HISTORY OF THE BANK OF PRESCOTT

McRAE YEARS

The Bank of Prescott was chartered on August 3, 1904 (2 p.m.) at a meeting held at Merchantile Trust Company in Little Rock, Arkansas.  The incorporators of the bank were Thomas C. McRae, Washington Y. Foster, Charles McKee, Charles McCain, S.J. Hesterly, W.N. Bemis, H.E. Bemis, W.B.Waller, J.M. Pittman, C.D. McSwain and James G. Clark.  Two thousand (2000) shares of common stock was initially paid for and issued to the incorporators.  The bank was capitalized with $50,000.  At the first meeting of the Board of Directors, the bank agreed to pay T.C. McRae $700 for a lot (corner of E 2^nd and Elm Street; 90 feet x 25 feet) to build a bank building on.

Thomas C. McRae, Washington Y. Foster, Charles McKee and Charles McCain served as the bank's first board of directors.

The initial officers of the Bank of Prescott were Thomas C. McRae, President; W.Y. Foster, Vice President; Charles McKee, Secretary; and Charles McCain, Treasurer and Cashier.

The bank opened for business in 1905.  It finished the year with assets of $108,624.17.  This increased to $247,518.81 at the end of 1906.

By 1910 the bank had grown to over $293,000 in total assets.

The bank first reached the $500,000 asset milestone in 1913.  During the January 1914 annual meeting, President McRae’s remarks included comments about the good cotton crop from the previous year and how well the local farmers paid their loan balances.  He further commented about the continued growth of the bank’s Emmet branch and the bank’s insurance department.

In 1914, the bank’s building was remolded, as opposed to building a new building, which was of some discussion for two years.

The bank’s total assets reached $1 million in 1919.

The annual stockholders’ meeting of 1920 – the start of the “Roaring 20s” -  elicited this comment from President McRae:  “The high cost of living, extravagance, speculation, light production and loss from rains, make the conditions unlike anything we have heretofore had to contend with.”

The bank’s Board of Directors met in a special meeting on April 20, 1920 to receive and review a letter from then State Bank Commissioner W. T. Maxwell, which read as follows:

THE SIGNS OF THE TIMES:

A careful reading of and a fair interpretation of the signs of the times warrant the preparation and delivery of this letter.  The most forceful words in modern business are, DELIBERATION, PRUDENCE, CAUTION.

Your bank is open and doing business. The way to have it so is to keep it so.

Business enterprises do not operate automatically; sane, positive intelligent direction is indispensable.

Banks do not operate for a day or season, they are considered a permanent community enterprise.

The signs of the times demand of business a conservative policy plus.

Reserve should be a matter of daily attention.  Not just fifteen percent but sufficient to cover any contingency.  Your deposits are at the demand of the people.  They could be called.

Loans may be used if the proceeds are to be used in production; for speculation, not at all.  The banker is debtor to the depositor, and must guard well his trust.  He is clearly within his right if he inquires how the borrower will employ the credit sought.

Overdrafts, cash items and other junk should be immediately cleared, and “NOT” carried instead.

Collection is preferable to extension, reduced line preferable to renewal.

Money is the State’s margin of production over consumption; preserve it and cause the margin to widen; her bank deposit is her reserve; keep it high.

May the State not solicit, toward the stability of her financial and industrial enterprises, such studied conservatism by those in control as that their perpetuity may be but a consequence.

In 1921, Bank President Thomas C. McRae was elected Governor of Arkansas, and served until 1925.  As a result, his salary as President of the bank was reduced in January 1921 by $100 per month.  It appears that during his tenure as Governor, he continued to be elected president of the bank, but did not attend all meetings.  (An interesting question was raised by Jim McKenzie as to Governor McRae still being president of the bank and appointing the bank commissioner, which governors do, and that person regulates banks.  This appears to have been the case.)

In 1922, the bank reflected on the collapse of the price of cotton the previous year and it affected the bank.  The bank was forced to “economize.”

1924 was a turn around year as it was noted several times as being the best year since 1919.

In the February 1926 board meeting, the cashier of the bank made the statement that “…there is nothing that indicates inflation or speculation.”  It was likewise noted that the oil business had improved as compared to the previous several years.

The building was remolded once again in 1927.

Governor McRae died on June 2, 1929 – before the stock market crash.  His son, Thomas C. McRae, Jr., the bank’s long time Cashier, was elected as the bank’s second president.

The board of directors’ meeting on November 27, 1929 had the following comment:  “Since the fall in stock prices in New York bonds have shown a marked increase in price.  Our holdings are therefore more valuable…”

In T.C. McRae, Jr.’s first annual stockholders’ meeting in January 1930, he said, “The recent crash in the stock market, the tremendous increase in broker loans, the lowering of interest rates, the releasing of billions of dollars in capital, these things, have wrought a material change in the financial conditions, and we are therefore confronted with problems for 1930 that we did not have in 1929.”

To add to the stock market crash, there was a local drought in 1930.  President McRae commented in June 1930 that, “Business is the dullest we have had is so long I do not know the date to make comparisons.”  Things continued to get worse, and as a result the board adopted a resolution in August 1930 that read in part, “…that the policy of this bank be declared to be to assist in the way of extensions or renewals, in whole or in part, which the circumstances of each case warrants … and the policy of this bank to those customers who are willing to help themselves … be to give them every consideration and leniency in the emergency confronting them.”

Subsequent board meetings likewise reflected growing pessimism.  In December 1930, President McRae stated, “On account of the financial situation throughout the state, the distressed condition of most of the people and the lack of employment, business has not been good.”  He further stated “…the whole business (meaning the “banking” business) is unsettled.”  Nevertheless, the bank actually made a $10,000 profit for 1930.

In January 1931, the board reduced the salaries of some employees, and while others remained the same, the board made it clear that these salaries were from month to month, as conditions warranted.

President McRae’s annual meeting remarks in January 1932 included the following:  “The year 1931 was the most disastrous year for banks, and in fact all lines of business, than in any year in the history of this country, and all during the year we were compelled to proceed very cautiously.  …  The result has been a very poor year in earnings.  …  But for greatly reduced expenses our showing would have been much worse.  …  As to the year 1932, we are still in the midst of a great depression, and I see very little hope of increased business…”  The board additionally reduced the salaries of all but one employee.

The 1933 annual report by Mr. McRae was also very negative as the Great Depression continued.  He stated, “I reported 1931 bad, but the year just closed seems to have been worse.”  In forecasting what 1933 might hold, Mr. McRae offered these suggestions:  “…if the Government, as well as ourselves, balance budgets, and all stop borrowing in order to lend our way back to prosperity”, then things might improve.  “It is bitter medicine to balance budgets, but it makes better times inevitable, …”  Again, salaries were reduced.  The bank’s assets had dropped under $1 million for the first time since 1919.

In late February and early March 1933, area banks met in Hope to discuss the looming banking crisis, especially the perceived trouble the Little Rock banks had.  And then on March 5, 1933, President Roosevelt ordered all banks closed for three days, the famous “bank holiday.”  Not all banks reopened, but the Bank of Prescott did.  One of the local banks, Nevada County Bank, did not reopen.  The Bank of Prescott was appointed its receiver.  The Bank of Prescott actually increased its deposits after the bank holiday.  During the restricted period of the first half of March 1933, no state chartered bank in Arkansas could make a loan.

The Banking Act of 1933 was passed by Congress in mid-1933, and as a result the Bank of Prescott made application to becomes a member of the newly created FDIC in September 1933.

The January 1934 annual meeting brought once again a reduction in salaries of all employees.

In January 1935, Mr. McRae was finally able to report that comparatively speaking, things had gotten better in 1934 as compared to the previous depression years.  For the first time in several years, salaries were not reduced, but were left unchanged.  The bank’s assets once again ended the year (1934) over $1 million, a rather large increase of almost 80%.

Longtime stockholder and board member D.L. McRae, died in February 1936.  He was another son of Governor McRae’s and father to Duncan McRae (D.L. McRae, Jr., who died in 2003).

While things continue to improve over the 1935 – 1937 time period, Certificate of Deposit rates were reduced to 1%, reflecting bank’s inability to lend money safely and profitably.

The first mention of “world” conditions was made by President McRae in his annual stockholders’ remarks of January 1938.  He additionally commented on increasing unemployment and business’s reaction to Federal Government intervention via certain legislation passed by Congress.  Even though it had initially appeared in the early months of 1937 that it would be the “turn around” year, it was not.  As a result, the board again began reducing salaries on all employees.  The bank’s assets, while still above $1 million, fell significantly as a further reflection on the general state of economic affairs locally.

President McRae’s 1939 comments reflecting upon 1938 stated that things seemed to be getting better in the United States, economically that is, but continued to worry about the world political affairs.  Salaries were left as is for the time being.  The total assets of the bank did, however, drop under $1 million again.

In June 1939, the board approved the bank to be able to make car loans.  The maximum loan would be for 2/3rds of the sales price, and to be paid in monthly payments over a period not to exceed 18 months.  The board adopted the guidelines of the W.B. Worthen Bank in Little Rock.

Salaries were once again reduced in July 1939, the first time this had been done in midyear.

The January 1940 remarks of Mr. McRae were filled with the greatest enthusiasm since the start of the Great Depression, at least from an economic standpoint.  He specifically recognized the warring European nations and the large amount of blood shed.  In his 1941 remarks, Mr. McRae said much the same thing, that economically things were better, but was due to the European War.

In the July 1941 board meeting, President McRae states “Business for July has been the best from a standpoint of activity since 1929 and increasing each day.”

The bank’s assets go back over $1 million in 1941, and with the events of December 7^th, 1941, the Great Depression was officially over.

At the shareholders’ annual meeting of January 1942, President McRae noted that the new war had caused the bank’s business for 1941 to be good, but the downside was that commodity prices had increased significantly.  Even crop and cattle loans were good for the first time in years.  The 2^nd Army had selected Prescott as its headquarters for maneuvers, and as a result, the town was “run over” with soldiers and their business.  The Proving Ground in Hope opened in 1941 and many Prescott and Nevada County residents were employed there.  These new businesses resulted in an increase in new accounts for the bank.  Additionally, Lafayette County hit oil and this business spilled over to Nevada County.  President McRae stated that the oil royalty lease money was a “God send to many farmers.”  President McRae did say that the newfound business activity was negatively impacted somewhat by all the new government regulations that had come from Washington, some applicable to banking and some not.  He stated, “Our business has changed greatly, is still changing, the detail of operations is increasing and the Government is reaching out further and further and telling us what we can and cannot do.  [W]e have not seen anything yet.”  And finally, raises were given to all employees.

The report of President McRae in January 1943 for the 1942 year said that it was the best year in the history of the bank as far as volume was concerned, but due to the fact that the demand for loans was very light, the profitability of the bank did not match the volume of business.  Again, it was noted that the price for timber increased a great deal.  There was no unemployment and wages were “unheard of.”  President McRae for the second year in a row commented about new and increasing Government regulations.  He said, “The time requirement by the management in interpreting and even reading the many circulars and regulations of the Government and the Federal Reserve Bank is considerable, and many are difficult to understand.”  Profitability was not such that raises could be recommended.  Additionally, it was noted that Government approval was required to grant raises.

The year 1943 saw the best year in the bank’s history in all respects, both volume and profits.  The effects of the war on prices continued.  Full employment plus never before seen wages also continued.  President McRae again complained about the ever increasing number of Government regulations and the adverse impact on the bank.  The year saw the advent of Ration banking in which the bank became a middleman for ration tokens.  The bank may have broken even in this venture.  First State Bank was liquidated in 1943, leaving the Bank of Prescott the sole bank in the county.  President McRae did recommend salary raises, pending approval of the War Labor Board.  He did state, however, that he doubted that the bank would receive the required approval.  The bank ended the year with assets of almost $2.5 million.

1944 saw the same trend of business; excellent volume but little loan demand.  While profitability was not matching the volume, President McRae still recommend a salary increase for all employees, again subject to regulatory approval.  The bank ended 1944 with over $3 million in assets.

For 1945, President McRae said that the war had resulted in the bank’s best year ever.  Noted in his annual report was the “substantial” pay raise in September, plus a Christmas bonus, a first for the employees.  The bank’s assets were now over $4 million.

The year 1946 was a carbon copy of 1945, very good all the way around.

Loan demand finally picked up in 1948, thus leading to the best year ever for the bank as far as profits were concerned.  In his remarks, President McRae stated that, “It is easy to make money in the banking business, the job is to keep from losing it.”

STEPHENS/HUDSON/HENDRIX YEARS

The year marking the half way point for the century saw many changes.  There was talk of a paper mill coming to Prescott plus the oil field activity south of Prescott was causing good feelings.  During the year, W.R. Stephens, Dr. A.W. Hudson and Olen Hendrix became stockholders of the bank, along with Fred J. White from Oklahoma.  Thomas C. McRae, Jr. served as President until August 15, 1950 for a total of twenty-one years.  (He remained as Chairman of the Board of Directors until his death on October 9, 1952.)  Fred J. White succeeded him as President.  Chairman McRae noted in his remarks for 1950 that cotton had been “almost a complete failure” and as such negatively impacted on the performance of the bank.

The year 1951 was a really “cool” year as the bank installed air conditioning.  In November 1951, the bank made application with the FDIC to open a branch bank at the corners of 1^st & Main Streets.

Thomas C. McRae, Jr, Chairman of the Board of Directors, died on October 9, 1952.  Dr. A.W. Hudson was elected as his successor on a split 5 - 3 vote.  During the year W.R. Stephens became the largest shareholder of the bank.

In 1954 W.R. Stephens sold his interest in the bank, while is younger brother Jack Stephens retained a very small interest.

The year of 1955 saw Fred White resign as bank president with Olen Hendrix being elected as his successor.  W.R. Stephens returned as a stockholder of the bank (along with his investment company, Stephens Inc.), purchasing Mr. White’s ownership.

The bank’s assets reached $4 million in 1956, the first time since 1945.

At the 1958 annual shareholders’ meeting, President Hendrix announced that there was a great need for either a significantly remodeled building or a new backing facility.  He also announced that he had turned down other employment to remain at the Bank of Prescott.  Assets reached $5 million for the first time as of the close of business 1957.

In March 1958, the bank purchased from the First Baptist Church the initial parcel of real estate (East 2^nd Street South & East Main Street) where the current bank building is located.  The cost was $6,000.

In July 1959, Milam and Sons of Prescott was awarded the contract to build the new bank building.  The contract price was $144,900 with additional contracts for extras totaling $22,248.  In December Prescott had another new business, KTPA radio station.  The bank elected to use radio advertising for the first time.

In President Hendrix’s comments at the 1960 annual shareholders’ meeting, he stated that there were changes in the type economy being seen; changing from row crop farming to cattle and timber.  In March, the bank purchased additional and adjacent property for a parking lot for its new building.  The bank moved to its new facilities over the 1960 Memorial Day weekend.

The year 1962 saw the introduction of the Uniform Commercial Code in Arkansas, and its effect on the bank and banking in general was profound.  In December of this year, the bank first began to investigate the need of a branch bank on the West side of town.  (The actual property was purchased in January 1963.)

Prescott saw much business activity in 1963 according to bank records.  Prescott Manufacturing was having a new building built; it was announced that a new county hospital would start construction in 1964; the Interstate had been announced and was a few years down the road; and the Robbins Flooring plant was near confirmation.  Things were good for the community and for the bank.

1964 saw the first use of fees assessed for insufficient checks.  The new courthouse was completed in mid-1964 and the construction of the new hospital was nearing its start.  The Robbins plant was announced.

Ozan Lumber Company was sold to Potlatch in 1965 and the bank’s deposits increased as a result.

The banks’ West Side Branch was opened in 1966.

The bank instituted a retirement plan for its employees in 1967.  Also, the year saw the authorization for the expansion of the bank’s main facilities to provide for additionally required space for the bookkeeping department.  (This was completed in 1968.)

The bank in 1968 entered into an agreement with Worthen Bank & Trust to participate in the BankAmericard Program, the precursor to the Visa credit card.  The board also authorized management to begin closing all day on Saturdays.  Starting in August 1968, the bank did begin closing on Saturdays, but additionally began staying open all day on Wednesdays, and entertained the notion of extended Friday hours.

The main bank facility was once again expanded in 1969.  The assets of the bank as of the end of the year exceeded $10 million.

The bank’s twenty-year Chairman of the Board, Dr. A.W. Hudson, died in April 1971.  The bank also purchased for future expansion the property immediately south of the main facility from the old Nevada County Abstract business.

BRANNAN YEARS

On June 22, 1972 Johnny Brannan was elected as the bank’s fifth president, and additionally CEO.  The total assets of the bank were $13 million.  The bank in 1972 purchased two additional adjoining properties to the main bank for future use.  Assets of the bank reach $15 million as of the end of the year.

Additional expansions to the main bank building occurred in 1973, with completion in 1974.  The year also saw the first bank accounts put on a computer system, with other accounts computerized in 1974.

The bank in 1975 purchased the property at the corner of East 3^rd Street South and East Main Street for possible future expansion.  The bank’s board approved the establishment of an ATM in Emmet, believed to be the first off-site ATM in Arkansas

The bank’s loan system was converted to computer in 1977.  Also in 1977, longtime bank employee and director, W.R. Hambright, was elected Chairman Emeritus in recognition of his fifty plus years of service.  The bank’s assets topped $20 million.

The bank celebrated its 75^th anniversary in 1979.  The Nevada County Day Service Center was about to come a reality and the bank made a $10,000 contribution to this endeavor.  Long time employee and director W.R. Hambright died in late 1979. The bank’s assets exceeded $25 million during the year.

The year 1980 saw the initial discussion of the formation of First State Bank Holding Company of Prescott, a one-bank holding company that became the owner of over 98% of the stock of the Bank of Prescott.  (The incorporation date of the holding company was January 28, 1981.)

In 1981 the bank’s assets rose to over $30 million.  Olen Hendrix resigned as Chairman of the board after twenty-eight years of service.  Johnny Brannan was elected to succeed him, and today, after twenty-three years of service, continues in that capacity.

The year 1983 marked the relinquishment by Johnny Brannan of the position of president, and the election of the bank’s 6^th president, John Brannan, Jr. who remains the president of the bank today.  Assets of the bank ended the year at over $36 million.

The total assets of the bank as of the end of the 1986 were over $42 million.

In 1988 the bank made a $10,000 contribution to the local hospital in hopes that such a contribution would help the hospital remain open for the local citizens.

Through the leadership of John Brannan, Jr., the old Nevada County Industrial Development Corporation was revitalized in 1989.  In subsequent years, this lead to the current Prescott-Nevada County Economic Development Office.  The bank today continues to strongly support the County’s economic development efforts with annual contributions that exceed $5,000, plus the involvement of five of the bank’s directors.

The bank in 1992 moved to a total in-house data processing system.  Total assets of the bank year ending were $57 million.

In 1994 the bank became a member of the Federal Home Loan Bank of Dallas.

The assets of the bank exceeded $60 million as of year-end 1996.

The bank in 1995 purchased the former Dr. L.J. Harrell building next to the bank.  The new property would be used for parking expansion.

The assets of the bank exceeded $65 million as of year-end 1998.

After much anticipation and anxiousness, Y2K went without a hitch on December 31, 1999 and January 1, 2000.  The bank made a $10,000 contribution to help fund the new Hamilton Blakely Senior Citizens’ Center.

The summer of 2000 saw the bank make a $15,000 contribution to the Prescott School District for the purchase of the scoreboard for the new gymnasium.  In the fall of 2000, bank customers had their first opportunity to use TeleBANK-24, the bank’s new automated voice response system.  December 2000 gave the community and surrounding areas the worst ice storm in memory.  While the storm paralyzed the entire southern part of Arkansas, the Bank of Prescott’s disaster policy was invoked for the first time and allowed the bank to be open every day providing banking services to all its customers, and even in some cases, delivering money to its business customers.

The start of 2001 introduced the bank’s customers to its new debit card.  In July 2001 the bank’s customers started receiving their new image checks and bank statements.  September 2001 saw the dissolution of the bank’s first holding company, First State Holding Company of Prescott.  Bank customers were introduced to a new mortgage product through the Federal Home Loan Bank of Dallas that provided bank customers a fixed-rate home mortgage.  The assets of the bank exceeded $72 million as of year-end 2001.

In June 2002 the bank made a $10,000 contribution to the Friends of the Library in the community effort to make the new Nevada County Library a reality.  Also in June 2002 the bank began offering overdraft protection to its customers.

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