Barnett Banks, Inc.

1877–1993

In 1993 Business Week magazine called Barnett Banks, Inc., "Florida's most dynamic bank." Jacksonville-based Barnett was Florida's largest financial institution at the time, holding the majority of single-family-home mortgages, 27 percent of the state's deposits, and a large percentage of consumer loans. It ranked 20th among banking organizations nationwide. Although Barnett had only entered Georgia's market in 1986, it had become that state's ninth-largest bank by the early 1990s. The holding company had 32 banks and 7 non-banking affiliates in 235 cities, with over 600 offices in Florida and Georgia by 1993.

In 1877 banker William Boyd Barnett, his wife, and two sons Bion and William D. moved from Hiawatha, Kansas, to Jacksonville, Florida. The Barnett boys hoped a mild southern climate would benefit their mother's health. They could not have known that their father would found what would become Florida's largest bank. William B. established The Bank of Jacksonville on May 7, 1877. By the end of the year, the institution boasted $35,000 in capital. In 1888 the establishment's name was changed to The National Bank of Jacksonville. The burgeoning bank outgrew its original building in 1897 and moved to a new headquarters the following year.

Son Bion became president of the family enterprise in 1903 after his father died. The family name became part of the corporate culture in 1908, when the bank emerged from a reorganization as Barnett First National Bank of Jacksonville. The growing institution marked its 50th anniversary by moving into yet another new headquarters. When Bion celebrated the occasion in 1927, he proudly recounted that the family-owned institution had endured epidemics, fire, freezes, and financial panics.

But an even bigger challenge loomed on the bank's horizon. When some of Florida's financial institutions failed in the wake of the 1929 stock market crash, the relatively secure Barnetts formed Barnett National Securities Corporation, a bank holding company. The new entity quickly acquired and reopened three banks that had failed. Later, when President Franklin Roosevelt scheduled a bank holiday for March 5, 1933, Barnett's officers used an ingenious strategy to prevent a run on deposits. On March 4, the bank hauled out all of its cash in denominations of one-, five-, ten-, and twenty-dollar bills--nothing larger. All the teller windows were opened, and employees were instructed to count out each withdrawal slowly. As customers at the end of the lines saw their friends and neighbors leaving the bank with large bundles of bills, their confidence in the bank's liquidity was restored, and many went home.

With its headquarters in the state capital, a military town, Barnett First National's growth paralleled the city's development during World War II. And in the postwar era, when Florida became a retirement haven, immigrating seniors brought their savings and pensions to the state's financial institutions. Barnett stock was sold on a limited basis to the public beginning in the mid-1950s, and in 1962 the shares were listed on the Over-the-Counter Exchange.

The case was settled out of court in 1992 through the issue of $1.25 million in common shares to the plaintiff class.

1963–1988

Jacksonville attorney Guy W. Botts joined Barnett First National as president in 1963. He hoped to transform the essentially local entity into a statewide banking institution. The vehicle for this metamorphosis was Barnett's 30-year-old holding company subsidiary, Barnett National Securities Corporation. Although Florida's unique banking law restricted Barnett First National Bank from acquiring additional banks, when Barnett National Securities became the group's parent company in 1966, it was empowered to purchase other banks. Over the course of the four years before 1970, the reorganized entity acquired eight local banks and opened a ninth in Jacksonville. Each of these subsidiary banks was a separate corporation composed of a single full-service banking office. Botts' strategy worked so well and quickly that the holding company changed its name to Barnett Banks of Florida, Inc., in 1969 to reflect its statewide influence.

During the 1970s Barnett established the state's first credit card franchise. The Barnett Computing Co. subsidiary was subsequently created to facilitate credit transactions. This expensive undertaking helped the parent develop chainwide computerization before its competitors. The company founded many of its nonbanking subsidiaries during this decade. In 1971 the Barnett Mortgage Company subsidiary was formed, and many of the company's subsidiary banks were renamed "Barnett Banks." Barnett Winston Company, an investment vehicle, was formed in 1972; Barnett Investment Services, Inc., Barnett Leasing Company, and Barnett Banks Trust Company, N.A., began operations the following year. Barnett also became the southeast's first bank to be listed on the New York Stock Exchange in the early 1970s.

Charles E. Rice became Barnett's president in 1972. He had been president of First National Bank of Winter Park, the first bank acquired in 1966 by the Barnett holding company. Rice led the second wave of acquisitions--by 1975 Barnett controlled the largest number of banks of any holding company in Florida and had a market share of deposits of at least five percent in the state's eight largest cities; Barnett ranked second only to Southeast First National Bank of Miami. These acquisitions were made in spite of the brutal national recession of the mid-1970s and the Florida real estate crash. Barnett was duly proud that it had been able to pay quarterly dividends throughout this period, which promotional literature described as the "most severe financial crisis since the Great Depression."

As Barnett recovered in 1976, Florida's lawmakers revised laws that had prohibited branching. In 1977, the first year it was allowed (and coincidentally, Barnett's centenary), Barnett began to consolidate its more than three dozen individual banks and to open new offices. Four branches were launched that year, and nine more opened in 1978. Barnett worked to "blanket" Florida with branches: from 1978 to 1988, 230 branches were built.

Barnett grew much faster than its in-state competitors, and it was able to garner a dominant share of the market. The institution's strong position prepared it for the deregulation of the banking industry and the advent of regional interstate banking, which Florida's lawmakers approved in 1985. Unlike many of its rivals, Barnett was able to withstand the assault from outside banks--of Florida's top 15 banking companies in 1980, all but four were acquired by 1988.

1986–1992

And Barnett did not just hold its own. In 1986 the bank moved into neighboring Georgia with the purchase of First National Bank of Cobb County, a metropolitan Atlanta institution. Barnett dropped "of Florida" from its name, becoming Barnett Banks, Inc., in 1987. By the early 1990s, Barnett had made enough acquisitions to be Georgia's ninth-largest bank.

As interest rates dropped precipitously in the late 1980s and early 1990s, bank customers in all ranks sought higher-interest alternatives to standard savings. Barnett launched the Emerald group of mutual funds in 1988 to keep those customers "inside the Barnett family." And as the baby-boomer generation began to reach trust and private banking minimum income and net worth levels, competition to win their accounts intensified. Barnett joined a movement to merge trust and private banking. Prior to this time, private bankers had concentrated on gathering deposits, and trust departments had managed clients' investments. But in the 1990s many banks focused on providing their most affluent customers with a service-, rather than product-oriented, approach. The merger of these two departments provided the convenience desired by customers and encouraged officers in the two departments to share contacts.

Barnett was the subject of a class action suit in 1990 that charged that Barnett Equity Securities had distorted or failed to disclose vital information to investors. The case was settled out of court in 1992 through the issue of $1.25 million in common shares to the plaintiff class.

In 1991 the company announced that it would acquire CSX Commercial Services, a student loan holder, from CSX Corp. The $1 billion unit's name was changed to BTI Services. Barnett became the Florida student loan system's "Lender of Last Resort." Under sponsorship of the state's guarantor agency, the Office of Student Financial Assistance, Barnett distributed loans to students who had been denied by at least two banks.

Barnett purchased United Savings of America, a failed Florida thrift, in February of 1992. That May, Barnett also agreed to buy the 144 branches of First Florida Banks, the state's last large independent bank, for $800 million. While some analysts criticized the purchase as too expensive, Barnett justified the acquisition in terms of "synergies and data center consolidation," according to a 1992 Computerworld article. It hoped to consolidate and convert the two banks' check processing systems from a paper-intensive operation to one based on new imaging technology. The technology stored an electronic image of each financial document, so that a printout with over a dozen "checks" per page could be sent to the customer, rather than the physical checks themselves. Besides saving storage costs for customers (especially businesses) and banks, imaging reduced postage costs and streamlined the work flow. Barnett had already begun testing of Unisys Corp.'s InfoImage check processing imaging system at three of its check processing centers, and hoped to reap a return of 15 percent to 18 percent on its investments in the new technology.

1992–1993

Barnett's intricate and far-flung network of computerized branches, automatic teller machines, and offices was assaulted, along with the rest of south Florida, by Hurricane Andrew on August 24, 1992. Barnett's first challenges were to protect assets, locate employees, and try to conduct business at the affected branches. The bank had warehoused cash in anticipation of the storm, and had stockpiled 10,000 gallons of fuel at strategic locations for emergency generators. Barnett's disaster plan also included contracts with vendors to provide new ATMs, satellite dishes, and other emergency equipment. Contracted security officers provided 24-hour protection, and company recovery efforts were coordinated through a central command that worked with the Florida governor's office to set up temporary banking locations in the hardest-hit areas. Most major bank branches in the affected areas were reopened less than two weeks after Andrew struck.

Barnett was considered one of the more progressive banking firms in terms of employee child care and health benefits. In 1992 Working Mother magazine ranked Barnett Banks, Inc., among the 100 best companies for employees who were parents. The corporation had a child care center at its Jacksonville headquarters and arranged for discounted child care for employees at 600 branch offices. Barnett also established an on-site medical clinic to make health care services more convenient to employees. And while many U.S. businesses resisted passage of 1993's Family Leave Act, Barnett already had a similar policy in place.

By 1993, Barnett enjoyed deep market penetration within its home state: the institution's chief retail executive, Thomas B. Johnson, bragged that Florida offices were within ten minutes of 96 percent of the state's population. And although the company had itself grown through acquisitions, it found itself the frequent subject of takeover speculation. The lucrative and still-growing Florida market was one of the U.S. banking industry's most attractive. Analysts reasoned that such regional banks as First Union Corp., NationsBank Corp., Sun-Trust Banks Inc., and Wachovia Corp. would try to acquire Barnett if the federal government lowered barriers to national banking during the 1990s. Barnett defended itself against such threats by maintaining high earnings and a high stock value.