Seattle First National Bank Inc. History

Company History:

Seattle First National Bank Inc., the oldest bank in Seattle, operates the largest community banking network in Washington State. A wholly owned subsidiary of BankAmerica Corporation, Seafirst, as it is commonly known, played an integral role in the growth of Seattle and has continued to pioneer innovations in the banking industry into its second century of business.

As the news of great riches in the West spread throughout the East and the Midwest during the first half of the 19th century, those brave enough to endure the hardships of traveling across the country by horse, wagon, or foot began their slow exodus west in search of their fortunes. One of these restless individuals in particular, itching for greater opportunity, was a farmer in Illinois named Dexter Horton. Horton, who had moved to Illinois in 1841 from his birthplace in Schuyler County, New York, had little success working his 80-acre farm. Eleven years spent clearing and tilling the land had resulted in failure and Horton was ready for a change. Talk of greater prospects in the West circulated throughout his community in DeKalb county, and when his neighbors formed a wagon train in 1852, Horton, his wife, and their small daughter joined the 27 other people and headed west.

Initially, Horton's financial condition remained as bleak as it was in Illinois. Arriving in Seattle in 1853 after spending a year in Salem, the capital of the Oregon Territory, Horton found work anywhere he could get it. He chopped wood, operated a logging camp's cook house, worked at a sawmill, and drove a wagon for a former neighbor from DeKalb County. By the following year, Horton, in a partnership with two other Seattle businessmen, began selling merchandise left by visiting ships as payment for Northwest timber. Selling clothes, tools, groceries, and any of the sundry items ship captains would leave as payment, Horton's mercantile business blossomed and his reputation as a person of high integrity became known to the 170 settlers residing in the area. With no bank in town, loggers, mill hands, and many of the gold prospectors and fur trappers in the area turned to Horton for the safekeeping of their valuables. Horton kept the deposits in sacks or pigskin pouches and cached them in various places around his store--the most popular repository being the bottom of a fish barrel. Eventually, Horton's rudimentary banking services gained such popularity that he decided to start a business devoted solely to fulfilling banking needs. In 1870 Horton and his mercantile partner for many years, David Phillips, opened Phillips, Horton and Company with $50,000 of capital.

Two years later, David Phillips died and Horton renamed the bank Dexter Horton and Company. Over the next 20 years the bank thrived. The growth in deposits at Dexter Horton and Company reflected the transformation of Seattle from a small settlement to a legitimate town. In 1882 deposits totaled more than $300,000. Five years later, they had grown to $750,000, and by the end of the decade deposits had topped $2 million. During this same period Seattle's population leapt 1200 percent, from 3,500 to over 42,000.

During these years of robust growth for Horton's bank, two other predecessor banks of Seafirst were founded. In 1882 a private bank, George W. Harris and Company, was formed. Several months after the bank opened, Harris obtained a national charter and the bank was renamed First National Bank of Seattle. The following year, Puget Sound National Bank was founded. These two banks, along with Dexter Horton and Company, would form the nucleus of what would eventually become Seafirst.

In 1893 the years of exponential growth enjoyed by Dexter Horton and Company shuddered to a stop. An economic downturn pulled the nation into a depression, and a consequent bank panic swept across the country. Fearing their money was at risk, hordes of depositors rushed to their banks to withdraw their accounts, causing many banks to close. The banks in Washington state were not excluded from the panic. In a four-year period from 1892 to 1896, the number of banks declined from 173 to 91. Although Horton's bank escaped closure&mdash did Seafirst's other main predecessors and the newly formed Seattle National Bank--its deposits shrank considerably. In 1892 Dexter Horton and Company boasted deposits of $1.4 million. By 1897 deposits had fallen to $638,000.

The economic slide of the 1890s ended in the Northwest with the discovery of gold along the Klondike River in the Yukon Territory. On July 14, 1897, a steamship arrived in San Francisco with news of the gold strike. Three days later, a group of miners and an Associated Press reporter docked in Seattle with 3,000 pounds of gold. The news spread quickly and the rush for gold began in earnest. As the nearest seaport to the awaiting riches northward, Seattle and its businesses benefited tremendously from the infusion of thousands of gold seekers. Seattle's population doubled to over 80,000 during the 1890s, with a majority arriving after 1897. Each newcomer was a potential depositor and the boost to businesses in the area increased the wealth of the city, which invariably was funnelled through the city's banks. The deposits at Horton's bank rose from the pre-gold rush low of $638,000 to $3.7 million by 1900. While timber had originally attracted settlers to Seattle, the discovery of gold transformed the area from a town enjoying steady growth into a boom city teeming with hopeful fortune seekers. For Horton's bank, the Klondike strike was a defining event in its history. From 1897 and on, both Seattle and the predecessors of Seafirst began the inexorable push toward greater growth.

In the decade to follow, a time during which Seattle's population increased to almost 250,000 and total bank deposits in the area ballooned from $17 million to $80 million, three additional predecessor banks that would figure prominently in the formation of Seafirst were founded. In 1903, a year before Dexter Horton's death, the Union Savings and Trust Company and the Washington Trust Company were organized. Six years later, the Metropolitan Bank opened its doors. These years of growth also witnessed one of the many bank mergers that would characterize the industry for the rest of the century. In 1910, the same year in which Dexter Horton and Company was granted a national charter (becoming Dexter Horton National Bank), the First National Bank of Seattle and the Puget Sound National Bank merged, retaining the Seattle National name, and supplanted Dexter Horton National as the city's largest bank. Dexter Horton National, now headed by a former messenger for the bank, Norval Latimer, responded by affiliating financially with the Washington Trust Company. This did not restore the bank as the area's largest, but did enable it to circumvent banking regulations that barred national banks from engaging in trust business.

The following decade witnessed the outbreak of World War I, and with it came another upsurge in banking activity. Spurred by the sale of Liberty Loans and an increase in foreign trade and its financing, deposits in Seattle's banks nearly doubled to $174 million. Strengthened by the upturn in business, Dexter Horton National expanded its banking services by adding a foreign exchange department and began engaging in investment banking, an area of banking business eschewed by commercial banks before the war. The breadth of services offered by Dexter Horton National increased during the 1920s, and it once again became the area's largest commercial bank in 1924 by merging with the Union National Bank of Seattle. Deposits after the merger totaled $31.8 million.

The decades of phenomenal growth in the Seattle area had, by the 1920s, begun to attract of bankers and businessmen from the East Coast and California. By 1929 Seattle's population had increased to 365,000, making it the nineteenth largest city in the United States, and its port bustled with activity to and from the Orient and Alaska. As the city rapidly shifted toward the era of modern technology and the modern corporation, the demand for capital to effect the transformation was in high demand. Bankers in the East, with larger reservoirs of cash than their Western counterparts, began to court the customers of Seattle banks. Fearing that the financial control of the area would be wrested away from them by outsiders, several of Seattle's bankers discussed a merger as an antidote to the creeping influence from the Eastern financial centers. In 1929 the Dexter Horton National Bank, the Seattle National Bank, and the First National Bank Group, with combined deposits of $96 million, consolidated to become the First Seattle Dexter Horton National Bank. The consolidation created one of the six largest banks on the Pacific Coast and enabled the bank to finance the capital outlays needed by local companies that banks from Chicago and New York had previously funded.

With the new name and solidified resources came an economic disaster far more deleterious than the bank panics of 1893 and 1907. The beginning of the Great Depression in 1929 rocked the nation's economy and caused the closure of numerous banks. From 1929 to 1933, the number of banks in the United States plummeted from 25,586 to 14,771 and deposits shrank from $58.2 billion to $41.6 billion. Washington state banks suffered even greater losses than the national average, but banks in Seattle incurred comparatively smaller--although still severe--losses. The First Seattle Dexter Horton National Bank, which changed its name again in 1931 to First National Bank of Seattle, saw its deposits sink by nearly $27 million from 1929 to 1933. At the same time its loans drop to $22.5 million from $57.7 million. But by 1934, while most of the United States remained mired in the Depression, First National began a steady comeback, recording deposits of $74.9 million by the middle of 1934 and $84.7 million by the end of the year.

As First National recovered from its losses, sweeping national bank reform changed the nature of banking and marking the beginning of a new era. The Banking Act of 1933 guaranteed deposits, limited bank investments, and, most important for the future of First National, allowed banks to open branches. At roughly the same time that the federal government gave its nod to branch banking, Washington state law also legalized the practice. First National quickly absorbed its six affiliated banks and turned them into branches. In the bank's zeal to open more branches and extend its presence to the eastern regions of Washington state, First National consolidated in 1935 with Spokane and Eastern Trust Company, the oldest and largest of the eastern Washington banks. The consolidation, renamed Seattle First National Bank, joined Eastern and Spokane's deposits of $27 million with those of First National's to give Washington state its first bank with over $100 million in deposits. This move also stretched the presence of the Seattle-based bank across the state.

By 1940, through the aggressive acquisition of additional branches, Seafirst had become the largest bank in the Pacific Northwest and one of the 50 largest in the United States. Deposits had grown to over $200 million, and 22 communities outside of Seattle were served by the bank. This growth, however, paled in comparison to the bank's achievements during World War II. Between 1939 and 1945, deposits at Seafirst jumped from $209 million to $679 million. The bank, with 35 branch offices, catapulted into the top 25 of the nation's largest banks.

In the years following the war, Seafirst's growth was hindered by a sluggish economy that chipped away at the bank's deposit level. It would take six years for the bank to surpass its record high in deposits in 1945. From 1945 to 1951, Seafirst added 16 new branches to a banking system that remained the largest in the Pacific Northwest. Throughout the 1950s and 1960s, Seafirst continued to acquire smaller banks and turn them into branches. By 1962 Seafirst had 100 branch offices and deposits of over $1 billion.

After 15 years of feverish growth, Seafirst directors decided to halt further acquisitions and restructure the bank to streamline its operations in the early 1960s. Concerned that the proliferation of branches had created a labyrinthine management structure and that the mounting competition by local banks would begin to erode into its customer base, directors developed a marketing plan to focus the bank's image and reorganize the supervision of its branch operations.

By the end of the 1960s, Seafirst had launched several innovative banking services, expanded internationally, and positioned itself for its next century of business. In 1966 the bank moved its headquarters into a new 50-story building. Seafirst also pioneered the move toward credit cards in Washington state by issuing Firstbank cards in 1966. Other firsts included the introduction of a savings bond as a new time deposit instrument in 1966, the 1967 acquisition of a mortgage lending company as an affiliate, and the installation of automated teller machines in 1968. Seafirst opened a representative office in Tokyo and a wholly owned subsidiary in Switzerland in 1969, representing the company's initial foray into the European funds market.

Once reorganized, Seafirst continued to expand during the 1970s. Under the stewardship of William M. Jenkins, chairman of the bank since 1962, the number of branches grew to 172 and deposits increased to $6.65 billion during the decade. By the early 1980s, Seafirst was the 18th largest bank in the nation. It controlled nearly 40 percent of the Washington market and was roughly twice as large as its nearest competitor. As the bank's regional dominance increased, however, it became the target of union and consumer groups. Critics charged that Seafirst had grown too fast and had adopted deposit and lending policies that discouraged consumer business. Seafirst did charge higher banking service fees than its competition, apparently assuming its position as the leading bank was unassailable.

The dramatic increase in oil prices during the 1970s spawned a multi-billion dollar energy exploration industry with which Seafirst became heavily involved. The bank opened an energy office in 1979 and began granting loans to fund many of the exploration projects. For Seafirst, the success of these projects upon both the discovery and continued high price of oil. When oil prices began to drop in the early 1980s, Seafirst found itself with $1.2 billion in energy loans (representing 17 percent of its total loans). The ramifications were catastrophic. In 1981 the bank posted earnings of over $80 million. The following year, it recorded a loss of $91.3 million. After losing another $133 million in 1983, Seafirst's capital base dropped to approximately $323 million, $37 million lower than its nearest competitor. The future for Seafirst appeared bleak, but the bank was rescued by the infusion of $150 million into its capital base as a result of its acquisition by BankAmerica Corporation in 1983.

Although the acquisition provided immediate relief for Seafirst, full recovery from the imprudent decisions of the 1970s did not occur overnight. Still saddled by its pernicious energy loans, the bank continued to lose money and suffer from a tarnished image. But by the end of the decade, however, Seafirst began recording profits once again. This turnaround was largely due to sweeping operational and marketing changes that restored the public's perception of Seafirst as a consumer-oriented bank. Branch offices were relieved of much of their administrative and processing responsibilities, allowing personnel more time with customers. Seafirst also offered additional services to attract new customers and halt the attrition of existing accounts. In addition banks stayed open until 6 p.m. each weekday and offered Saturday hours, and customers were offered 24-hour service via telephone.

By the early 1990s, Seafirst had shed its negative image, substantially increased its customer base, and posted enviable profits. In 1992 the bank's deposits totaled $12.35 billion. It reported a net income of over $233 million, buoyed in part by the absorption of 82 former Security Pacific branches from the 1991 merger of BankAmerica and Security Pacific.

As Seafirst points toward the future, its prospects look bright. Having learned from its mistakes during the 1970s, Seafirst's position as the leading bank in Washington state appears solid. Undoubtedly, the bank will be challenged by changing conditions in the future, but if it continues to meet the needs of its patrons, Dexter Horton's legacy should continue well into the future.

Principal Subsidiaries: Centrum Properties Corporation; DAS Holdings Inc.; Equipment Transfer Corporation; LAD Northwest, Inc.; Seafirst Whitehead Dareco; Leasco of Washington; Seafirst America Corporation; Seafirst Capital Corporation; Seafirst Services Corporation; Seattle-First International Bank

Further Reading:

• Asher, Joe, "Seafirst Expands Card Delivery Systems," ABA Banking Journal, April 1991, pp. 76-78.
• Dunphy, Steven H. "Did State's Biggest Bank Want To Stay In Big Leagues Too Badly?," Seattle Times, April 24, 1983, p. C1.
• Hollie, Pamela G., "Seafirst Bank's Image Problem," New York Times, September 15, 1980, pp. D1, D7.
• Paich, Milo R., "Making Service Quality Look Easy," Training, February 1992, pp. 32-35.
• Scates, Shelby, Firstbank: The Story of Seattle-First National Bank, Seattle: Seattle-First National Bank, 1970.

Source: International Directory of Company Histories, Vol. 8. St. James Press, 1994.

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