Pioneer Banking in Tucson: Lionel and Barron Jacobs and the Founding of the Pima County Bank

Journal of the Southwest

Pioneer Banking in Tucson: Lionel and Barron Jacobs and the Founding of the Pima CountyBankAuthor(s): Dawn MooreSource: Arizona and the West, Vol. 24, No. 4 (Winter, 1982), pp. 305-318Published by: Journal of the SouthwestStable URL: http://www.jstor.org/stable/40169218 .

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PIONEER BANKING IN TUCSON

LIONEL AND BARRON JACOBS AND THE

FOUNDING OF THE PIMA COUNTY BANK

by

DAWN MOORE"

On January 2, 1879, transplanted California merchants Lionel and Barron Jacobs established the Pima County Bank as the first formal financial institution in Tucson, Arizona. During the previous de- cade, the economy of the frontier community had gradually expanded and matured as the population of Tucson and southern Arizona doubled. The military, miners, and ranchers, all provided markets for Tucson merchants. As business activity increased, so too did the financial needs of the community. As local businessmen, the Jacobs brothers recognized the importance of banking services for con- tinued economic growth. Conscious of the high risk of failure, Lionel and Barron first conducted financial operations as part of their mercantile establishment. When demands for financial services increased with the discovery of the Tombstone mines and the

coming of the railroad, they moved quickly to found a formal bank. A

pioneer financial institution, the Pima County Bank helped meet the needs of Tucson's expanding business community and formed the cornerstone of the city's modern banking system.

Lionel and Barron Jacobs were two of twelve children of Mark Israel and Hannah (Solomon) Jacobs. Lionel had been born in En-

gland in 1840. Barron was born in 1846 in Baltimore, Maryland,

"The author is a master's candidate at the University of Arizona, Tucson. A version of this paper was presented at the Arizona Historical Convention held in Tucson, April 30 -May 1, 1982.

[305]



306 ARIZONA and the WEST

where the family had arrived two years earlier. The Jacobs family traveled to California during the gold rush and settled in San Diego in 1851. For the next six years, Mark Jacobs operated a general merchandise store and a newspaper and periodical depot. In 1856 the

family moved to San Bernardino, where a married daughter already resided. There, Mark and Hannah managed a store and hotel. After

finishing their education, Lionel and Barron joined the family mercantile firm, M. I. Jacobs & Company. Acting on their father's orders, the Jacobs brothers in 1867 opened a retail mercantile store in Tucson, Arizona. Mark Jacobs believed that the relocation of the territorial capital and military headquarters from Prescott to Tucson that year would stimulate the local economy and create new markets. In California, the elder Jacobs purchased goods which he shipped to his sons in Tucson.1

Scarcity of currency and credit - a problem dating back to the

Spanish period in southern Arizona- hampered the Jacobs brothers

during their first year in business. Tucsonans preferred to deal in U. S. greenbacks or in gold and silver coin, but hard currency and federal paper were in constant short supply on the Southwest frontier. Banks on the East and West coasts were reluctant to

ship money to Arizona because of the danger of robbery enroute. Arizona's unfavorable balance of trade- in which more money flowed out of the territory than flowed in - created a continuous drain on available cash. Banknotes, which might have served as an alternative medium of exchange, did not circulate in large quan- tities in Arizona because businessmen did not trust them. Eastern and California banks often issued more notes than they could back with gold reserves. Furthermore, poor communications pre- vented Arizona merchants from acquiring accurate information on the current status and value of various banknotes. Because businessmen frequently discounted the notes (accepting them at less than face value), their value fluctuated constantly.2

^chard L. & Arlene A. Golden, The Mark I. Jacobs Family: A Discursive View,' Western States Jewish Quarterly [WSJQ], XIII (January 1981), 99-106; Gerald Stanley, "Merchandising in the South- west: The Mark I. Jacobs Company of Tucson, 1867 to 1875,

" American Jewish Archives [AJA], XXIII (April 1971), 86-88, 96.

2Dwight L. Clarke, William Tecumseh Sherman: Gold Rush Banker (San Francisco: California Histori- cal Society, 1968), 5; Fifty Years of Growth in Tucson, 1903-1953 (Tucson: Southern Arizona Bank and Trust Company, 1953), 2; Richard K. Vedder, The American Economy in Historical Perspective (Bel- mont, California: Wadsworth Publishing Company, Inc., 1976), 175, 183. For similar problems in Idaho Territory, see Thomas G. McFadden, "Banking in the Boise Region: The Origins of the First National Bank of Idaho," Idaho Yesterdays, XI (Spring 1967), 5, 7.



PIONEER BANKING in TUCSON 307

In the absence of cash, the Jacobs brothers - like other Tucson merchants - transacted business without currency. Some customers

paid for goods with checks drawn on bank accounts outside the

territory. Merchants passed bills of exchange, bank drafts written on their firms' accounts in San Francisco or New York, on to their creditors or sold them to customers. Invoices, or promissory drafts, also circulated as currency. Contractors who sold raw materials to firms outside Arizona, or to government agencies within the terri-

tory, commonly received papers directing the purchaser to pay the seller. As payment could take months, or even years, merchants either endorsed the drafts for payment to distant creditors or sold them locally for cash.3

Limited credit imposed further hardships on Tucson merchants and underscored the importance of cash, drafts, and bills of ex-

change. Irregular communication between Arizona and commercial centers in California and on the East Coast made it difficult for local businessmen to purchase goods on credit. For this reason, Lionel and Barron Jacobs sent weekly remittances of cash, bank drafts, or bills of exchange to their father in California as advance payment on orders with San Francisco wholesalers.4

In their dealings with California suppliers, the Jacobs brothers relied mainly on bills of exchange and bank drafts. Cash transactions were risky, time-consuming, and expensive. And, because Tucson lacked a full-fledged bank, they could not forward remittances by check. To compensate for these deficiencies, Lionel and Barron

bought bills of exchange from the rival Tucson mercantile firm of Lord and Williams. Between 1866 and 1879, LotcI and Williams offered a variety of financial services and was considered the town's "official bank." The firm had a large capital foundation, a fine repu- tation, and excellent facilities. Consequently, the federal government in 1869 designated Lord and Williams as the U. S. Depository for government institutions in Arizona. In its dealings with the

government, the firm obtained drafts which it sold to local merchants. Also, Lord and Williams used surplus capital to open ac-

3George L. Anderson, "Banks, Mails, and Rails, 1880-1915," in John G. Clark (ed.), The Frontier

Challenge: Responses to the Trans- Mississippi West (Kansas U. Press, 1971), 276; Clarke, William Tecumseh Sherman, 18, 417; William J. Parish, The Charles llfeld Company: A Study of the Rise and Decline of Mercantile Capitalism in New Mexico (Harvard U. Press, 1961), 37-38.

4Chuck Hemann, "When Bankers Wore Boots," Arizona Highways, LIII (September 1977), 7; Stanley, "Merchandising in the Southwest," A} A, XXIII, 100.




counts in banks in New York and California, upon which it sold bills of exchange. Besides buying from Lord and Williams, the Jacobs brothers acquired drafts from forts and from the army paymaster in Arizona. Because troops were paid in greenbacks and gold coin, Lionel and Barron were able to trade currency to the army for drafts, which they then endorsed and sent to their California

suppliers. They obtained additional drafts from the military in

exchange for grain, lumber, and other goods.5 Shortage of cash and credit compelled Lionel and Barron

Jacobs, as well as other Tucson merchants, to gradually inaugurate banking services. Beginning in 1870, the Jacobs brothers compen- sated for the lack of stable currency by investing a part of the store's capital in a money exchange - M. I. Jacobs & Company, Money, Bullion, and Exchange Brokers - which converted greenbacks into gold coin. Mark Jacobs purchased specie in San Francisco and

shipped it to Tucson by registered mail or by Wells, Fargo & Com-

pany Express. Lionel and Barron then exchanged the coin for greenbacks, and sent the paper currency to their father, who used it to purchase more coin. The Jacobs family profited from the unequal rate of exchange between California and Arizona. In Tucson, paper money fluctuated between sixty-five and eighty-five cents on the dollar, lower than in California. The value of specie, on the other hand, was high and relatively stable in Tucson, where demand al- ways exceeded supply. In California, where hard money was plenti- ful, coin circulated at rates lower than in Arizona. Thus, the Jacobs brothers received more greenbacks for coin in Tucson than in San Francisco, and more coin for paper money in San Francisco than in Tucson. The Tucson economy also benefited as the importation of gold coin eased the local shortage of hard currency.6

The Jacobs brothers recognized that funds invested in money exchange were "more productive than if employed in merchandize. "

5Stanley, "Merchandising in the Southwest," A] A, XXIII, 96; The Man, the Idea, the Bank," in Tucson Citizen (Arizona), October 27, 1929. Fifty Years, 3; Parish, Charles llfeld Company, 37-38; Lewis B. Atherton, The Frontier Merchant in Mid- America (U. of Missouri Press, 1971), 140.

6Golden & Goldeit, "Jacobs Family," WSJQ, XIII, 106; Stanley, "Merchandising in the Southwest," A} A, XXIII, 100-102. Audrey Marshall, "Southwest Jewish Traders," 7, typescript, Jacobs Bio- graphical File; M. I. Jacobs & Company, Money, Bullion & Exchange Brokers, bank draft, De- cember 28, 1870, Folder 1, Box 1, Jacobs Family Papers [JFP], Special Collections [SC], University of Arizona Library [UAL], Tucson. M. I. Jacobs to Lionel and Barron Jacobs, February 28, 1870, Folder 2, Box 1, Jacobs Papers [JP], Arizona Historical Society [AHS], Tucson.




Ranchers, miners, freighters, and merchants all required large capital outlays to establish themselves in business. Eastern and California financial centers, however, were reluctant to invest

money in what appeared to be risky ventures in a remote and un- known territory. In the absence of outside investment capital, Lionel and Barron - as a part of their regular store operations -

began in 1871 to loan greenbacks at five percent per month. To maintain a steady weekly flow of cash to their father in California, the Jacobs brothers insisted on short terms - usually forty-five days- and prompt repayments. Again, Lionel and Barron helped meet a critical financial need in Tucson. Although other Tucson merchants (especially Lord and Williams) also granted small cash

loans, only the Jacobs brothers made lending an important part of their overall business.7

So long as the Tucson economy expanded slowly, the Jacobs brothers' exchange and lending operations adequately served the

community's needs. By 1875, however, Tucson began to boom. The

telegraph had arrived in 1871, and carriers such as Wells, Fargo &

Company soon established regular freight and passenger schedules. As regular contact was established with the outside world, more

people settled in southern Arizona. The growing population, in turn, stimulated business activity and created demands for more sophisti- cated financial services.8

Between 1875 and 1878, Lionel and Barron Jacobs informally expanded their banking operations to meet Tucson's new financial needs. In 1875 they began accepting savings deposits, ranging from a few dollars to a few thousand. Renamed L. M. Jacobs & Company, upon Mark Jacobs's retirement in 1875, the firm issued certificates of deposit that specified amount and date payable. The company also stored personal valuables in its safe. In June of 1875, for example, William S. Oury, Tucson's first Anglo mayor, deposited with the

Jacobs store the baptismal records of Marcos and Louisa Smith. To

satisfy increased demands for credit, the Jacobs brothers granted

7M. I. Jacobs to Lionel and Barron Jacobs, February 28, 1870, Folder 2, Box 1, JP, AHS. Stanley, "Merchandising in the Southwest," A] A, XXIII, 100. Parish, Charles llfeld Company, 59-60; A. R.

Gutowsky, Arizona Banking (Tempe: Bureau olF Business Research and Services, College of Business Administration, Arizona State University, Occasional Paper 1, 1967), 8; Fifty Years, 3.

8Don C. Bridenstine, "Commercial Banking in Arizona- Past and Present" (Ph.D. dissertation, University of Southern California, 1958), 11. Gutowsky, Arizona Banking, 8; John Bret Harte, Tucson: Portrait of a Desert Pueblo (Woodland Hills, California: Windsor Publications, Inc., 1980), 51.



3io ARIZONA and the WEST

more short-term loans and loaned larger sums of money for longer periods of time, sometimes demanding mortgages on property as col- lateral. In 1878, the company loaned $14,000 to Pima County, $160 to the Territory of Arizona, and $608 to Henry C. Hooker, owner of the Sierra Bonita Ranch in southeastern Arizona.9

The Jacobs brothers also collected delinquent drafts and notes on behalf of creditors. As word of the collection service spread, businesses and individuals asked them to redeem checks and drafts written on the U. S. Depository at Lord and Williams and on other local mercantile stores. The Jacobs brothers also redeemed vouchers drawn by military personnel. They transferred the proceeds by registered mail to banks outside the territory, using either currency, coin, or postal money orders. In this way, the Jacobs brothers opened well-defined channels of communication and trade between Tucson and the outside world. The store, for its part, profited from commissions taken directly from money collected. 10

The Jacobs brothers' financial services became increasingly important during the late 1870s. Two events in 1877 vastly accelerated population growth and economic expansion in Tucson and throughout southern Arizona. In the summer of 1877, the Southern Pacific Railroad reached Fort Yuma, California, and in March of 1880 the railroad entered Tucson. Business speculation ran high in anticipa- tion of a flood of new settlers and of reduced shipping costs for farmers and ranchers. Also in 1877, Ed Schieffelin discovered silver at Tombstone in southeastern Arizona. By 1879 *he mines were

producing tons of ore. Business activity intensified as Tucson served as headquarters for mining operations.

"

Tucson's growing population and newly established trade channels generated high demand for banking services. Because of the improved economic outlook, Lionel and Barron Jacobs in November of 1877 formulated plans to open a bank separate from the store.

9M. I. Jacobs & Company assessment, 1872, copy in Folder 2, Box 1; L. M. Jacobs & Company statement, November 30, 1878, Folder 6, Box 3, JFP, SC, UAL. Receipts of deposit to James Blade, June 17, 1875; and to L. C. Kendell, July 7, 1875; W. S. Oury deposit envelope, June 9, 1875, all in Folder 1, Box 1, ibid. Golden & Golden, "Jacobs Family," WSJQ, XIII, 110.

10W. Brichard & Company to M. I. Jacobs & Company, April 14 and 26, 1872, Folder 3, Box 1, JP, AHS. David Neahr to L. M. Jacobs & Company, October 5, 1875, Folder 5, Box 1, JFP, SC, UAL.

nGutowsky, Arizona Banking, 8; Bret Harte, Tucson, 51; John Myers Myers, The Last Chance: Tombstone's Early Years (New York, 1950), 25-37. Albert Steinfeld, "Commercial Interests," in Tucson Citizen, January 1, 1890.



Lionel (above) and Barron Jacobs established the Pima County Bank as Tucson's first formal financial institution.- Arizona Historical Society, Tucson.



M. I. Jacobs & Company (above, far right) and Lord & Williams Company (left) offered many banking services, (below) The Arizona National Bank was a successor of the Pima County Bank. - Arizona Historical Society.



PIONEER BAN KIN Gin TUCSON 31 1

They agreed, so long as either brother controlled the bank, to invest as much money in the institution as possible. If outside parties should ever assume control, the Jacobs family would contribute only what it deemed prudent. Their efforts failed, however, when they were unable to raise the necessary capital.

IS

Undaunted, Lionel and Barron during November and Decem- ber of 1878, again turned their attention to the creation of a bank. Lionel proposed a minimum investment of $50,000 paid-in capital, the brothers to provide $25,000 and other parties to contribute the remainder. By early December, the Jacobses had amassed their $25,000, which consisted of $5,000 of Lionel's personal funds, $10,000 from the trustee account of L. M. Jacobs & Company, and $10,000 from collections on mortgages. Barron Jacobs, who was in Baltimore buying goods for the store, questioned the use of such a large amount of the company's money in a risky venture. He

expressed particular concern over the calling in of mortgages. Why, he asked, "should we give up a good investment just for the sake of having the handling of the money

" Despite his concern,

Barron nevertheless suggested ways of raising capital and of recruit-

ing other merchant investors. l3

Four major partners contributed the remaining $25,000: E. B.

Gage, owner of the Grand Central Mine in Tombstone; Pinckney Randolph Tully, co-owner of Tully & Ochoa mercantile company in Tucson; Phillip William Smith, former owner of the Vulture Mine in central Arizona; and A. Lazard, a Tucson attorney. Besides providing money, Gage also advised the Jacobs brothers on business matters and helped establish Eastern connections and credit. On December 24, 1878, Lionel and Barron Jacobs and their partners incorporated the Pima County Bank.14

As planned, the Jacobs brothers retained control of the new bank. Although the stockholders elected Phillip Smith president,

12Lionel Jacobs to Barron Jacobs, November 15, 26, and December 17, 1877, Folder 2, Box 2, JP, AHS.

13Lionel Jacobs to Barron Jacobs, November 30, 1878, L. M. Jacobs & Company Letterbooks, XL, JFP, SC, UAL. Barron Jacobs to Lionel Jacobs, December 12, 1878, Folder 4, Box 2, JP, AHS.

14Barron Jacobs to Lionel Jacobs, December 12, 1878, Folder 4, Box 2, JP, AHS. Pima County Bank, Articles of Incorporation, December 24, 1878, Miscellaneous Bank [MB], I, 895, Pima County Records [PCR], Tucson, Arizona. Audrey Hunter, "First Bank Only Needed Space, Good Sound Safe," in Tucson Arizona Star, June 7, 1959. "Phillip W. Smith," First National Bank poster, Tombstone Chamber of Commerce, Arizona.




Lionel Jacobs, as cashier, controlled the bank's affairs. The Jacobs brothers alternately served as cashier for many years. Articles of

incorporation of the Pima County Bank provided for general banking transactions to be conducted at the corporation's principal office in Tucson, and at any branch office that the directors might establish. The articles also authorized capitalization at $100,000 ($50,000 over the partners' initial investment), which allowed for future expansion. Under these arrangements, the Pima County Bank opened for business on January 2, 1879, in one corner of the L. M. Jacobs &

Company store at Meyer and Congress streets.15 For a time, the Jacobs brothers had feared that they might not

be the first to establish a bank in Tucson. On November 30, 1878, the Tucson Arizona Weekly Citizen announced that former Terri- torial Governor Anson P. K. Safford, Tucson Mayor James H. Toole, former newspaper editor John Wasson, and local businessman Charles Hudson would open a bank as soon as they could acquire a

building, a safe, and other equipment. Alarmed, Barron had

suggested that Lionel explore the possibility that they abandon their

plans and invest instead in the Safford, Toole, Wasson, and Hudson venture. Lionel, however, emphatically rejected the idea. Fortu-

nately, the Pima County Bank commenced operations three months before its rival - Safford, Hudson & Company, Bankers. Although the Jacobs brothers feared that Tucson could support only one bank, both institutions prospered for several years in the bustling economy of southern Arizona. 16

The Pima County Bank was designed to serve the commercial and industrial interests of the region. It soon established reserve accounts with the Pacific Bank of San Francisco, the Second Na- tional Bank of Baltimore, the Bank of Commerce of St. Louis, and the Ninth National Bank of New York. These correspondent banks honored checks or telegrams for withdrawals from Pima County Bank accounts.. Because the bank maintained permanent contacts

15Pima County Bank, Articles of Incorporation, December 24, 1878, MB, I, 895, PCR. Lionel Jacobs to S. G. Murphy, February 26, 1879, Pima County Bank Letterbooks, LXXVIII; L. M. Jacobs & Company, Journal A, January 2- December 31, 1879, ibid., XLIV, JFP, SC, UAL. Pima County Bank advertisement, in Tucson Arizona Star, January 12, 1879.

16Lionel Jacobs to Barron Jacobs, November 30, 1878, Jacobs Company Letterbooks, XL, JFP, SC, UAL. "A Bank for Tucson," in Tucson Arizona Weekly Citizen, November 30, 1878.




with the nation's financial centers, local businesses could transfer funds with less risk and delay, and thus complete more transactions.17

The Pima County Bank worked hard to alleviate local shortages of cash and credit. The Tombstone mines, in particular, required large amounts of currency to meet payrolls, and the bank shipped packages of specie to Tombstone every two weeks. To offset the constant drain from 'cash on hand," Lionel Jacobs arranged for

regular shipments of two or three thousand dollars in gold coin and

greenbacks, deducted from the bank's account at the Pacific Bank in San Francisco, the closest correspondent. For safety, the Pacific Bank sent the money over the space of several days by registered mail and by Wells, Fargo & Company.

18

Besides U. S. currency, Mexican silver dollars also were in demand in the Southwest. During the first months of operation, the Pima County Bank purchased Mexican coins wherever a surplus existed in Arizona and New Mexico. Lionel Jacobs hired agents -

usually David Neahr of Yuma, Arizona, and Hall Porter of Silver

City, New Mexico - to buy as many Mexican dollars as possible -

usually 2,000 to 3,000 coins- without inflating the price. By May of

1879, he began acquiring Mexican silver in San Francisco to make the bank "independent of the trade here" and also to take advantage of lower prices in California.19

Despite the bank's efforts, cash remained scarce in southern Arizona. To assist businessmen in making transactions without cur-

rency, the Pima County Bank established two types of deposits. A

regular checking account allowed a customer to draw on his account at any time by presenting a signed check. Also, individuals could put money into time-savings accounts and receive certificates of deposit. A certificate of deposit indicated who held the account and when it would mature. Once endorsed, a certificate circulated like money. When an account reached maturity, the current certificate holder

17Pima County Bank advertisement, Tucson Star, January 12, 1879. Barron Jacobs to Lionel Jacobs, December 28, 1878, Folder 4, Box 2, JFP, SC, UAL.

18P. W. Smith to Pima County Bank, September 25, 1880, Folder 4, Box 5; Lionel Jacobs to S. G. Murphy, February 12 and 18, 1879, Pima County Bank Letterbooks, LXXVIII; Wells, Fargo & Company Express receipts, April 17, 1879, Folder 3, Box 4, all in ibid.

19Lionel Jacobs to David Neahr, February 17, 1879; to Hall M. Porter, February 25, March 10, 1879; to M. I. Jacobs, April 12, 1879, Pima County Bank Letterbooks, LXXVIII, ibid.




presented the paper at the bank for cash. The bank also wrote checks on its reserve accounts and sold bills of exchange, which merchants then turned over to their creditors. By using bills of

exchange to meet some of its local obligations, the bank further increased the circulating medium in Tucson.20

The Pima County Bank also stimulated the Tucson economy by providing credit, most effectively through overdrafts and cash loans. Preferred customers could overdraw their accounts by offering as

security "commercial paper" in the form of territorial, county, and

city warrants or bonds. These prearranged overdrafts were considered loans, on which the bank charged monthly interest. Cash loans also were extended to approved applicants. Initially, the bank's directors followed a conservative policy, granting short-term (thirty- or

sixty-day) loans at 2 or 3 percent interest per month. To receive a loan, a borrower either signed a promissory note (endorsed by two other parties) or he presented a mortgage on property. Loans were renewable upon approval of the bank officers. After the bank had been in operation for a few months, Lionel Jacobs granted a few

long-term loans on the security of "good Commercial paper" or

mortgages on real estate. James Brash, who owned a flour mill in Florence, in March of 1879 borrowed $3,000 for two years at 2%

percent interest per month.21 The Jacobs brothers carefully regulated the credit operations of

the Pima County Bank. They limited overdrafts when money was in short supply, and denied loan renewals if they saw a prospect of more

profitable investment elsewhere. Even after a loan had been approved, the bank cashier sometimes postponed transfer of cash to the borrower. Lionel Jacobs, for example, delayed the shipment of silver coin to James Brash until the bank had collected on several small notes and built up its cash reserves.22

20Pima County Bank statement for week ending February 22, 1879; Lionel Jacobs to Abe Franklin, July 7, 1879; Lionel Jacobs to M. I. Jacobs, May 5, 1879, all in ibid. Pima County Bank advertisement, Tucson Star, January 12, 1879. Fifty Years, 4.

"Lionel Jacobs to M. I. Jacobs, April 12, 1879; to C. H. Ted, February 8, 1879; to H. C. Hooker, April 9, 1879; to Dave Calisher, March 12, 17, and 21, 1879, all in Pima County Bank Letterbooks, LXXVIII, JFP, SC-UAL. Tombstone Weekly Nugget (Arizona) receipt, August 28, 1880, Folder 5, Box 4, JP, AHS. Gutowsky, Arizona Banking, 10.

"Lionel Jacobs to Calisher, March 20, 1879, Pima County Bank Letterbooks, LXXVIII, JFP, SC, UAL.



PIONEER BANKINGin TUCSON 315

Throughout the late 1870s and early 1880s, the Pima County Bank served as a collection agency for Tucson businessmen. Merchants and freighters sent checks and notes to the bank for collection, and the cashier forwarded them to the banks upon which they were drawn for payment. To collect on notes, the bank contacted the financial institution nearest the residence of the debtor. In Arizona and New Mexico, payment was accepted in coin, paper currency, or bills of exchange and shipped by registered mail to Tucson. Elsewhere, money was deposited with a

correspondent of the Pima County Bank, and the correspondent bank acknowledged payment by telegram.23

Creditors of Tucsonans also used the bank's collection service. Lionel and Barron Jacobs routinely collected payment for checks drawn on the Pima County Bank; Wells, Fargo & Company; the U. S. Depository at Lord and Williams; or Safford, Hudson &

Company. They likewise contacted Tucson merchants for payment of delinquent notes drawn on other financial institutions. Occa-

sionally, creditors sent drafts to the bank, along with shipments of

goods, and instructed the cashier to procure payment before mak-

ing delivery. Usually, the bank remitted the proceeds, minus a commission, in New York or San Francisco bills of exchange or in

post office money orders. For Tucson merchants, the collection service decreased the time involved in completing transactions and increased the volume of their business. The bank, meanwhile, used the commissions on collections to pay other expenses.24

The Pima County Bank flourished as area businesses increas-

ingly depended upon its services. In the spring and summer of 1879, Lionel Jacobs worked hard to build up a steady volume of business and stabilize the bank's financial position. By early fall, he believed

23M. W. Kales to Lionel Jacobs, February 3, 1879, Folder 1, Box 4; Lionel Jacobs toCalisher, March 3, 1879; to M. L. Woods, March 18, 1879; to Randall & Danagh, February 8, 1879, Pima County Bank Letterbooks, LXXVIII, all in ibid. Sandoval y Biille to Pima County Bank, June 7, 1879, Folder 1, Box 4, JP, AHS.

24J. Goldwater & Bros, to L. M. Jacobs & Company, November 19, 1879; Kales to Lionel Jacobs, February 3, 1879, both in Folder 7, Box 4; T. Parish to Pima County Bank, November 29, 1879, Folder 6, Box 4; Elliot National Bank to Pima County Bank, January 16, 1880, Folder 9, Box 4; S. Heinsheim & Brother to Cochise County Bank, March 12, 1884, Folder 1, Box 9; Lionel Jacobs to E. W. Moore, April 4, 1879, Pima County Bank Letterbooks, LXXVIII, all in JFP, SC, UAL.




that he had constructed a solid foundation. His interests, however, had gradually drifted into other areas of business, and in September, Barron - as assistant cashier - assumed actual control of the bank's operation.25

In late 1879, ^e imminent arrival of the Southern Pacific filled Tucson with "frantic speculation of expectation" and prompted further changes in the activities and organization of the Pima

County Bank. To better handle the anticipated surge in business

activity, the Jacobs brothers made several physical improvements. In October, they considered moving the bank to accommodate a shifting of the commercial center of Tucson. They finally agreed, however, that "appearance secures business" and decided to remodel the exist-

ing structure rather than move. In the dry goods section of the store, they installed a counter and a new safe.26

With the arrival of the railroad and the peak of mining operations in Tombstone in the early 1880s, the Jacobs brothers initiated

changes in the bank's capital structure and persuaded their partners to expand banking operations. In January of 1880, the bank officers were reshuffled. Phillip Smith resigned as president to open a mercantile store in Tombstone and was replaced by Pinckney R. Tully. Lionel Jacobs, who was spending an increasing amount of time in San Francisco, relinquished the cashier's position to his brother Barron. Meanwhile, the Jacobs brothers had taken the profits from the bank's first year and placed them in a "Surplus" account. Even-

tually, some of the surplus would be divided among investors. Also in 1880, the bank issued stock certificates and established a "Capital Stock" account to generate an additional $25,000 to $30,000 in investment capital. Finally, to handle increased volume and improve services, the bank acquired additional correspondents.27

25Lionel Jacobs to Barron Jacobs, September 23, October 13, 1879, Folder 9, Box 4, ibid.

26Lionel Jacobs to Barron Jacobs, October 27, 29, 30, and November 5, 1879, ibid. W. Quinlan to Barron Jacobs, February 9, 1880, Folder 4, Box 9, JP, AHS. Pima County Bank advertisement, in G. W. Barter (comp.) Directory of the City of Tucson for the Year of 1881 (San Francisco: H. A. Crocker & Company, Printers, 1881), 1. Bret Harte, Tucson, 51.

27Lionel Jacobs to Barron Jacobs, November 3, 25, 1879; Smith to Barron Jacobs, January 20, 1880; to Pima County Bank, March 9, 1880, Folder 9, Box 4; Barron Jacobs to Smith, June 9, 1880, Folder 2, Box 5, all in JFP, SC, UAL.




In the spring of 1880, the Pima County Bank expanded its

operations by establishing a branch office in Tombstone. Barron

Jacobs appointed Phillip Smith manager and Heyman Solomon cashier of the so-called "Agency,

" located in one corner of Smith's mercantile establishment. Previously, Smith had offered a few bank-

ing services in his Tombstone store. Most of the "Agency's" business related to the mines. It provided cash for payrolls and collected miners' checks to merchants. E. B. Gage's Grand Central Mine also hired the "Agency" to supervise shipments of some of its bullion to San Francisco and New York.28

As the Pima County Bank flourished, Lionel and Barron Jacobs concentrated more on banking operations and devoted less time to

merchandising. Initially, the brothers had believed that "once established the management of the Bank will be found to be an easy matter involving very little trouble, & will not interfere with the conduct of the Mdze [sic] business." By the end of 1879, however, Barron was having difficulty running both operations alone, with Lionel frequently out of town. When sales slumped early in 1880, the brothers finally decided to discontinue their mercantile operations. Capital invested in the languishing store would produce a

higher return if invested in the prosperous bank. Also the brothers felt a civic duty toward the bank. They believed that a banker should also be a philanthropist, and that banks existed to benefit the public. As bankers, the Jacobses did more than just conduct routine business. They counseled, advised, and gave information on a variety of financial topics, Both brothers realized that they could no longer manage simultaneously their banking and their mercantile business.

Consequently, in February of 1880, L. M. Jacobs & Company closed its doors.29

28Records of Pima County Bank stockholders meeting, March 3, 1880; Barron Jacobs to Smith, March 1, 1880, both in Pima County Bank Letterbooks, LXXIX, ibid. "Phillip W. Smith," First National Bank poster, Tombstone Chamber of Commerce. Smith to Pima County Bank, September 25, 1880, Folder 4, Box 5, JFP, SC, UAL. W. Quintan to Barron Jacobs, February 9, 1880, Folder 4, Box 4, JP, AHS. P. W. Smith, General Merchandise and Banker, advertisement, in Tombstone

Epitaph (Arizona), June 1, 1880.

29Lionel Jacobs to Barron Jacobs, November 26, 1877, Folder 1, Box 2, JP. AHS. Lionel Jacobs to Barron Jacobs, October 4, and November 10, 1879, Folder 9, Box 4, JFP, SC, UAL. Lionel Jacobs, "Banking in Arizona," 4-5, typescript, AHS. "Notice," in Tucson Star, February 24, 1880.




As controlling officers of the Pima County Bank, Lionel and Barron Jacobs for the next three decades focused their attention on

serving the financial needs of Tucson and southern Arizona. During that period, the bank changed names several times. Between 1882 and 1885, it was nationally chartered as the First National Bank of Tucson. Under the national charter, the Jacobs brothers reorganized the Tombstone Agency of Pima County Bank as an independent institution and renamed it the Cochise County Bank. Lionel Jacobs acted as manager of the Tombstone bank from 1883 to 1890. A

general economic downturn in Arizona in the mid- 1880s, however, caused the brothers to return the national charter, and again operate as a territorial bank, known as the Bank of Tucson. In 1888 the Bank of Tucson acquired new investors and merged with a private bank- D. Henderson, Banker- to form the Consolidated Bank of Tucson. When the Consolidated Bank obtained a national charter in

1890, the Jacobs brothers sold their interests and invested in a rival bank, the Santa Cruz Valley Bank, which they nationalized in October of 1890 and renamed the Arizonal National Bank. Also

early in 1890, the brothers closed the Cochise County Bank because of the depressed economy of Tombstone following mine closures. Lionel and Barron finally retired from banking around 191330

As pioneer bankers and merchants the Jacobs brothers contributed greatly to the development of Tucson's economy. By offering banking services, they helped alleviate shortages of cash and credit and facilitated business activity. Through their mercantile store, and especially through the activities of the Pima County Bank, business transactions were completed easily and at reasonable costs, and a growing number of businesses were attracted to Tucson and southern Arizona. Lionel and Barron Jacobs and the Pima County Bank

helped lay the foundation for Tucson's banking system and paved the

way for future economic development.

30<The Man, the Idea, the Bank," in Tucson Citizen, October 27, 1929. Smith to Barron Jacobs, April 28, 1882, Folder 1, Box 7; A. Springer to Barron Jacobs, July 17, 1883, Folder 2, Box 8, JFP, SC, UAL.



Pioneer Banking in Tucson: Lionel and Barron Jacobs and the Founding of the Pima County Bank

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Transcript of Pioneer Banking in Tucson: Lionel and Barron Jacobs and the Founding of the Pima County Bank