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Book Title: Standard History Of Knoxville

CHAPTER XIII.
BANKING.

First Bank Established 1811—State Bank Organized—Some of the Private Banks—The First National Bank in 1864—Other National Banks—Clearing House Association—Building and Loan Associations in the Hands of Receivers—Insurance Companies.

The history of banking in Knoxville is unusually interesting. The first bank established in the city was popularly known as the Bank of Tennessee, but its corporate name, the act of incorporation being" passed November 20, 1811, was the "President, Directors and Company of the Bank of the State of Tennessee." This act of incorporation or charter provided that the capital stock should not exceed $400,000, the shares to be $50 each. Subscriptions were opened January 1, 1812, in Knoxville, and also in the following-named counties: Anderson, Blount, Carter, Campbell, Claiborne, Cooke, Bledsoe, Grainger, Hawkins, Jefferson, Greene, Rhea, Roane, Sullivan and Washington. To each of these counties 440 shares were assigned, and the state became a stockholder to the extent of $20,000, reserving the right to withdraw at the end of ten years. The subscriptions were payable in either silver or gold, and were divided into eight annual installments. As soon as $25,000 was paid in the stockholders met in Knoxville and organized, electing all of the officers, except one director, who was appointed by the governor to look after the interests of the state.

At this first election of officers Hugh L. White was chosen president, and Luke Lea, cashier. The first board of directors was composed of the following-named gentlemen: John Crozier, James Park, David Campbell, Calvin Morgan, John Hillsman, Robert King and James Dardis. The bank building stood on the northwest corner of Gay and Main streets, and there were branches of this bank in Clarksville, Jonesboro and Columbia. The smallest denomination of note from the establishment of the bank until 1815 was $5, but after that date bills of $1 could be issued. The charter of this bank extended for thirty years, but it continued in existence only until 1828, when it began to close up its affairs, which process continued for three years.

The next bank established in Knoxville was a branch of a bank established by an act of the legislature passed July 26, 1820, the act having been passed "to establish a bank of the State of Tennessee for the purpose of relieving the distresses of the community and improving the revenues of the state." The capital of this state bank was fixed at $1,000,000, in bills payable to order or bearer, to be issued on the credit and security of the borrower, the whole to be warranted by the state on the proceeds of the sales of public lands. To the branch of this bank established at Knoxville four-tenths of the capital stock was allowed, and there was an agency established in each county in the state which was formed prior to 1819. The principal reason for the establishment of this bank was the financial panic which occurred about that time, the first felt in the state, and the legislature was convened in extra session by Gov. McMinn for the purpose of providing some measure of relief. The president and the ten directors of this bank were elected by the legislature on joint ballot, and were instructed to put the bank into operation by October 15 of that year. They were to issue $500,000 in bills of denominations not less than $5 nor greater than $100, and afterward provision was made for the issuance of fractional notes to the amount of $75,000. According to the charter of this bank, either the bank at Nashville or the bank at Knoxville, or both, together with their branches, could consolidate and incorporate themselves with the State bank, but this consolidation was never effected, the two banks mentioned being satisfied to remain independent of the State bank.

This State bank began business on the day fixed by the statute, and for a time was successful; but as it had so many agencies scattered throughout the State large amounts were lost through the defalcations of the county agents. Besides all this, the cashier of the main bank in Nashville in 1832 was found to have permitted overdrafts to friends and others to the extent of $80,000, the greater part of this being also lost, and on account of these various and extensive losses the governor of the state. William Carroll, in his message to the legislature in 1833, advised the closing of the bank, and in conformity with this recommendation the legislature at that session passed an act abolishing the bank and providing that its funds should be deposited in the Union bank, which had then recently been incorporated with a capital of $3,000.000, but which had no branch in Knoxville. Thus ended the second financial institution established in Knoxville. It was located at the corner of Crozier and Cumberland streets. James Campbell, or "Scotch Jimmy," as he was familiarly called, was its cashier. Its business was at all times quite limited.

Between 1850 and 1860 there was great activity in Knoxville in all departments of commercial and financial enterprise. The Bank of East Tennessee was chartered, this charter being obtained by Cowan & Dickinson, and sold by them to a Mr. Fiske of New Orleans. William M. Churchwell became the president of this bank in 1852, and under his management a system of wild speculation and over-issues was indulged in, and the bank ceased to exist in 1856. Samuel Morrow was cashier of this bank, and he, in connection with John Baxter, afterward established the Exchange and Deposit bank.

The Bank of Knoxville was organized in 1854 by John L. Moses, Joseph H. Walker and A. L. Maxwell. They in 1855 sold it to Hugh A. M. White and George M. White., who continued its business until near the beginning of the war, when they wound up its affairs.

The Farmers' bank was established in 1854 by Hugh L. McClung, who sold it to Shepherd & Wheless of Nashville. They continued it for a few years and then consolidated it with the Ocoee bank of Cleveland, Tenn., which in 1859 was purchased by John R., William A., George M., Joseph and Benjamin Branner, who removed it to Knoxville. Here they opened it in the building afterward occupied by the People's bank. Of the Farmers' bank John R. Branner was president and Joseph R. Mitchell, cashier. It continued in business until the breaking out of the war, and even afterward, but was wound up in the years immediately following.

The People's bank was established in 1865 by C. M. McGhee, John R. Branner, Thomas H. Galloway and Joseph R. Mitchell, the firm name under which the business was carried on being J. R. Mitchell & Co. In May, 1866, this bank was incorporated with a capital stock of $35,000, and with officers as follows: C. M. McGhee, president, and Joseph R. Mitchell, cashier. Later Mr. Mitchell became president and F. A. Moses, cashier. This bank had a prosperous career for some years, but at length, through misfortunes, its business had to be discontinued, and its affairs were wound up in 1892.

The First National bank was established in 1864, the principal movers in this enterprise being W. T. Perkins and Mr. Patterson of Cincinnati, and Perez Dickinson, Horace Maynard, William Heiskell and William G. Browniow of Knoxville. It was organized by the election of Mr. Dickinson, president; Mr. Perkins, vice-president, and Mr. Patterson, cashier. The capital was $50,000, and it began business in the building which had been used by the old Bank of Tennessee, and which is now occupied by the Mechanics' National bank. Its business was always well managed, and its credit stood high all over the United States. One incident in connection with the history of this bank is especially worthy of note, that being the payment to the stockholders of their dividends in gold, while Mr. Dickinson was president. R. R. Swepson, who came to Knoxville from North Carolina, became president of this bank in 1868, succeeding Mr. Dickinson, and remained president during the remainder of the period of the bank's existence. Mr. Patterson was succeeded as cashier by Rufus M. McClung, who continued in that position until the affairs of the bank were closed in 1872, it being in a certain measure then succeeded by the East Tennessee National bank.

The East Tennessee National bank was organized in July, 1872, and authorized to transact business under the National Banking law by John J. Knox, Comptroller of the Currency, in September following. The first board of directors was composed of the following gentlemen: Joseph R. Anderson. R. Love, Joseph H. Earnest, F. W. Taylor. William Brazelton, Joseph Jaques, Richard C. Jackson, J. A. Ravi, Samuel McKinney, F. H. McClung, J. W. Lillard, S. B. Boyd and J. E. Raht. The first officers elected were R. C. Jackson, president; F. H. McClung, vice-president; and William B. French, cashier. The bank began business in January, 1873, in the old First National Bank building, and was in a certain sense the successor of that bank, although its management was composed of entirely different men. Remaining in that building until 1885, it then removed to its present location at the southwest corner of Gay and Union streets. The presidents of this bank, succeeding Mr. Jackson, have been Joseph Jaques, from January, 1879, until December 27, 1882, R. S. Payne, until June 1, 1892; B. R. Strong, until June 1, 1894; and F. L. Fisher, from that date until the present time. The vice-presidents have been, besides Mr. McClung, W. W. Woodruff, from January, 1882, until 1884; R. S. Payne, January, 1884, to April. 1884; E. J. Sanford, April, 1884, to the present time. The cashiers, in addition to Mr. French, have been J. W. Lillard, June 18, 1873, to February 8, 1878; R. C. Jackson, from 1878 to 1883; J. L. Glover, from March, 1883, to August, 1883; F. L. Fisher, August, 1883, to June 1, 1894, and S. V. Carter, June 1, 1894, to the present time. The capital of this bank is $175,000; its surplus, $200,000; deposits, $1.000.000; and loans and discounts, $900,000. The directors of this bank elected for the year 1899 are as follows: E. J. Sanford, W. W. Woodruff, Daniel Briscoe, C. M. McClung, John McCoy, Adrian Terry, H. S. Harris, Peter Kern, F. L. Fisher, C. M. McGhee and C. R. Love.

The Merchants' bank began business in July, 1881, under a charter granted to a corporation in 1869, which was never used and which this bank-purchased. The officers elected were as follows: John S. Van Gilder, president; H. T. Ault, cashier, and Albert Van Gilder, assistant cashier, each of whom still retains his position. The paid-up capital of the bank is $100,000, and the business conducted is of a conservative character and at the same time as liberal as the rules of good banking will permit. In connection with the business of this bank are three striking features, viz.: It has never paid interest on deposits, has never re-discounted any paper, and has never borrowed any money. The bank is located at No. 516 Gay Street, South.

The Mechanics' National bank was organized in 1882 with Thomas O'Conner, president; Sam House, cashier, and F. W. Armstrong, assistant cashier. It began business in the building then recently vacated by the East Tennessee National bank. September 15, 1882, E. J. Sanford was elected vice-president. The directors at this time were Thomas O'Conner. S. B. Luttrell, A. J. Alters, R. N. Hood, S. P. Evans, J. T. McTeer, H. L. Ross, B. R. Strong, J. W. Lillard, James M. Meek and Frank McNulty. The president, Thomas O'Conner, was killed October 19, 1882, and for a short time E. J. Sanford acted as president, being elected to that position October 23 and serving until 1883, when S. B. Luttrell became president, and has filled the office ever since. M. L. Ross became vice-president in 1883, and still remained in office until his death, May 30, 1899. Sam House was cashier until December 12, 1889, being then succeeded by the present cashier, E. G. Gates. W. B. Sullivan is assistant cashier. The capital of this bank is $100,000, the surplus $110,000, the deposits $500,000, and the loans and discounts $425,000. The bank is located at No. 612 Gay Street, in the building formerly occupied by the old Bank of Tennessee and later by the East Tennessee National bank. During the war this building was occupied as an office by the provost marshal.

The Knoxville Banking Company was incorporated March 4, 1887, the incorporators being J. W. Hope. T. H. Heald, H. W. Lynn, R. Knaffle and Peter Kern. The object of the incorporators was the organization of a bank, and they were invested with the authority to couple with a general banking business a safe deposit trust company, by virtue of an act of the legislature passed March 19, 1875, and approved March 23, 1875, entitled an act to provide for the organization of corporations, and an act of the general assembly passed March 23, 1883, and approved March 28, 1883, entitled an act to amend an act entitled an act to provide for the organization of corporations, passed March 19, 1875. The organization of this bank was effected in January, 1888, the capital at the time being $25,000, and was opened for business in the February following. At the expiration of the first year of the bank's existence the capital was increased to $50,000, and in 1892 it had a surplus of $15,000. At the present time the capital is $50,000, the surplus and undivided profits $15,000, deposits $135,000, and loans and discounts $133,000. The officers of this company elected January 14, 1899, are as follows: W. H. Gass, president; J. W. Hope, vice-president; H. M. Johnston, cashier, and W. O. Whittle, assistant cashier. The directors are: C. R. McCormick, R. Knaffle, J. W. Hope, John W. Green, J. G. Hellner, H. M. Johnston and W. H. Gass.

This bank receives deposits of one dollar or more in its savings department, on which interest at the rate of three per cent per annum is allowed on sums not withdrawn, the interest being credited and becoming part of the principal at the end of each June and December.

Another feature of the business of this bank is this: In the savings department it makes loans on real estate at six per cent per annum, thus enabling those who desire to borrow small sums on good real estate security to do so, something which they have not heretofore been able to do.

The City National bank was chartered in 1888, the first board of directors being M. P. Jarnagin, James G. Rose, J. P. Haynes, John E. Chapman, J. T. Shields, Jr., James A. Anderson, R. F. Gaut, A. N. Strong and S. H. George. On January 12, 1888, an organization was effected with the following result: M. P. Jarnagin, president; James G. Rose, vice-president; and W. S. Shields, cashier. W. S. Shields became president in 1891, and still remains in that position. J. P. Haynes became vice-president in 1892. Edward Henegar became cashier in January, 1891, and was succeeded by the present cashier, William T. Marfield, in January, 1897. The bank began business with a capital of $100,000, paying no dividends for five years, at the end of which period the surplus of $100,000 was added to the capital, making it what it is at present. $200,000. Since that time fair dividends have been paid. The bank has always been a safe and conservative institution, has now a surplus of $30,000, carries deposits to the amount of $1,200,000, and is one of the strongest of the financial institutions of Knoxville. Its present board of directors is as follows: William S. Shields, S. H. George, D. K. Young, Edward Henegar, J. P. Haynes, J. T. Shields, Jr., John E. Chapman, J. A. Anderson and J. P. Powers The officers are as follows: William S. Shields, president: J. P. Haynes, vice-president, and William T. Marfield, cashier.

The Holston Banking and Trust Company was chartered January 17, 1890, by H. M. Aiken, R. M. Rhea, Anton Lobenstein, James L. Cooley and S. H. McNutt for the purpose of organizing and operating a bank in Knoxville. The capital was paid in instalments, the intention being that when $100,000 had been paid in the organization should be converted into a national bank. On October 26, 1891, this amount of capital had been paid and considerably more, the surplus being returned to the subscribers, and the Holston National bank was then organized with H. M. Aiken, president: H. S. Mizner, vice-president: and W. H. Geers, cashier. Mr. Aiken served as president until August 8, 1893, the vice-president then acting as president until January 9, 1894, when he was elected president, serving in that capacity until January 12, 1897, when Hu. L. McClung was elected and still remains in office. When Mr. Mizner was elected president, Jackson Smith became vice-president, and served until Mr. McClung was elected president, when he was succeeded by S. H. McNutt, who still fills the office of vice-president. Mr. Geers was cashier until April 8, 1892, and then after an interim of about six weeks Joseph P. Gaut was elected cashier on June 1, 1892, and still remains in office. This bank is located at No. 524 Gay Street. Its capital remains at $100,000, its surplus is $20,000, deposits $250,000, and loans and discounts of $260,000. The present board of directors consists of Hu. L. McClung, John J. Craig, S. H. McNutt, James H. Cowan, A. D. Scruggs, D. A. Rosenthal, H. S. Mizner, John M. Allen and Jesse L. Rogers.

The Knox County Bank and Trust Company was incorporated August 25, 1890, the incorporators being J. C. Karnes, W. C. Karnes, C. Rutherford, J. E. Martin and J. C. Cawood, the purpose of the incorporation being the organization of a bank in the city of Knoxville, which was effected September 11, 1890, with A. Chavennes, president; C. Rutherford, vice-president; and Charles Karns, cashier. The bank opened for business October 7, 1890, in the Patterson block, at the junction of Central avenue and Broad street, remaining there until the expiration of a three years' lease, and then removed to its present location. No. 318 North Gay street. The only changes in the officers of this bank have been that James C. Karns became president in 1892 and E. H. De Pue vice-president in 1895, the cashier remaining the same. The capital of the bank at the beginning was $20,000, and at the present time it is $40,000; the deposits amount to $40,000 and the loans and discounts to $60,000.

The Third National bank was organized early in 1887 with the following officers: Gen. R. N. Hood, president: R. P. Gettys. vice-president; John A. McKeldin, cashier, and H. B. Branner, assistant cashier. It opened for business on Wednesday, July 6, 1887, in a building erected by Frank McNulty and Col. C. M. McGhee, on the east side of Gay street nearly opposite its present location. This first building was designed by Bauman Bros., architects, and the interior was furnished by Andrews & Co. of Chicago. It was destroyed by the great fire of April, 1897, the bank, however, having in the meantime erected for its own use the building now occupied on the west side of Gay street, No. 413, at a cost of $30,000. This also is a fine building, two stories high, though all in one story in the interior, and has marble counters, marble wainscoting, etc., and taken all in all is one of the finest buildings erected for banking purposes in the Southern states.

Gen. Hood served as president until January 1, 1889, when he resigned and was succeeded by F. W. Armstrong, Gen. Hood taking the vice-presidency, and F. W. Armstrong being also cashier. This arrangement lasted until September 1, 1889, when Gen. Hood again became president; H. B. Carhart, vice-president; H. B. Brainier, cashier, and F. W. Armstrong, assistant cashier. Upon the death of Gen. Hood, in February. 1892, H. B. Carhart became president: H. B. Branner, vice-president; and F. W. Armstrong, cashier. In January, 1893, H. B. Branner became president; E. E. McMillan, vice-president, and F. W. Armstrong, cashier, which arrangement continued until the death of Mr. Armstrong in March, 1896, and in January, 1898, C. M. Cooley became cashier, the officers remaining as thus given.

The capital stock of this bank is $200,000: circulation. $45,000: surplus, $45,000: deposits, $609,000: and loans and discounts, $595.000.

The directors of this bank for the year 1899 are as follows: D. A. Mims. E. E. McMillan. J. Van Deventer, H. B. Lindsay,, B. L Smith, E. C. Camp, J. L. Thomas, W. R. Tuttle, Charles T. Cates, Jr., William S. Mead, W. P. Hood and Joseph Burger.

The Farmers and Traders' Bank, Safe Deposit and Trust Company was chartered March 6, 1891, by C. R. Love, George M. Burdett, T. W. Keller, James F. Beals, M. A. M. Armstrong, C. W. Steele, J. L. Maxwell, Jr., and D. R. Samuel. In 1895 the officers of this bank were C. R. Love, president; D. R. Samuel, vice-president; and J. L. Maxwell, Jr., cashier. The Associated Banking and Trust Company was chartered August 3, 1892, by W. H. Geers. George W. McCally, William P. Hoskins, Tully R. Cornick and Charles Dawes, for the purpose of conducting a banking business in Knoxville. This latter bank was located at No. 313 Union Street. By a consolidation of these two banks, the Union bank was organized November 1, 1895, the first officers of this bank being C. R. Love, president: W. H. Geers, vice-president: J. L. Maxwell. Jr., cashier, and the capital of the institution was $92,450. At the election held in October, 1896, W. L. Welcker was made president; C. R. Love, vice-president; W. H. Geers, cashier, and at the election in October, 1897, the only change made was in the office of vice-president, W. P. Flenniken being elected to that office. In October, 1898, W. H. Geers was elected president; Henry Hudson, vice-president, and Oscar M. Tate, cashier, being promoted from the position of assistant cashier and teller. The Union bank is located at No. 313 Wall Street, and pays interest on time deposits.

The Market bank was organized in 1893, with George W. Albers, president; T. B. Cox, vice-president, and W. J. Carty, cashier. The authorized capital was $50,000, at which it still remains. The first directors were George W. Albers, T. B. Cox, W. J. Carty, L. W. Davis, John B. Carty, John W. Howell and Thomas L. Carty. This bank was located at No. 313 Union Street.

The Clearing House Association of Knoxville was organized August 7, 1895, with Henry T. Ault, president; William S. Shields, vice-president, and E. G. Gates, cashier. The executive committee was composed of H. B. Branner, Frank L. Fisher and E. G. Oates. The business of the association is transacted at eleven o'clock, a. m., and its effect has been to aid in establishing Knoxville in the eyes of the country as a monetary center. For the first year of the existence of the clearing house the clearings amounted to $21,421,570.01; for the second year, $21,612,543.19, and for the third year, $24,887,786.91, the year ending August 31.

The Mechanics' Association was organized in 1870 for the benefit of the mechanics of the city, who were then comparatively few in numbers. In May, 1871, they gave an industrial exhibition lasting several days, which attracted considerable attention. On the 2Oth of that month Mr. W. H. Browning, architect of the Government building then being erected in Knoxville, delivered an address to the association, in which he ably presented to the members the benefits of co-operative building associations, and urged that as the mechanics were the bone and sinew of the country it was only proper that they should take their proper place in society, which they could best do through providing themselves with homes, and thus be independent of landlords. Associations of the kind had been successful in England and in the Northern states for years, he said, and there could be no reason why they should not succeed in the South. The association fixed the price of shares of stock and allowed their members to take out as many shares as they could pay for, the payments being made monthly. When $500 or $1,000 had been accumulated the money was sold at auction to the highest bidder, who would sometimes pay as high as twenty-five per cent for the money, this twenty-five per cent being called the premium, and being altogether distinct from the interest the borrower would pay. The premium was retained out of the sum for which the borrower gave his note, and formed a nucleus for a second loan. In this way the association sometimes made as high as twenty-five per cent, and even fifty per cent, if money was greatly in demand, and the borrower was enabled to build a house, and at the same time at a less cost to him than the payment of ordinary rents. Such was the argument used by Mr. Browning in 1871.

Influenced by such considerations as these thus set forth with such clearness and ability by Mr. Browning, a building and loan association, named the Knoxville Building and Loan Association, was organized in 1872, with W. P. Washburn, president, and John M. Brooks, secretary. After some time C. Aebli became treasurer, serving for a number of years, and J. N. Benziger was secretary for some years.

This association was successful and had a long career, but its business is now in process of liquidation and in the hands of Peter Staub.

The Savings, Building and Loan Association was the next organized, April 23, 1880, and was like the Knoxville, a successful institution. In 1890 its officers were W. W. Woodruff, president; J. W. Fletcher, first vice-president; Peter Kern, second vice-president; H. M. Wilson, secretary: and James E. Hickman, treasurer. Ten series had then been paid in full, and more than five hundred houses built in Knoxville by money borrowed of this association. The business of this association is now in the hands of A. J. Douglas, receiver.

The Covenant Building and Loan Association began business in December, 1889, with an authorized capital of $25,000,000. The shares of stock were $100, and during the first three years of its existence it sold to the people of Knoxville more than $500,000 worth of its stock. It was managed solely by Odd Fellows, but its membership was not limited to them. It loaned to the full face value of the stock, at a premium of six per cent payable monthly. M. P. Hammack was general manager, and W. Boright, manager of the local department. Its affairs are now in the hands of William M. Ashmore and C. R. McIlwaine, receivers.

The Southern Building and Loan Association was organized in Knoxville, January 15, 1889, its charter members being S. B. Luttrell, M. L. Ross, W. H. Collett, S. M. Johnson and Charles Dawes. On October 31 of that year it had outstanding 35,000 shares of stock, each share being $100, and its assets amounted then to $176,020.73. Of this amount $160,624 was in first mortgages on real estate. The association had 188 branches and was selling new stock at the rate of 6,000 shares per month. Its operations extended from Philadelphia, where was located its eastern department, to San Antonio, Texas, and from Louisville, Ky., to Savannah. Ga. It was buying or building for its members an average of forty houses per month, and within the first ten months of its existence it had built thirty houses for its members in Knoxville, and more than 4.000 shares of its stock were held in this city. The profits on its loans had been thirty per cent per annum. S. B. Luttrell was president; Charles Dawes, vice-president; W. H. Collett, secretary; M. L. Ross, treasurer, and S. M. Johnson, general manager. In July, 1890, it had $30,000 income per month and $5,000,000 of its stock subscribed. This was the largest association of the kind in the Southern states, and one of the largest in the entire country. The largest monthly income this company ever had was $92,000. Its affairs are now in the hands of D. A. Carpenter, receiver.

The Citizen's Building and Loan Association began business with an authorized capital of $50,000,000 at 311 Wall street. Its securities were held by the State National bank, the City National bank and the Third National bank. Like all the other associations of this kind it enjoyed a prosperous career until the decision of the supreme court of the state rendered in 1896, which was to the effect that premiums on loans, such as were paid by borrowers from building and loan associations, were usurious and therefore contrary to the laws of the state. Its affairs are now in the hands of A. Y. Burrows, receiver.

Mechanics' Building and Loan Association was organized March 13, 1886, those immediately interested in the organization being R. A. Kellar. C. R. Love, J. W. Caldwell, Frank A. Moses, W. K. Mitchell, W. H. Simmonds and William Epps. This association is not now in existence.

The Equitable Building and Loan Association was organized February 15, 1888, by Frank A. Moses, Fetter Ritter, Truly R. Cornick, Jr., John M. Brooks and W. F. Sawyer. This association is now out of existence.

The Perpetual Building and Loan Association was organized in June, 1889. But when it realized that there was a law in the state imposing double taxation on associations of this kind it concluded to disband and went out of existence July 18, 1889.

The Home Building and Loan Association was organized in 1889. It was strictly a home institution. Shares in this association were $100, and the payments sixty cents per month. The first officers were W. H. Simmonds, president; J. H. Scarborough, vice-president; E. H. Scharringhaus, secretary, and the Central Savings bank, treasurer. The affairs of this company have entirely wound up, which is also the case with the Franklin Savings and Loan Company.

The Star Savings and Loan Company was established in 1889 and is now in the hands of William S. Shields, receiver.

The above were all practically home associations, though some of them had, as has been seen, branches in other cities and towns. Besides them there were branches of building and loan associations in Knoxville, the headquarters of which were in other cities, as for example the Southern Home Building and Loan Association of Atlanta, Ga., on January 15, 1890, opened a branch in Knoxville, of which Gaut & Phinney were the managers. But perhaps the most important association of the kind that opened a branch in Knoxville was the Interstate Building and Loan Association of Bloomfield, Ill., with a maximum capital of $20,000,000, which began operations here in October, 1889. On October 14 a meeting of local stockholders was held at the Mechanics' bank, at which a board of directors was elected, consisting of W. H. Simmonds, W. E. Gibbins, Sam House, S. B. Boyd, E. M. Kennedy, W. W. Lee, E. Dean Dow, T. L. Williams and William Rule. W. H. Simmonds was elected president; W. E. Gibbins, vice-president: Sam House, treasurer, and T. L. Williams, secretary. This association claimed to present advantages to its members above any others in operation here, that if a person borrowed money on say ten shares of stock he received $1,000, instead of $1,000 less the premium he gave, the payments being $10.83 per month for 96 months, until the stock matured. The company had no expense fund which required one-sixth of the monthly dues to keep intact. The ollowing illustration was given to the public in order to show the working of this company's plan:

96 months' dues at $6 per month, amounted to $576.00
90 months' interest at 6 per cent, $5 per month, amounted to 450.00
90 months' premium at 7 per cent, $5.83 per month, amounted to 524.70
$1,550.70

Example for Borrower.

Face value of ten shares at maturity $1,000.00
96 payments at $6 per month 576.00
Net profit $424.00

Thus it will be seen that the premium was paid back monthly, instead of being all taken out at the beginning, as was the custom in most of the other building and loan associations. This company, however, did not remain in business long in Knoxville, in 1892 transferring its interests to the Citizens' Building and Loan Association.

Building and loan associations had been in successful operation in Knoxville, as in other cities of the state, for several years before any adverse court decisions were obtained against them. The first came in 1887, by the chancery court in Nashville, which attracted much attention here, as it was seen that it if should be carried to and sustained by the supreme court of the state it would sound the death knell of such associations in the state of Tennessee. This decision was to the effect that the premium paid for the loan, which was altogether separate and distinct from the interest paid by the borrower, was largely in excess of six per cent, the legal rate of interest, and that the device of accepting subscriptions to shares of stock in such associations and making payment in advance was a mere resort to the avoiding of usury laws. "That therefore it is considered by the court that the complainants recover of defendants all sums paid defendants in their two transactions above set out, as dues, principal and interest, in excess of 6 per cent per annum, for the amounts actually borrowed and for the time the loan ran."

At the time this decision was rendered there had been erected several hundred houses in Knoxville by means of money advanced by these associations and there were then several in course of construction. In defense of the association it was said that they were better than anything ever before devised to aid the poor man to acquire a home of his own, for not only did it accomplish this, but it at the same time developed in him a habit of saving a small sum each month, and after his house was paid for he would be likely to continue saving his money for future contingencies.

But the climax came in 1896, in connection with a suit by Mrs. Jane McCauley against the Workingmen's Building and Loan association, the original bill being filed to enjoin the sale of a house and lot under a trust deed executed by the complainant to her husband to secure a debt to the building and loan association. The chancellor refused the injunction and the property was sold to the City National Bank, which held a second mortgage, subordinate to that of the association. The case then went to the court of chancery appeals, which reversed the holding of the chancellor and granted the complainant the relief asked for. The defendants then appealed to the Supreme Court of the state, which sustained the court of chancery appeals. Quoting from the by-laws of the Workingmen's Building and Loan Association the supreme court said:

"The funds of the association as they accumulate in the treasury shall be offered and loaned by the board of directors to the best use and application among the stockholders entitled to borrow the same. The number of shares shall be regulated by the board of directors. * * * No money shall be loaned at a greater premium than thirty per cent nor less than twenty-nine and seven-eighths per cent. The successful applicant at the time of receiving the amount loaned shall pay a premium of thirty per cent on the amount bid for and shall secure the repayment of said loan with legal interest by satisfactory bond or mortgage upon real estate and interest on all loans taken by stockholders, and shall pay from the time of bidding for the same."

The bank paid to the association for the lot $1,258.

The question in this case was as to whether the premium was a fixed premium, and if so whether it made the contract unlawful. The court of chancery appeals had held that the margin of one-eighth of one per cent between the lowest and highest rate was a mere device to avoid trouble that might arise out of an apparently fixed premium, and was too small to be considered except as an attempt at an evasion of the usury laws.

The Supreme Court therefore held that the by-laws of the association did fix a premium on all loans. The opinion of the court was that competition in bidding for loans was an essential feature of the management of the business of a building and loan association and that this feature was not present in the working of the Workingmen's Building and Loan Association.

When the effect of this decision by the Supreme Court became fully known and realized there quickly sprang up a general desire on the part of the patrons of building and loan associations to repudiate all excessive forms of interest, and a number of bills looking to that end were filed in the chancery court. Association after association gradually decided to wind up its affairs, each one, however, protecting its interests as well as it could against suits by individual stockholders, each one who had borrowed money seeming to desire to be the first to secure his own individual interests. The Workingmen's Building and Loan Association held a meeting January 8, 1897, at which it was unanimously decided by the board of directors that under the then recent decision of the supreme court it was impossible longer to transact a profitable business, and all the assets of the association were turned over to the secretary with instructions to wind up its affairs, a bill was filed in Chancery court under which these instructions could be carried out, and an injunction secured preventing- all suits against the association, thus compelling all parties to come in by petition, and be placed on an equal footing. The affairs of the Workingmen's Building and Loan Association are in the hands of Charles M. Funck, receiver.

The Home Building Association was chartered March 17, 1897, with J. E. Willard, president. This association was designed to succeed the Workingmen's Building and Loan Association, and offered to accept the stock of that association. The design in establishing this association was that it should be strictly a home or local concern, and small salaries were to be paid its officers and the by-laws were so arranged as to prevent any difficulty with regard to invalidity or usury. Mr. Willard remained president one year and then was succeeded by Thomas Price. But it appeared that the people had by this time lost confidence in building associations, the business was not profitable, and the association settled up all of its accounts toward the latter part of theyear 1898.

The Knoxville Fire Insurance Company was organized in 1879 with a capital of $100,000. On January 1, 1886, it had a surplus of $26,993.10 and a reserve fund of $26,674.98. It carried on a fire insurance business successfully for about fifteen years and throughout the state of Tennessee, having agents in the principal financial centers, and its managers being among the most prominent and successful business men of the city of Knoxville. Upon going out of business it reinsured its patrons in strong Eastern companies.

The Protection Fire Insurance Company was incorporated in 1885, and was under the same management as the Knoxville Fire Insurance Company. In 1887 its assets amounted to $108,093.84, and it continued in business until about 1895. when its business was transferred to Eastern companies.

The East Tennessee Insurance Company was incorporated March 5, 1885, the incorporators being Columbus Powell, Matthew McClung, E. S. Sheppard, C. E. Lucky and R. M. Rhea. Its capital stock was $150,000 and in 1887 it had a surplus of $25,000. This company has also gone out of business.

The Island Home Insurance Company was organized in 1887, with the same officers and directors as the East Tennessee Insurance Company. Its capital stock was $200,000, and it remained in business a few years, when, like the other companies mentioned above, it wound up its affairs and went out of business, the reason for this course in each case being the same, that larger companies in the Northern and Eastern states, having more capital, could secure a large proportion of the patronage that the Knoxville companies naturally sought and depended upon.

The Republic Life Insurance Company of East Tennessee was organized in the rooms of the board of trade. January 21. 1872. The board of directors elected at first was as follows: Col. John Baxter, F. H. McClung, C. W. Coffin, George W. Ross, Joseph Jacques, E. J. Sanford, O. P. Temple, R. C. Jackson, J. W. Gaut, Rev. F. Esperandieu, George H. Smith, David Richards, H. D. Evans, J. B. Hoxsie, Dr. Josiah Curtis, and J. A. Ravi, all of Knoxville, and a few gentlemen of other parts of East Tennessee. R. C. Jackson was elected president: Dr. Josiah Curtis, vice-president: Spencer Munson, secretary; E. P. Bailey, treasurer, and J. M. Thornburgh, attorney. A finance committee, an executive committee and a medical committee were also appointed, and Munson and Bailey were made managers for East Tennessee.

The plan of this company as announced to the public was to invest the funds received in the ordinary course of business and its surplus premiums in real estate securities at reasonable rates, thereby retaining the money invested in life insurance at home, instead of permitting it to go to Eastern or Northern states, which had previously been the case. It was thought that this company would be unusually welcome to the people of the Southern states. In order to encourage those who desired to carry life insurance the stockholders of this company, on February 28, 1872, pledged themselves to take at least $100,000 in life insurance.

This company was in fact a Chicago company, the local organization being merely a branch established by J. E. Jacobs, who was the Knoxville agent. Some of the gentlemen named above took insurance in the company, paying premiums that were very high, a $5,000 policy carrying with it a premium of $111.55. After some years the main company went into the hands of a receiver, Samuel D. Ward of Chicago, who in 1884 notified policy holders that they must prove their claims within one year from August 8, 1884, or be barred from sharing in the distribution of the assets. The company therefore ceased to exist about 1885.


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PostPosted: Sun Feb 04, 2007 11:43 am 
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Though this is the "standard" history of knoxville, I find it disturbing that some of the facts stated do not align with facts about the specific banks. For example, the Bank of Knoxville history makes no mention of the President or cashier that signed their notes.

As usualy, Garland provides a more succinct reference on that subject.

Presidents:
William M. Churchwell (1853 - 1855)
M. W. Williams (1855 - 1863)

Cashiers
Samuel Morrow (1853 - 1854)
John Trenbath (1854 - 1863)

- Greg


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