A marathon bank, pt. 2

Philadelphia Bank note (Click for larger image in a new window)In the first installment of this history of the Philadelphia National Bank (PNB), I discussed its origins, survival through the Civil War, and emergence as a National Bank.

But history is “a marathon, not a sprint”—PNB was poised to enter the 20th century.

During the 1880s, it realized it could benefit from specialization and set up a Transit Department and a Credit Department. Transit helped coordinate faster clearing of documents with other banks, while Credit focused on institutional clients, since it was no longer possible to personally know all the individual officers of the companies requesting credit.

Following on the Credit Department at the turn of the century, PNB saw dramatic expansion of customers beyond the Philadelphia metropolitan area. It began relationships with the likes of Swift & Co. meatpackers in Chicago; B.F. Goodrich; Westinghouse; Sears Roebuck; and R.J. Reynolds. In order to meet its customers’ need for international trade, it established a Foreign Exchange department in 1910.

The Philadelphia National Bank stood as the largest bank in Philadelphia after 1914. The coming years saw perhaps the most dramatic change in the company’s history. In 1918 the Philadelphia National Bank purchased the Farmer’s and Mechanic’s National Bank, which dated back to 1807 and had been the largest Philadelphia bank for most of the second half of the nineteenth century. Then in 1926, Philadelphia National merged with its cross-town rival, the Girard National Bank. This was shortly followed by a merger with Franklin Fourth Street National in 1928.

Large mergers are sometimes viewed with suspicion, but these mergers were the logical result of a need to grow and to keep up with clients’ growth. In 1922, for example, the greatest credit was limited at $1.5 million, to Sears and Bethlehem Steel. Through the Girard merger, credit limits were increased to $2.5 million, to the likes of Campbell’s Soup. Finally in 1928, limits were raised to $5 million, to du Pont, Ford, General Electric and Philadelphia Electric Co.

PNB note, 1882 (Click for larger image in a new window)While the next decade reduced demand for credit and the 1940s shifted credit to federal borrowing, Philadelphia National Bank was able to loan $14 million (of a $100 million loan syndication) to General Motors in 1942. Bank staff was also stretched thin during World War II, as 147 team members spent time in uniform.

Five lost their lives.

Following the Second World War in 1951, Philadelphia National Bank expanded from Philadelphia’s central business district to residential neighborhoods with a merger with Ninth Bank & Trust. This acquisition provided a whopping five branches in neighborhood locations.

In addition to following the population, this acquisition also returned Philadelphia National to its roots of providing financial services to individuals and small business. In 1991, Philadelphia National Bank remade itself as CoreStates Financial Corp. Ten years later, CoreStates merged with First Union, which became part of Wachovia, and merged into the Wells Fargo family of banks in 2008.

History gives us the benefit of learning lessons, based on starts, errors, resets, and adjustments over many years. With Philadelphia National Bank, we see an organization that had modest ambitions, and which nearly didn’t survive its first twenty years. But it continuously refined its focus, expanded to meet customer needs, and over time businesses came to it.

PNB note 1902 (Click for larger image in a new window)While my son would apply the lessons to sports, the lesson I learn from this example is that companies whose goals are to be the biggest, usually are never the best. The Philadelphia National Bank is a great case where the goal was to be the best, with the result that it became one of the biggest.

The Philadelphia National Bank was never a sprinter, but it sure won the marathon.

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