First Union National Bank of Florida and sister banks in 10 other states plan to combine into one company this summer.
The consolidation is part of a trend by big institutions like NationsBank and Barnett Banks to do away with numerous subsidiary banks and, in the process, cut costs. But the centralization also undercuts the big banking companies' local ties as decisionmaking on business deals and on support of community activities is made from afar.
Banking companies have been required to maintain separate banks in each state where they operate branches. Each bank has its own name and board of directors and files separate financial statements with regulators. Starting in June, companies no longer have to maintain the separate banks.
Charlotte, N.C.-based First Union Corp. has applied to the Office of the Comptroller of the Currency for permission to merge its 11 banks to create a single bank from Connecticut to Florida.
The changes will begin with the Florida and Georgia banks in June and will be completed next year, said Ken Darby, a spokesman for the Florida bank, First Union's biggest. First Union ultimately expects to save $6.5-million a year.
The holding company will be left with its bank unit and a Delaware-registered company needed to operate some of its insurance businesses. First Union employs about 11,400 people in Florida and a total of 38,350 in its banks nationwide.
"This is more about reducing red tape and the gyrations that the bank office has to go through," said R. Harold Schroeder, who tracks the banking industry for Keefe, Bruyette & Woods. "Instead of keeping books and records for every legal entity First Union owns, now it will have one set of books and one set of records."
The reorganization was authorized under a 1994 federal law dismantling decades-old barriers to interstate banking and removing the expense of keeping separate banks with different boards and officers.
NationsBank last year quietly folded its Tampa-based Florida bank into its operations in Georgia. This month, NationsBank told federal regulators that it wants to operate a single bank on the East Coast that has branches from Maryland to Florida. It would do so by combining two separate banks, including its Georgia-Florida institution, and will operate its single bank from Charlotte.
Barnett Banks, based in Jacksonville, last spring folded 32 of its banks into five larger regional banks throughout Florida. In September, without any announcement, Barnett folded its five banks into one based in Jacksonville. In Florida, Barnett retained one separate bank on Captiva Island off Fort Myers.
Barnett's consolidation in particular represents a philosophical shift. The company argued for years that its decentralized structure kept it in closer touch with Florida's communities. Now, pressed by cost-cutting pressures, Barnett has decided to join its peers and consolidate.
_ Information from Times staff writers Robert Trigaux and Ameet Sachdev and the Associated Press was used in this report.