Nevada County Picayune and Gurdon Times Newspaper Archive

Solid conservative leadership gets Bank of Prescott through the Great Depression

Editor's Note: This is the second in a three part series on the Bank of Prescott's first century. This part deals with the Great Depression.

In Thomas 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 "banking") 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 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 only a few days later, 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.

In January 1935, 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 percent.

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 continued to improve over the 1935-1937 time period, Certificate of Deposit rates were reduced to 1 percent, 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. 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 2/3 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.

The January 1940 remarks of 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 bloodshed. In his 1941 remarks, 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 stated "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, 1941, the Great Depression was officially over.