full-service Deposit Guaranty branches in selected food stores; and mergers with banks in the Mississippi towns of Meridian, Corinth, and Southaven were given shareholders’ stamps of approval. By the end of 1988, Deposit Guaranty’s intrastate strategy of opening branches in every major market in the state was virtually complete. As the U.S. Congress moved to bail out and reform the troubled savings and loan industry through the Financial Institutions Reform Recovery and Enforcement Act of 1989, Deposit Guaranty closed the decade with 131 branches in 41 communities and more than $3.5 billion in total assets.

When interstate banking finally arrived in Mississippi in July 1990, Deposit Guaranty had already lined up its first acquisition in the promising “ArkLaTex” region to the west, and the $1 billion Commercial National Bank (CNB) of Shreve-port, Louisiana, was added to Deposit Guaranty’s stable. As assets climbed toward $5 billion in 1991-92 Deposit Guaranty unveiled a full-service investment services subsidiary named Deposit Guaranty Investments, Inc. and initiated plans to acquire the First Columbus Financial Corporation of Columbus, Mississippi. The $200 million First Columbus deal was closed in 1994, and Deposit Guaranty soon purchased $300 million in assets by acquiring banks in West Monroe and Hammond, Louisiana.

Amidst rumors that Deposit Guaranty was being targeted for acquisition, management, keen to be “the acquirer rather than the acquiree,” stayed on the acquisitions offensive in 1995 and 1996, adding a Clarksdale, Mississippi, bank; Merchants National Bank of Fort Smith, Arkansas; and the Louisiana banks Tuscaloosa Bancshares Inc., Bank of Gonzales, and Jefferson Guaranty Bancorp (later merged as Deposit Guaranty National Bank of Louisiana). With the aftermath of the savings and loan crisis fueling a wave of consolidation in the U.S. banking industry in the mid-1990s, regional players like Deposit Guaranty looked to new technology and efficiency measures to protect market share and increase their customer base. In 1995 alone, for example, Deposit Guaranty introduced touch-tone phone-based and on-line PC-based banking services, an Internet web site, and a business-to-business electronic data interchange service for its business customers. By mid-decade Deposit Guaranty’s long road from an $880,000 community thrift to a $6-billion mega-regional made it one of the two largest banks in the Mississippi, with the state’s most extensive retail banking network, its biggest trust and international banking departments, and its largest brokerage and residential mortgage operations.