by Theodore Davie
San Diego Trust & Savings Bank has long been associated with the city of San Diego having been established there one hundred years ago. Now with over 50 branch banking offices and 37 off-site automated teller machines, the bank is a familiar feature in the county. Earning the distinction as a “Major Regional Bank” in 1985 when its assets exceeded $1 billion, it did not expand its sphere of activity beyond San Diego. Rather, the Bank continued to build on its existing community base at its customary pace commensurate with the needs of the city. This long-standing sensitivity and attachment to its community are distinguishing characteristics of San Diego Trust. The Bank has other distinctive qualities that see it apart. In one hundred years it has never attempted to overextend itself by merging with or acquiring other financial institutions. In effect, it has always sought to develop its own resources.
San Diego Trust is celebrating its centennial in 1989, having reached this milestone by adhering to traditional banking values and dedicating itself to the welfare of the community of San Diego. Traditional values in banking mean many things but none more important than, in the words of Joseph Sefton Jr., “taking no unnecessary risks with depositors’ funds. “Traditionally these values have included maintaining liquidity by operating to yield profit, controlling costs, processing loans watchfully and managing, competently. These principles were set in place by Joseph Sefton Sr. when he established the Bank in 1889. The Sefton family has directed the Bank’s operations from 1889 to the present, with the founding Sefton, his son and grandson occupying the presidency for nearly three quarters of that time. This constitutes a banking dynasty that has maintained its position of leadership in the Bank. In all likelihood the stewardship will continue into the fourth generation with Harley Knox Sefton, who is now a vice president.
The decision to settle in San Diego by Joseph Sefton Sr. was based on its amenities and his belief in its potential for growth, despite the reversals in economic activity that occurred after the economic boom of 1886-1888.1 He was not the only optimistic one, however, for a reading of the periodicals of the time reveals that most community leaders shared Sefton’s expectations.2 These were practical businessmen, not boomers, speculators, confidence men or adventurers, who moved from town to town motivated by quick profit without commitment. In fact, these leaders were part of an essential group of citizens who remained after the profiteers left, and who would help to enlarge the base on which the future city would be built. Like Sefton their vision included a sense of commitment, of performance that included investing and building to give, not to take. Fortunately, the boom of 1886-1888 had provided the necessary base for future growth, for during this time hotels, houses, wharves, and a network of railway tracks had been built. These were major assets and viewed as such.
Joseph Sefton Sr., a vigorous person, but in ailing health most of his adult life, was a self-made man. Through his own efforts he succeeded as a salesman in wholesale hardware in Baltimore. Later he became a partner in a paper box manufacturing firm in Dayton, Ohio. As soon as he was financially able to do so, he and his wife, Hattie, traveled to warmer locations during the winter months in search of an agreeable years round climate. Thus the family discovered San Diego.3
As early as January 1889, a number of San Diego businessmen agreed to assist Sefton in the establishment of a bank. They obligated themselves to purchase shares of capital stock in the sum of $200,000 to capitalize it. Sefton desired to operate a bank that would appeal to citizens of small and moderate means, who at the time were reluctant to use banks. He found the appropriate means to satisfy his desires in a state chartered savings bank. Savings banks, since their inception in Great Britain in the early 19th century, were dedicated to protecting the savings of “tradesmen, laborers, servants. . . and affording to industrious persons the twofold advantage of security and interest. “This intention to better the conditions of the general population appealed to Sefton’s philanthropic instincts. His bank would adhere to these conservative percepts while avoiding the relatively risky lending of commercial banks.4
Sefton opened the doors of his Bank on May 15, 1889, then named the San Diego Savings Bank, after the state approved its incorporation on April 15. He had been assisted in the formation by Myron T.Gilmore, assistant cashier of the First National Bank and by one of the directors of that bank, J.H. Braly. In fact, Sefton’s Bank first office was in the same large banking room as the First National. Two existing circumstances can be cited to explain this arrangement: new banks desired to locate at or near the busiest intersection of the city, which was then Fifth and E Street, where First National was located; and national banks, which could only engage in commercial business, desired close affiliation with “banks of deposit,” that is, savings institutions.5
At the time of the opening, San Diego was attempting to rise from an economic slump that set in after the financial collapse in the spring of 1888.6 The small savings bank prospered in a modest way with Sefton as president and Gilmore, the only employee, as cashier. The board of directors was active from the start, assisting in the setting of policy, deliberating over loan applications and inspecting property specified in the applications. In September 1891, it authorized the hiring of Mary Fletcher, the second employee, sister of Colonel Ed Fletcher, full time for $25 a month.
The Bank had very little time to develop before a number of local, national and international events adversely affected it along with other financial institutions. Two banks in the city failed in November 1891, the California National Bank, a commercial bank, and the California Savings Bank. The two had a close affiliation, and the man who was president of both, committed suicide. These tragic events eroded public confidence in banking in the community and caused considerable apprehension among banking commissioners in San Francisco. Inspectors were immediately sent to San Diego to evaluate the condition of the two remaining savings banks, one of which was Sefton’s Bank.
Hard times were destined to continue. From 1890 to 1893, European nations and manufacturers had demanded from the United States payments in gold. When the Treasury’s gold supply depleted dramatically, a financial panic swept the nation, reaching San Diego on June 21, 1893. As depositors gathered, banks started to close their doors. When the First National closed, people assumed that Sefton’s Bank had closed also, as the two banks had a common entry door. However, nothing could be further from the truth. Sefton’s Bank remained open, and not one dollar of depositor’s funds was lost. Two local banks failed in the 1893 panic, Consolidated National and the Savings Bank of San Diego. (First National Bank opened after nine days.) San Diego Trust experienced about 40 % loss in deposits, and a substantial decrease in loans on real estate, in the six-month period after the June panic.
These distressing events led Sefton to reevaluate his Bank’s position. Believing that an independent location would be advantageous, he moved the Bank to new quarters in the Keating Block at Fifth and F Street early in 1894.
Most of the nation had gone into recession following the grave financial disruption of 1893, and recovery was long and painful. In San Diego the downturn exceeded that which could be expected because in 1897 a severe drought set in for three months, reducing economic activity drastically. Despite the difficult times in the 1890s, San Diegans remained confident in the future, and there was much to be confident about. Construction of a canal across the Isthmus of Panama would bring much needed seaborne commerce once it was completed. Construction commenced in 1904 with a completion date set for ten years later. An exposition to coincide with the completion would increase awareness of the city in the nation. Planning for the event commenced in 1908. A project for construction of the San Diego and Arizona Railroad was also issued in 1908, but its completion was delayed until 1919.
In the autumn of 1907, New York’s financial markets suffered huge losses and banks’ depositors panicked nationwide, withdrawing their funds, which disappeared from circulation. Sixteen banks failed in California, but none in San Diego.
By 1909, legislators and bankers were in agreement that reforms were needed to build and sustain public confidence in banking. The enactment of the California Banking Act of 1909 launched a new epoch for the state’s banking industry, making it more worthy of the public trust. It eliminated the distinction between state commercial and savings banks, authorizing “departmental banking,” permitting all state banks to conduct any form of banking when authorized – commercial, savings and trust. The act also permitted state banks to establish branches, sanctioning pre-existing circumstance as 36 branches existed because previous legislation neither affirmed nor prohibited them. The panic of 1907 also prompted the federal government to create standards designed to dampen the extremes in the cycles of “boom and bust.” The Federal Reserve Act became law in 1913, providing for a central banking organization. Although states’ bankers thought features of the act encroached on states’ rights, it was exceedingly influential and has been made more so by strengthening enactments.7
In March 1908, the senior Sefton died, leaving a large estate. His only surviving son, Joseph, managed the estate for the family through the Sefton Investment Company, which had been incorporated in 1902.8 The junior Sefton, who was 26 when his father died, elected not to take the presidency of the Bank, nominating Gilmore for the post at the annual meeting in January 1909.9 Sefton became vice president. In 1913, the Bank moved back to Fifth and E Street and into the Watts Building.
The exposition, which opened on New Years Day 1915 and closed two years later, was an artistic and financial success. San Diego Trust played an important role in this event principally through the efforts of Joseph Sefton Jr. who, as director of publicity, promoted it widely throughout the United States and abroad.
Even though the exposition drew thousands of visitors, the economy lagged. There was no significant improvement when the Unite States entered the European war in 1917, as the city lacked a significant industrial base. However, it participated in the Southern California “boom of the 1920s,” when the automobile and the railroads carried thousands of new residents into Southern California. During 1922 and 1923, more state banks were chartered in California than in any other equal period of time in the past.
Planning for the future to keep pace with the rapidly growing community occupied much of Sefton’s time. In his role as chief planner for the Bank, he now desired to convert it to a departmental bank, provided for in the Banking Act of 1909. Studies had been conducted and conclusions reached that the Bank could assist in the industrial development of the region. Accordingly, management added a trust department in January 1923 and commercial department two years later, when the name of the Bank was changed to San Diego Trust & Savings Bank. These were stimulating times for the Bank. All financial indicators continued to rise: capitalization was increased, staff benefits were augmented, and early in 1927, ground was broken for construction of a fourteen story combination bank and office building at Sixth and Broadway.10
By 1927, prosperity in the nation expressed itself in many forms including speculation in the stock market, which in 1928 and 1929, experienced a series of roller coaster variations. Finally, in Late October 1929, the financial market crashed, precipitating a worldwide financial crisis, Banks failed in the United States and in Europe. Great Britain abandoned the gold standard. The nation’s gold supply dwindled and depositors again made runs on banks, which attempted to survive their greatest crisis.
In spite of attempted remedies by the federal government, conditions worsened in 1932 and 1933. Banking customers diminished in great numbers as they closed their accounts and took their funds in cash. On March 6, 1933, a National Bank Holiday forced all banks in the United States, whether sound or not, to close. But Washington quickly realized that the country could not operate with its banks closed. San Diego Trust reopened on March 14; however many banks never reopened.
Franklin D. Roosevelt’s New Deal then sponsored legislation that would revolutionize banking and greatly influence it for the following 50 years. The Banking Act of 1933 set up the Federal Deposit Insurance Corporation (FDIC), specifying mandatory membership for all banks – federal and state. This landmark legislation, designed to build confidence in banks, brought all banks under federal government supervision. Banking began to regain public confidence, its most valuable asset, without which even strong banks might fail. Many years before, San Diego Trust adopted and advertising slogan, “The Bank That Public Confidence Built.”
These were trying times for Sefton, Gilmore, and their associates because they, as all bankers, were required to operate under federal controls, which had been designed to assist weak banks; but theirs was strong. The Bank’s key indicators for three years after the 1929 crash remained at an even level. After the “holiday,” they began to rise again and have continued to do so in every reporting period since.
Joseph Sefton Jr. was elected to serve as president on January 15, 1935, and Gilmore to president emeritus. Gilmore was 88 at the time. His honorary position was discontinued four years later when he died.
World War II brought recovery from the depression. Unlike during the First World War, between 1941-1945 San Diego became a major production arena.
San Diego Trust was 61 years old and still a home office only, or “unit,” bank in 1950. But by this date some directors and officers believed that the desired level of growth would only come with entry into branch banking. Sefton was not one of these. Like most operators of small independent banks in California, he had opposed branch banking since he first entered his father’s Bank in 1904.11. Be that as it may, the Banking Act of 1909 permitted branch banking when authorized by the state’s banking department, and in the next 20 years, branch banking would change the face of the industry in the state. In 1910, there were 491 state chartered banks and 36 branches. In 1927, there were 313 banks operating 707 branches. Now in 1989 there are just under 300 individual and parent banks and 1700 branch offices. Up to 1927, the state and federal laws, and the courts restricted federal chartered banks from branching, but the McFadden Act of 1927 loosened these restrictions.
Early in 1928 when local newspapers reported that Bank of Italy had made an offer to purchase San Diego Trust, Sefton responded unequivocally, denying that he would ever sell the Bank.12
By 1956 Sefton’s son, Thomas, the next senior officer to his father, knew that his father’s opposition to branch banking was based on his credo: “Knowing the person with whom he does business is a banker’s greatest strength , and for which no substitute has been found. “The son realized that the senior Sefton might be influenced to favor the establishment of branch offices if he could be persuaded that a branch office manager could be a creditable extension of the president’s special relationship with clients. Although the senior Sefton maintained his position in opposition, he was only slightly displeased when he was outvoted by the board of directors. The fact that the first branch office, Park West, would be built on the site of the Sefton family’s original residence at Sixth and Laurel did much to mollify the senior Sefton.
Thomas Sefton’s comment on the matter years later summarized his belief that, “branch banking was vital for the Bank’s survival. In the early 1950s we were known as the biggest building in town and the smallest bank. Today we are the largest locally owned bank in San Diego. Without branches, this would not have been possible.”
When it was time to turn over the Bank to his successor in February 1960, the elder Sefton would even boast of the success of the move into branch banking, “Now, with two branches in full operation, and additional permits granted and three applications (for new branches) in process, our position in branch banking is assured.”
Joseph Sefton became chairman of the board in 1960 when his son was elected to the presidency. He had served the Bank and its community for 58 years when he died on March 3, 1966, at age 84. His service to the community was significant and memorable. He had inherited his father’s interest in animal life, especially birds, donating his father’s much admired collection to the city. Joseph Sefton Jr. served the Society of Natural History as president for 29 years. In 1948, he formed a foundation which purchased a vessel and equipped it for oceanographic research. This public consciousness and sense of service have become distinguishing traits of each member of the Sefton family.
Thomas Wolcott Sefton represents the third generation of an eminent financial and public-spirited family.13 In the first 20 years of Thomas Sefton’s leadership the growth of the Bank, as measured in assets, loans, and earnings, was remarkable and in many ways attributable to the development and expansion of the branch office system and installation of electronic data processing (EDP), as well as to the introduction of a number of new services and products.
Although American banking has for the most part reached its highly developed position through incremental advances, it has experienced a few major, fundamental changes along the way. The employment of EDP is one such revolutionary change. The Bank’s adoption of it was practically forced on it by the tremendous increase in checking transactions in the 1950s. San Diego Trust’s system became operational in 1963. Soon its application became widespread and innovative enabling such advances as electronic fund transfer (EFT), which included automated teller machines (ATM) and point-of-sale (POS) computer terminals.
San Diego’s growth in the last half of the 1960s was remarkable. In fact it was one of the brightest spots in the California economy. The Bank contributed by meeting continuing demands for loans.
The Bank’s ten years summary indicates its prosperity. Assets increased from $48.3 million in 1960 to $194.6 million at the end of 1969; loans from $13.4 million to $50.4 million; operating earnings from $0.38 to $3.27 per share. The staff had grown to 650 members and fourteen branch offices, in addition to the main office, were operating in the county. Addressing a letter to the staff in December 1970 the president referred to the “exciting growth and expansion at San Diego Trust.” He informed them that a vital part of the growth plans of any corporation is its capital structure, which must be constantly reviewed and kept in pace with the Bank’s growth. The acknowledging that he knew many of the staff desired to own the Bank’s stock which was difficult for them to do because of its high market price, he cited board action in approving a 25 for 1 stock split which would bring the market price down from about $600 to about $24 per share, an affordable price.
In planning, attention was now concentrated on organizing for future growth: purchase of a building to house an expanding EDP department; establishment of supplement training to qualify members of existing staff for promotion. It was also time to set up programs to improve employment opportunities for minorities. The Bank committed itself to affirmative action procedures in hiring and training minority group members, and participated in community programs to qualify them.
San Diego felt the onslaught in 1975 of the worst recession since the second World War, brought on by and energy crisis, inflation, and high interest rates. But once again San Diego Trust could report an outstanding years. Due to its recent growth it had become the 16th largest bank in California.
Under the identifying sign “7/24”, i.e., 24 hours a day, 7 days of the week, a network of automated teller machines (ATM) simultaneously went operational at seven banking offices in July 1976. This marked the commencement of the first widespread application of electronic fund transfer (EFT) technology in the county. The determined way San Diego Trust set the system in operation enhanced its reputation as an innovative organization.
As the nation moved into an era of expanding financial services, competition intensified. Individuals in banks and agencies probed for openings in federal and state laws and regulation, gambling on future legislative action or favorable decisions from the courts. From about 1960 onward regulatory and administrative agencies had assumed authority that rightfully was the function of the congress. That body, beset by a diversity of interests, often found itself unable to act in a timely manner. It was rendered partially impotent by the applications of rapidly expanding technology. For example, it could not reach a consensus for a national EFT policy until after ATMs and point-of-sale transactional terminals were a national presence.14
Non-banking organizations-financial service conglomerates consisting of brokerage, insurance and finance companies, automobile manufacturers, retailers-became competitive with traditional banking. They were known in the industry as non-bank banks. California appeared attractive to all of them. As a matter of fact, it was not a one-way invasion because several major bank holding companies expanded aggressively, setting up loan production and non-deposit-taking subsidiaries in California. Foreign banking entities increased their presence in the state by acquiring additional California chartered banks.15
All of this activity was leading to deregulation of the traditional banking industry, Finally, in 1978, Congress passed the first of three financial institution’s deregulatory acts. Two more followed in 1980 and 1982, These omnibus deregulatory bills were enabling legislation for widespread changes in the structure and procedures of banking, supportive of conditions and trends in the financial services industry.
Competition became formidable. But San Diego Trust was not deterred. It met the challenge by continuing its drive for efficiency and by aggressive movement into competitive products and services the Bank and its Clientele could afford. The Bank was the first in the community to introduce interest bearing checking accounts (NOW). Its MasterCard Banking Card (direct purchases from funds in checking accounts) was the first to be issued in California. These and a host of other services in 1983 were gathered into a versatile system designated “The Key to The City.” It was a success because a survey had been conducted to determine what the clientele wanted.
San Diego’s strong economy and rapid expansion of local business led the Bank to form, in 1978, the Corporate Banking Department to assist branch managers in meeting the financial requirements of mid-sized and small local businesses.
The year 1984 marked the 60th anniversary of the Bank’s Trust Department. During that year, true assets exceeded $1 billion for the first time, representing a tripling of assets in the previous ten years. It continues to be the leading trust department of all locally-based banks.
The success in the exciting period of time in the Bank’s history, when it dealt successfully with change while adhering to its valued standards, can be underscored by a review of conditions at the end on 1984: net income was $13.55 per share and the Bank had $305.1 million in its investment portfolio, indicating and exceptionally liquid position. The Bank passed the $1 billion-in-assets milestone in April 1985.
In review, it can be seen that San Diego, situated on a fine harbor and served by a railroad, was a small city of promise in 1889 when Joseph W. Sefton Sr. established the San Diego Savings Bank, as it was the called. There was a pervading sense of optimism in the community which was reflected in the widespread desire for metropolitan status. Sefton felt too. A successful businessman from the midwest, this would be his first venture into banking. He wanted the Bank to attract all classes of customers, but he particularly desired it to be a secure depository for those of limited means, who at the time were reluctant to use banks. The success of these designs is now evident. They were the source of what has grown into a notable financial institution whose progress continues to parallel that of its community. San Diego Trust & Savings Bank’s roots are deep and widely spread in the original territory. The histories of both bank and city remain intertwined to the benefit of both. Remarkable, too, is the single family vein that runs through its history. The founder’s son and grandson have each served as president . . . Its objective is to continue to prosper regardless of the changing economic and regulatory conditions of the future.
The author for this article serves as San Diego Trust & Savings Bank’s historian and design coordinator.
The basis for this article is the author’s “San Diego Trust & Savings Bank, 1889-1989: A Centennial Book,” San Diego, California, 1989. Much of the material in the book was compiled from the Bank’s own records and from Sefton family documents, including clipping books and the Sefton family bible.
1. Joseph Weller Sefton was born on March 21, 1851, in Thurmont, Maryland. San Diego Union, March 26, 1908.
2. See, e.g., The Golden Era, September 1889, pp. 445-446.
3. Sefton suffered a serious injury to the knee in 1875 that would greatly affect him the rest of his life. While running to catch a train, his derringer fell from his pocket, discharged upon hitting the platform, the bullet striking him in the knee.
4. See American Banker, 150th Anniversary Edition, New York, 1986, pp. 18-24 and p.72.
5. California Banking Commissioners Annual Report for 1888, San Francisco, pp. 81-85. See also Ira B. Cross, History of Banking in California, Volume II, San Francisco, 1927, pp. 727-728.
6. Pourade, Richard F. The History of San Diego: The Glory Years, The Union-Tribune Publishing Company, San Diego,. 1964, pp. 72-79.
7. For a detailed analysis of the California Banking Act of1909, see Cross, Volume II, pp. 719-728. For a discussion of the Federal Reserve Act, see Cross, Volume II, pp. 851-853.
8. Joseph Weller Sefton, Jr., born on September 4, 1881, in Dayton, Ohio, was the second child and first son born to Joseph and Hattie Sefton. At the time of his father’s death in 1908, he was also the only surviving son. San Diego Union, March 4, 1966.
9. Myron T. Gilmore, born on January 11, 1847, in Dedham, Maine, first began his working career as a blacksmith’s helper. With the advent of the Civil War, he joined the 15th Maine Volunteer Infantry. A close friend convinced Gilmore in 1883 to come to San Diego and join him at the First National Bank, where he soon became the assistant cashier. San Diego Union, June 10, 1939.
10. For an architectural study of the building, see Landmark, by the author, San Diego Trust & Savings Bank, San Diego, 1978.
11. A.P. Giannini founded the Bank of Italy, which later becoming Bank of America, in San Francisco in 1904. He was largely responsible for the introduction of branch banking throughout California. For a narrative description of his methods, see James, Marquis and Bessie R. James, Biography of A Bank, Harper & Brothers, New York, 1954, pp. 48-92.
12. See San Diego Union, March 10, 1928.
13. Thomas Wolcott Sefton, born in New York City on October 8, 1917,into a Scotch-Irish family, was orphaned at two months. He was adopted by Joseph W. Sefton Jr. and his wife, Helen, and raised on his parent’s estate in San Diego’s Point Loma suburb.
14. See American Banker Commemorative Edition, “Banking’s Past/Financial Services’ Future,” pp.64-65.
15. Ibid ., pp. 56-62. This chapter is aptly titled, “A Hungry Mood Awakens Bankers to New Frontier.”