Real Life "Wonderful Life": In the Depths of the Great Depression, a Community Bank Comes Back from the Brink through the Cooperative Efforts of Its Community, Officers, and Owners (2005)

Almost everyone knows about George Bailey, the banker (played by Jimmy Stewart) whose building and loan was miraculously saved in the ever-popular Christmas film It's a Wonderful Life. Few people know that something similar actually happened in East Tennessee during the Great Depression. The town was Bristol, not Bedford Falls, and the bank was not the Building and Loan, but the First National Bank of Bristol. It was barely two years after the October 1929 crash on Wall Street when, in November 1931, Leslie Rowles Driver, a 42-year old cashier from nearby Johnson City, accepted the position of vice-president at the First National, soon bringing to Bristol his wife and four children. This was a fearful time for bankers and their families--in the four years following the stock market crash, nine thousand banks closed. A mere six months after the Drivers moved, at a meeting of 70 business leaders representing half the First National's stock, on June 26, 1932, it was announced that the bank would be reorganized. The bank's investment in listed bonds had depreciated by approximately $300,000 in market value, and there had been rumors and massive withdrawals. Total deposits declined by 38% in 1932. The bank's chairman presented the reorganization plan. It included the following: 1. $400,000 of doubtful or slow returning assets were to be removed from the books; 2. stockholders were asked to cancel their stock in the interest of the bank and the local economy; 3. $250,000 in new capital and surplus were to be developed through the sale of new stock; and 4. the withdrawal of funds already deposited in checking accounts would be limited to 5% for at least 90 days. This was the only alternative to receivership and expensive liquidation. Over $150,000 of new stock was subscribed in 30 minutes. The plan received significant support from a number of businesses, as well as the local newspaper, and on the evening of July 14, over 700 depositors met with the bank's reorganization committee. The president of the Hamilton National Bank of Knoxville spoke on the costs of a bank failure to the entire community. A First National director reported on the bank's recent history and the reorganization plan. Deposits had declined by more than $1 million within a year. The bank was forced to call loans and borrow from the Reconstruction Finance Corp. in order to meet demand. At this point, the need was assessed to be $300,000 in capital and $75,000 in surplus. Business leaders, stockholders, and other local bankers spoke in favor of the bank and the plan. This included the owner of the Bristol Herald Courier and the president of the Dominion National Bank. By the end of the meeting, persons representing deposits of $476,000 had agreed to the plan, and more than 200 others (a majority of the depositors present) had signed creditor's agreements. At about the same time, 56 leading businessmen subscribed to stock, and 65 businessmen launched a drive to sell stock. Some nine weeks later, on Sept. 22, a meeting was held to sell the remaining 351 shares. By then the total goat in refinancing the bank was $312,500, translating to 2,500 shares @ $125 per share ($250,000 in capital; $62,500 in surplus). Ninety-three percent of deposits were already voluntarily restricted before the meeting began. It was an auction style meeting, and 120 shares were sold in 45 minutes. The entire meeting lasted two hours, and the president of the Dominion National bought the last ten shares. The reorganized bank now had between 200 and 300 stockholders. A total of $1.5 million was on deposit, and over $300,000 in restricted deposits were to be released. A representative of the Comptroller of the Currency would arrive soon to direct the bank's affairs until a new charter was issued. On Oct. 20 the Washington Trust and Savings Bank, a local institution, telegrammed the Comptroller of the Currency that the First National had deposited $312,500 of capital and surplus and that the Washington Trust held no stock as collateral. …