U.S. Bancorp’s
The bank, which dates back to the mid-1800s and was originally two separate California banks, already had lost some connection to the Golden State as a result of foreign ownership. But with the sale to U.S. Bancorp, Union Bank’s charter will cease to exist.
The $105 billion-asset, San Francisco-based Union “is really the only remaining very large home-grown and historically important California bank,” Todd Baker, senior fellow at the Richman Center for Business, Law & Public Policy at Columbia University, and the managing principal of Broadmoor Consulting, said Tuesday in an interview.
“Other banks have grown up underneath it, but none have the historic roots or the history of importance in the development of California,” Baker said.
Union’s current form dates to April 1996, when two Japanese banking giants — Mitsubishi Bank and Bank of Tokyo — merged and combined their respective U.S. subsidiaries, Union Bank and the Bank of California. It was a marriage with formidable partners on both sides.
Bank of California’s origins can be traced to a partnership its founder, William Chapman Ralston, formed in San Francisco with three other financiers. Ralston chartered Bank of California in 1864, on the Fourth of July.
At a time when dubious business practices were commonplace, Ralston’s dealings — especially involving the Comstock Lode and other Nevada silver mines — were notorious for their sharpness. At the same time, Ralston put his wealth to work developing San Francisco, building the California Theater and the Palace Hotel. Bank of California branched out to Nevada and Oregon, playing a major role in developing those states.
For a decade, Ralston loomed larger than life in the affairs of the city, and stories involving him grew legendary. In one famous episode, in 1869, Ralston reportedly averted a run on the bank by exchanging gold bars held in the bank’s vault with gold coins kept at the Treasury Department’s branch in San Francisco.
“They did a middle-of-the-night trade with the Mint,” Baker, who served as Union Bank’s executive vice president for strategy and development from 2010 to 2015, recounted. “The story is, the next morning when customers came to withdraw their funds, they saw the piles of gold coins and concluded the bank was solvent.”
Six years later, Ralston’s empire grew overextended and collapsed, nearly taking the Bank of California down with it. Ralston died under mysterious circumstances swimming in San Francisco Bay, but the bank was rescued by two of Ralston's business associates, Darius Ogden Mills and William Sharon.
Union Bank's origins were more pastoral.
In the early years of the 20th Century, founder Kaspare Cohn, a prosperous Los Angeles wool merchant, provided banking services to many of the Basque shepherds whose wool he purchased. When state banking authorities caught wind of Cohn's private banking activities, they ordered him to stop — or to regularize the business with a charter. Cohn chose the latter option, founding the Kaspare Cohn Commercial and Savings Bank in 1914.
Following Cohn’s death in 1916, his sons changed the bank name, creating the Union Bank brand in the process.
From World War I through the 1970s, Union Bank was managed by two visionary and long-tenured leaders, Ben Meyer and Harry Volk. From 1916 to 1980, Meyer and then Volk presided over decades of growth during which Union Bank played an instrumental role in spurring Los Angeles’s extraordinary expansion in the decades before and after World War II.
Union “financed the wool business when California was heavily pastoral, then it really developed the commercial banking capabilities that supported the rise of Los Angeles in the early part of the 20th century and through the war years,” Baker said.
“Union Bank was sort of the Southern California exemplar of a home grown bank in the way Bank of California was in the North,” Baker added.
More recently, the histories of both institutions were marked by foreign ownership.
Union was the first to be acquired. Standard Chartered bought the company for $377 million in 1979. Bank of Tokyo paid $750 million for Union in 1988, and merged it with its California First Bank unit. Union’s merger with Bank of California, which had been acquired by Mitsubishi Bank, followed the combination of the Japanese parents in 1996.
Even as a subsidiary of an overseas owner, Union Bank was known for its executive training programs and a strong middle-market lending business, according to Walter Mix, another former Union Bank executive who later served as director of California’s Department of Financial Institutions and who currently heads the financial services practice at BRG.
Mix said the sale to U.S Bank will likely make Union Bank “more tech-enabled” and make the local market even more dynamic. But the loss of a charter with such deep roots in the state still burns, he said.
“From a California perspective, many of us who’ve been here a long time hate to see the franchise move to the hands of another institution,” Mix said.
