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The Fall of the Banking House of

Michael Hillman

The end of 19th and the beginning of the 20th century marked the most promising and prosperous period in Emmitsburg's history. This high watermark owes its thanks in many ways to two families: the Annans and the Horners, whose names and good work have all but been forgotten.

In 1882, Andrew Annan, with his sons Isaac S. Annan, James C. Annan and son-in-law, Major 0. A. Horner, organized the Annan-Horner Bank. For 40 years, through diligent loans and investments, the bank brought prosperity to the community. Sadly, these great families lost everything, including their reputations, following the collapse of their banking house in 1922.

To fully understand the impact of the fall of the Annan-Horner Bank banking house on those individuals and the community at large we must first step back in time and briefly trace the roots and accomplishments of these two great families.

The Annan Family

Robert Annan, the great-grandfather of Andrew Annan and the founder of the banking house of Annan & Horner, was born in Scotland in 1742. He studied theology at the University of St. Andrew under Alexander Moncrief, one of the original founders of the Presbyterian Church.

Licensed by the Associate Presbytery when only nineteen years old, Robert migrated to New York in the summer of 1761 where he remained for nineteen years having four congregations under his charge.

In 1764, Robert married Margaret Cochran, daughter of William Cochran. In 1762, William Cochran purchased the western and northern portions of Carrollsburg, an area which now encompasses most of the land west of Track Road up and north to Fairfield, Pa. (In 1754, Samuel Emmit had purchased the smaller eastern part of this tract). Margaret Cochran bore Rev. Annan two sons: Robert II and William, both of whom became physicians.

Robert was a firm believer in the colonial cause. According to family legend, he was known far and wide for his frequent and colorful denunciations of the British Government. He was often visited by Washington, Hamilton and Lafayette. One can only wonder what might have been said as these great figures sat and talked of the events shaping their world.

Robert Annan II was a graduate of Brown University. Following graduation, he studied medicine under Dr. Rush of Philadelphia, the foremost doctor of the time. Upon his death Robert's grandfather, William Cochran, passed his Tom's Creek Hundred Estate on to Margaret and her sister. The estate eventually came into the hands of Robert via Margaret, whence it became know as the Annan Homestead.

Upon completing his studies, Robert established his practice in Emmitsburg, where he met his wife Mary Cochran. Mary and Robert II had 11 children. The youngest, Andrew, was born in the Annan homestead in 1805.

[Historical Note: Like his neighbor, William Emmit, Robert tried his hand at "town farming"-Robert's town, called Annandale, was laid out west-south-west of of William Emmit's new town-"Emmitsburg"-half way toward present day Mount St. Mary's University. While Robert was able to sell some lots in Annandale, he was unable to repeat William Emmit's success and eventually gave up on the idea. The area where he had hoped to build his town, however, still bares the name Annandale, as does the present day road that skirts its western boundary.]

We know very little about Andrew Annan other than that he followed the footsteps of his father and became a physician. In ____ he married Anna Motter, with whom he had six children: Robert L., David, Isaac S., Andrew A., James Cochran and Anna Elizabeth.

Robert L. Annan was born on February 22, 1831. In 1849, he entered Washington and Jefferson College. Upon graduation, he studied medicine at the University of the City of New York. In 1855, he returned to Emmitsburg and joined his father's practice.

For the next fifty-two years, he served the Emmitsburg Community. Concerned with the welfare of the community at large, Dr. Annan was often sought out for his advice and, because of his education, was made a trustee of the public schools. In 1869, he married Alice Columbia Motter, the daughter of Mr. Lewis Motter. Following her death in 1878, he married Miss Hessie Birnie. Between the two, he raised eight children.

Isaac S. Annan was educated in the public schools of Emmitsburg. When twenty-years-old, he became a clerk in the general dry goods store of George W. Rowe. Following Rowe's retirement in 1856, Isaac became the store's proprietor and changed its name to I. S. Annan & Company.

In 1858, Isaac's brother James joined the firm. The store became known as I. S. Annan & Brother. In 1880, having profited handsomely from the store, Isaac turned the day-to-day operations of the store over to his brother James. Free of the duties of maintaining the store, he turned his attention to one of the most pressing needs of the community: clean drinking water. In 1880, Isaac, organized the Emmitsburg Water Company.

James Cochran Annan, was born in 1836. He was the junior member of the firm of I. S. Annan & Brother. Like his brothers, he was active member of the Emmitsburg Presbyterian Church. For thirty years, he was superintendent of the Presbyterian Sunday School and along with his brother Robert, one of the Church's trustees.
In ____ James married Rosa J. Stewart, a member of an old and well-known Scottish-Irish family of the Cumberland Valley, Pa. Rosa and James had _____ children: the _____ James Stewart, was born in _______

Anna Elizabeth, the youngest child of Andrew and Anna Annan, was born _________. In 1878, Anne married Oliver Horner, with whom she had ___ children. Andrew Annan Horner, the _______, was born _____.

The Horner Family

As in the Annan Family, the roots of the Horner family can be traced to the original settlement of the area.

In 1753, John and Mary Williams joined the growing community of what was then called the Tom's Creek Hundred. With the help of their son-in-law, William Shields, John and Mary acquired one of the finer tracts of land in the area, Wilson's Fancy. Wilson's Fancy now encompasses Emmit Gardens and Silo Hill.  [First settled in 1733 by John and Mary Wilson, Wilson's Fancy was the very first homestead in what would later become know at the Tom's Creek Hundred area.]

After his death in 1756, John Williams deeded the land to his three youngest children: Eleanor, Ester and Henry. Over the ensuing years Henry acquired his sisters' shares and in the early 1800's renamed the combined properties "Fort Henry."

With the onset of the Revolutionary war, Henry, then 33, was elected second lieutenant of the Game Cock Company, one of the two companies raised in immediate area, both of which belonged to a regiment commonly referred to as "The Flying Camp Battalion" Henry's company was commanded by his neighbor, Capt. William Blair. Henry's brother-in-law, William Shields, commanded the second company.

When Capt. Blair was wounded at the battle of Brooklyn Heights, Henry assumed command of the "Game Cock" company. Under Henry's command, the company participated in many hard-fought battles and, because of this, they drew the attention of George Washington and the admiration of Gen. Lafayette, to whom they reported during the final assault on the siege of Yorktown.

When the war was over, Henry returned to Emmitsburg and turned his attention to his farm and community affairs. In _____, Henry oversaw the building of the bridge over the Monocacy between Taneytown and William Emmit's new town of Emmitsburg. Henry also severed as local Justice of the Peace, and many deeds of this period bear his name.

In 18___, Henry married Jane Witherow Cooper. Henry and Jane had one son, _______, who showed little interest in farming the Fort Henry estate. Instead, he presided over a business career in Frederick, were he quickly rose to prominence.
When the war was over Henry returned to Emmitsburg and turned his attention to his farm and community affairs.

Jane's sister, Sara, married Alexander Love Horner II, whose parents had settled on a farm just across the Pennsylvania-Maryland line. Sara and Alexander had four children: George, Mary, David and, in 1817, their last child, Alexander L. Horner III.

In 1825, Sara Horner died, followed six year later by her husband, Alexander. After, the death of their father, the Horner children went to live on the great Fort Henry estate of their now-widowed Aunt Jane. In 1853, a year before her death, Jane sold Fort Henry to her youngest nephew, Alexander.

Following the outbreak of the Civil War, Alexander's nephew, Oliver enlisted as a private in Company C of Cole's Maryland Cavalry. Following the resignation in 1862 of his cousin John Horner, Oliver assumed the leadership of the Calvary Company.

Under Oliver's leadership the exploits of the mostly Emmitsburg-staffed company became legendary. Promoted repeatedly for efficiency, bravery and meritorious conduct, he ended the war with the rank of Major and joined Henry Williams in the ranks of true American heroes who proudly called Emmitsburg home.

Just like his great uncle Henry Williams before him, following the war, Oliver returned to Emmitsburg, Md., where he engaged in various mercantile pursuits. He was appointed Emmitsburg's postmaster in 1869. He resigned that position in 1877 to become United States storekeeper of customs in Baltimore. A post he held until 1882.

In 1878, Oliver Horner married Anna E. Annan, the daughter of Anna and Andrew Annan. In 1882, he returned to Emmitsburg and was immediately elected president of the Emmitsburg Board of Commissioners. It was under his tenure that the new Frederick County Board of Health first raised concerns over the quality of drinking water available to the residents of the town. As President of town's Commissioner, Oliver facilitated the town's ceding of a right of way for the laying of water pipes to the new Emmitsburg Water Company that his brother-in-law, Isaac Annan, owned.

The Formation of the Banking House of Annan & Horner

In 1882, Andrew Annan, with his sons Isaac S. Annan, James C. Annan, and son-in-law, Oliver Horner, organized the Annan & Homer bank. I. S. Annan served as president; Oliver Horner served as cashier.

In 1883, Isaac's son Edgar joined the new banking firm. Born on July 4, 1865, Edgar was educated at New Windsor, Md. In 1883, Edger gave up his studies and began work at the bank. Following the death of in 1897 of Oliver Horner, Andrew became the bank's cashier.

In 1902, five years after Oliver Horner's death, his son, Andrew Annan Horner, succeeded to his father's interest in the banking firm. Born in March 1881, Andrew Annan Horner attended public grammar school and the High School of Emmitsburg. Unlike his cousin Edger, Andrew completed his education at Eastman's Business College at Poughkeepsie, Ny., where he majored in banking.

In 1909, Andrew married Helen Bruce Morrison, daughter of William and Helen (Agnew) Morrison, of Emmitsburg, Md.

[Historical Note: William Morrison was the son of Emmitsburg's wealthiest landholder, David Morrison, who was married to a sister of Robert Morris, the financier of the American War of Independence.]

In _______, James Stewart Annan, the _____ son of James Cochran and Rosa Annan, joined the banking firm. Know as J. Stewart Annan, he attended New Windsor College, the Chambersburg Academy, in Chambersburg, Pa., and Lafayette College, Easton, Pa. Upon the completion of his education, J. Stewart returned home, and engaged in various occupations, including the management of his farms that totaled over 700 acres.

In addition to being on the board of the Bank, J. Stewart Annan was also a director in the People's Fire Insurance Company of Frederick County, the Emmitsburg Water Company, the Emmitsburg and Frederick Turnpike Company, and in 1907, he was elected to the office of Commissioner of Frederick County for a four-year term. He was re-elected for a second term in 1911.

In 1896 J. Stewart Annan married his cousin Andrew's wife's sister, Elizabeth Morrison. Shortly after their marriage, the pair purchased the old Horner home place, ‘Fort Henry.'

A wealthy man, Stewart Annan had the means to turn Fort Henry's "Mansion House" into a true mansion. In the Victorian style of the time, he added an eye-catching turret with curved windows and steep-like roof. He added a formal dining room on the first floor and, adjoining it, he included a butler's pantry. In 1897, he added an entire rear wing. On the east side of the rear addition, he built first and second floor porches. He also installed an oval "Tiffany" stained glass window on the second floor, also characteristics of the Victorian times.

J. Stewart and his wife Elizabeth were the closest thing Emmitsburg ever had to royalty. They lived extravagant lives, funded by the profits they received from all their business investments. Elizabeth was a frequent visitor to the most prestigious stores in Baltimore and the couple thought nothing of paying more for a simple light fixture than most residents in the town earned in a year.

Under the tutelage of these three men, the bank prospered. They loaned liberally to friends and neighbors, and reinvesting their profits back into the community. In a short matter of time, the Annans and Horners became controlling stockholders in the Emmitsburg Water and Turnpike Companies and, following the bankruptcy on the Emmitsburg Railroad in 1897, they assumed a significant financial holding in it as well. They also invested heavily in local farms and orchards. In ___, they purchased the Blue Mountain Apple Orchard, which held great promise of even more profit.

World War I - Boom and Bust in the American Farming Comminutes

Come On! Buy More Liberty BondsWhen the war in Europe began in 1914, the United States was in a recession. European need for goods such as food and munitions helped end the recess in and set the stage for a long economic boom.

The destruction of European farms benefited American farmers. Excited by the rise in prices for food, they borrowed heavily to buy more land and expand production.

America's entry into the war in April 1917 unleashed a torrent of Federal spending, most of it funded by Liberty War Bonds. The bonds were denominated in small amounts, i.e., $100s and sold by investment bankers. The small denominations opened the floodgates to a whole new group of investor, namely small community banks like the Annan-Horner Bank.

To ensure the Liberty-Bonds sold well, the federal government pressured the newly founded Federal Reserve to keep its lending rates low. Looking to cash in on the higher returns on the Liberty Bonds, many small banks, including the Annan-Horner Bank, borrowed heavily from larger banks and invested in these bonds.

In addition, many of the bank customers withdrew savings from lower interest savings accounts and purchased their own bonds. In withdrawing their funds, the banks customers had a significant impact on the working capital of the bank.

As long as interest rates stayed low, the boom in the high yield Liberty Bond market remained strong. When they needed to raise cash, the Annan-Horner Bank found a ready market for its Liberty Bond holding. As such, liquidity was not an issue.

Unfortunately for the Annan-Horner Bank, as well as other holders of Liberty Bonds, the decision of the Federal Reserves to hold interest rates led to a rapid growth in the money supply, setting off an inflationary boom. Following the cession of hostilities in Europe, to address the inflationary spiral, the newly established Federal Reserve System set in motion drastic deflationary steps.

The Fed's plan included the raising of short-term interest rates and the liquidation of the Liberty Bonds, which would further reduce the money supply. Raising interest rates, however, dramatically affected the value of the fixed-interest Liberty Bond. As Interest rates rose, the value of the bonds plummeted.

As the Federal Reserve began to enact its second phase of its deflationary plan, the calling in of loans, banks like the Annan-Horner Bank were forced to sell their Liberty Bond holding at below face value. Well-funded big estates and banking institutions purchased the depressed bonds by the hundreds of millions with heavy losses to innocent original purchasers.

As Interest rates continued to increase, small banks and people who had Liberty Bonds and were trying to hold them were forced to sell them at whatever they could get. Needless to say, the decision of the central bank had a chilling effect. Adjustments throughout the economy were sudden, erratic and severe. By Dec 7, 1920, the value of Liberty Bonds hit a record low.

While all Liberty bondholders suffered, farmers were especially hurt. Wartime demand for food and agricultural raw materials had increased the prices of farm products. Higher prices had stimulated farmers to borrow heavily and invest in additional land and equipment-most of this purchased on easy credit that was meant to be guaranteed by the rising farm incomes.

Farms were the first thing to recover in Europe following the end of WWI and, with them, the need for American food stocks evaporated almost overnight. Shut out of the European market, the domestic oversupply of food stocks led to a drastic fall in the prices of farm products, which directly translated into declines in farm income. The fall in food prices undercut the farmland prices and meant that many farmers had difficulty paying interest on their loans, leading to a mortgage crisis in the farming community.

Failures and foreclosures followed, including many locally like the Zacharias Family that lost their farm Single Delight, which had been in the family since the first European settlers stepped in the area.

Already pressed by losses form Liberty Bonds, many small banks in farming communities were unable to bear the brunt of this second blow and failed. The Annan-Horner Bank did not escape this fate, and according to its own records was insolvent at the close of 1920. The bank 1920 statement, prepared by Edger L. Annan, showed that the bank had absorbed its capital and surpluses of $20,000, and was $40,000 short in accounts. As bad as this might sound, this loss was only a paper loss and would only become actual if the bank was forced to sell its liberty bonds at the depressed prices.

Word of the condition of the Annan-Horner Bank was kept closely guarded and few knew of its dire straights. The Annan-Horner Bank families placed their hope in the return of the bond market; the profitability of their orchard and the water company investments; and the continued loyalty of their customers. These were customers who, in spite of declining farm incomes, had heretofore not succumbed to withdrawing their savings from the bank. As long as depositors did not need to withdraw their money, there would be no need to cash in the Liberty Bonds and the bank would survive.

The Perfect Financial Storm

However, time and weather were not on the bank's side. On April 1921, two nights of freezing temperatures destroyed 75% of the county fruit crop. The cash crops many farmers depended on to fund themselves until the fall harvest were wiped out. The entire cherry, peach, pear and plum crop, along with most varieties of apple were hit the hardest. The late frost also killed the winter wheat crop, which placed additional financial burden on local farmers.

Robbed of their spring cash crops, farmers began to withdraw savings to cover operating costs. To cover withdrawals, the bank was forced to sell some of its Liberty Bonds at the depressed prices, forcing it deeper into a financial abyss.

To add insult to injury, the late spring frost was followed by drought that lasted well into August and was described by many as the worst drought ever experienced. In July, the area received less then 1" of rain versus its normal 6 inches. Hay crops, a vital staple for livestock, produced only stubble. By August, the drought was being called the worst in three years, and water use restrictions were put into effect throughout Frederick County.

To limit their losses, the bank began to call in loans. In April, the bank seized the property of a Callahan. In 1917, the bank had placed a lean on the property following the failure of the Blue Ribbon Egg Company, which Callahan had funded with a loan from the Annan-Horner Bank.

May 14, 1921, the property was subsequently sold at the public square in Emmitsburg. Andrew A. Horner represented the bank and was questioned as to the correctness of the title, to which he replied was good. Based upon this declaration, Dr. Jamison, a prominent physician in town, bought the property.

About the same time, in an attempt to raise badly needed capital, Annan-Horner Bank filed for a charter as a state bank. It was to have a capital of $50,000 with a surplus of $25k. The money was to be raised by the selling of stock at a subscription price of $15, though the face value of the stock was only $10 share. The extra $5 was to be used to establish a surplus fund.

Shares for the bank were heavily marketed to the residents of Emmitsburg. For many, this was the first opportunity to hold a share in a company. Many residents who bought shares did so by paying for their shares by drawing upon savings in their savings accounts. In doing so, they inadvertently helped convert a significant portion of the bank's outstanding debt. In this case, it was money owned to its depositors to shareholder equity.

Exchanging debt for equity is a frequent strategy used in resolving high profile bankruptcies today. Creditors agree to trade what is owed to them in exchange for shares and, with them, control of the company. As creditors have a higher priority in receiving their money than stockholders, if the institution should fail, the decisions to accept such a deal only comes after extensive research into the assests of the company and its ability to survive in its restricted form.

Whether the residents of the town who traded their savings for stock in the Annan-Horner Bank understood the risk they were taking or not will probably never be known. However, it is reasonable to ask whether they would have been so willing to part with their hard-earned savings had they known the true status of the bank's financial condition.

Unfortunately, since the Emmitsburg Chronicle, which had so effectively chronologized the events of the community for the past 32 years, had ceased operation the year before, the outcome of the stock offering was unknown, as well as what happened over the next two months. It is only through later court testimony and newspaper's reports that we learn that the Annan-Horner Bank suspended operations on August 24, 1921, and, on October 21, its accounts were assumed by the Farmer's State bank.

Did the bank openly fail or was it simply taken over by the Farmers State Bank, as that bank seized upon the opportunity to establish a presence in Emmitsburg? Several clues point to the later. First, Andrew Annan, the cashier for the Annan-Horner bank, was retained as the cashier for the new Farmers State Bank. Had the bank openly failed, it is doubtful they would have retained him.

Second, the Annan-Horner Bank continued to lend money. On November 21, a month after being "succeeded by the Farmer's State Bank," the bank, under the name Annan & Horner, Inc., lent Albert Wetzel and his wife $140. The note, payable in 90 days, was subsequently endorsed to the Baltimore Commercial Bank as collateral security for a larger loan of several thousand dollars from that bank to the Annan Horner bank.

Lastly, less than a month after ceasing operation, Mrs. Andrew A. Annan, president of the Emmitsburg Democratic Women's Club and wife of __________ , was elected representative to the Democratic State Convention. Again, had the bank openly failed, it would be doubtful that it could have secured such a victory with the losses residents would have occurred.

The year 1922 brought no relief to the Banks hard pressed farmer customers. April, usually one of the wettest months of the year, saw only one inch of rain. Once again, a late frost destroyed a considerable portion of peach, apple, cherry and pear crops (upon which the farmers banked so heavily), as well as the early vegetables in the gardens. In increasing numbers, farmers had to turn to savings to make ends meet.

The Collapse of the Banking House of Annan-Horner Bank

Up until this time, the bank suffered primarily from events outside of its control, but, with the finances becoming increasingly tenuous, certain questionable actions of the bank (whether intentional or not) cast suspicion on its veracity, setting the stage for the collapse of the bank.

A few days before the 18th of February, 1922, the Baltimore Commercial Bank returned the Albert Wetzel note to the Annan-Horner Bank requesting that they substitute other collateral in place of it. On February 18, Albert Wetzel, as required, went to the bank to repay his note. After making the payment, he was informed that the actual note was temporarily missing, but "not to worry, it would be found and delivered to him."

Contrary to the bank's statement, a few days after receiving Wetzel's payment, the bank returned his note to the Baltimore Commercial Bank, falsely stating the note was uncollected.

Several months later, the Baltimore Commercial Bank sued Wetzel and wife and obtained a judgment against them for $140. While there is no record of Mr. Wetzel's response upon learning that a lean had been placed against him, one can only assume that word spread quickly through the community.

Two months later, and before the Baltimore Commercial Bank brought suit against Wetzel, the Annan-Horner Bank lent $3,000 to George Smith, who pledged the $2,300 in his savings account with the Annan-Horner Bank as security collateral for the loan. The loan was no sooner agreed to when it was resold at a discount to the Baltimore Commercial Bank-the bankbook being delivered along with the loan papers in the case that any money be taken from the account.

When the note came due in June, Smith offered to pay the balance due on the note, $700, provided the Annan-Horner Bank would accept his deposit book with the bank at its face value of $2,320 with accrued interest. The offer was refused.

Smith was told that the note was in the hands of the Baltimore Commercial Bank and settlement would have to be made with that bank. The bank refused to allow him to withdraw his savings without his bankbook and, shortly thereafter, a lean was placed against Smith for the defaulted note.

Given these questionable events, which had begun to weigh heavily upon the public's belief in the integrity of the bank, one can only imagine what went through everyone minds on May 6, 1922, when they awoke to headlines in the Frederick Post that the local Union Bridge Bank, one similar to the Annan Horner Bank, was short $150K.

For the next few weeks, newspaper headlines blazed with allegations that the cashier had managed to cover the missing funds every time the bank was examined. It was only after his activities had raised suspicion that the president of the bank requested the investigation, whereupon the deficiency in funds was discovered.

In a futile and fatal last-ditch effort to raise capital, on September 22, the Emmitsburg Water Company, which was controlled by the Annan-Horner families, raised the water rates. The public outcry against the rate increase was swift and severe. With it, any sympathy for the plight of the two families vanished.

Within days, a leading attorney in town, Vincent Sebold, filed suit against the rate increase with the State Public Service Commission. The petition was signed by 2/3 of water users, as well as the non-family member of the Water Company Board.

While the bank might have been able to explain away the Smith and Wetzel fiascos as mere oversights, when Dr. Jamison found the property he had purchased five years earlier from the Annan-Horner Bank (which at the time they claimed had a clear title) was under threat of Sheriff sale, the bank lost all credibility with the citizens of the town.

Unbeknownst to Dr. Jamison and contrary to public statements of the bank at the time of the original sheriff's sale, the title to the property sold to Dr. Jamison was not clear. The bank had a second lean on the property. Several months after winning this lean, the Annan, Horner Co. sold it to the Farmer's and Mechanics National Bank of Frederick to secure a loan to them.

When it entered bankruptcy, the Annan-Horner Bank ceased making payments on the loan to the Farmer's and Mechanics National Bank. In response, the Farmers and Mechanics National Bank directed that the property be sold by the sheriff. While Dr. Jamison managed to delay the sale, the damage was done.

In November, Dr. Jamison filed a petition with the circuit court alleging that the bank had liabilities in excess of assets in excess of $110,000 and, as such, was insolvent. A few days later, the bank admitted the insolvency and offered no objection to the appointment of a receiver, which was appointed on Dec 4th.

Three days later, a petition was filed with in Federal court by the attorneys for Albert Close, Mary Martin and Ersa Six. The three neighbors all had savings accounts with the Annan Horner Bank. Like Jamison's petition, their petition alleged that the banking firm was insolvent and that the bank had committed an act of bankruptcy by allowing a receiver to be appointed to take charge of the property and affects.

Upon reviewing their petition, the judge issued an order giving the Annan Horner bank until Dec 23rd to reply or they would be adjudged on involuntary bankrupts. Once judged bankrupt, the case would be handed over to Federal authorities, which the depositors felt were better qualified to handle the case than the locally appointed receiver.

On December 11, four days after the receiving the order from the Federal court, Andrew A. Horner, cashier of both the Annan-Horner and Farmer's State Bank, submitted his resignation.

The Dec 23rd deadline came and went with no reply from the Annan Horner Bank. As such, the Annan Horner Bank was declared involuntarily bankrupt.

Ten days later, a fire destroyed the barn at the bank's Blue Mountain Orchard Company. Six horses, two mules and 14 cows were lost with the barn, together with a large quantity of hay and feed and farming equipment. The total loss of livestock is estimated at $3,500, hay and feed at $1,000, and farming equipment at $800. Along with the barn and its content went a silo and a shed. The total loss is estimated at upwards of $10,000.

According to Samuel Long, who tenanted the farm, all was well when he retired Sunday evening. When he arose on Monday at 5 am, he heard the crackle of flames and looked out to see the barn a flaming mass. "The entire upper part of the barn had already caught fire." Whispers of arson quickly spread through the town.

On March 17, Arthur Willard, who had been appointed by the Federal court as bankruptcy referee, began his public hearings. The object of the hearings was to ascertain the assets of the bank and individual members of the firm. The trustees for the creditors and depositors: State's Attorney General Alexander Armstrong, John S. Newman, and Emmitsburg Lawyer Vincent Seabold would turn the assets into cash for the benefit of the creditors and its 300-400 depositors.

The bank's assets consisted mostly of personal loans to local residents and equity in real estate over and above montages on dwellings in Emmitsburg. In addition, the bank claimed the 255-acre Blue Mountain Apple Orchard to be worth $20,000 to $25,000. However, against the Orchard property were two montgages equaling $40,000. One held by John Hollinger for $15,000 and other by the Baltimore Commercial Bank for $25,000.

On April 27, Edgar L. Annan and Annan Horner appeared as witnesses. It was during this hearing that residents of Emmitsburg first learned that the bank was technically insolvent as early as 1920, a full year after they had been lulled into buying stock in it. In his defense, all that Edgar Annan could say was he thought the figures wrong even though they were his figures.

In their testimony, the cousins claimed that poor investments, mainly in the Blue Mountain Orchard, a garage, and other investments, especially Liberty Bonds, were responsible for the condition of the bank's finances. 

At the resumption of the hearings four days later, it was disclosed that, before the finical conditions of the bank had been made public, Edgar Annan had sold his place of home and place of business in Emmitsburg for approximately $11,000 and had invested the proceedings in the name of his wife and two daughters. The trustee immediately sized upon this revelation and opened an investigation into the transaction with the view of having the proceedings declared a part of the assets of the defunct bank.

In June, the bankruptcy referee began to investigate the bank's handling of transactions involving a $900 loan to Francis S. K. Mathews and another for $200 for Albert C. Wetzel.

The bank had discounted the two notes, bundled them along with other notes and sent them on to the Baltimore Commercial Bank as collateral for a loan. When the notes came due, they were sent to the Farmers' State Bank in Emmitsburg for collection. Upon receipt of the notes, he notified Matthews and the latter borrowed $900 on a note from the Farmer's State Bank and paid the Annan-Horner note. Instead of turning this amount over to the Baltimore Commercial Bank, he credited the amount to the Annan-Horner Bank.

Later, the Baltimore Commercial Bank notified the Farmer's State Bank that nothing had been heard from the Matthews and Wetzel notes sent for collection. Officials of the Farmer's State Bank pressed Horner as to his actions and gave him 24 hours to make good the amount under threat of suing his bond. He secured the money and turned it over the Farmer's State Bank.

On ________ 1923, the bankruptcy referee appeared before a grand jury and won an indictment charging embezzlement, false pretenses on the handling of the Mathews and Wetzel notes, and then later, handed down four more indictments against Andrew Annan and Andrew Horner stemming from charges made based on the non-payment of claims aggregating $154. The largest claimant was the bank's principle nemesis: Dr. Jamision.

Arrest & Trial

On the afternoon of Thursday, Sept 20, 1923, Edgar L. Annan and Annan A. Horner were arrested by Deputy Sheriff Charles W. Smith. Following their arrest, they were brought to the Sheriff's office where bail for Horner was set at $2,000 and fpr Annan at $1000.

Thomas Baumgardner bailed out Horner and Robert L. Annan bailed out his brother Andrew.

The arrests caused a great deal of excitement in the town. A warrant for the arrest of Annan Horner had been sent to the Deputy Sheriff Addlesburger on Wednesday. The warrant for the arrest Edgar Annan was sent to Baltimore, where he had moved.

On Thursday morning, Andrew drove to Emmitsburg from his home in Baltimore, where he had moved two week prior, to address some business matters. Upon arriving in town, he was arrested. Horner was arrested as he walked down Main Street near the center of the town.

When it became known that the arrests had been made, a crowd of several hundred people assessable at the square to witness the officers pass with the men in custody.

While it was generally known that the grand jury had indicted the former bankers, the utmost secrecy was maintained on the part of the State's attorney and court official until the warrants were issued and arrests made.

The specific changes made against the two involved the settlement of the estate of Charles Shuff. The warrants charged that the bank failed to pay certain creditors of the estate and that the bank had illegally obtained loans, old notes that had been paid off or renewed.

After arriving at the sheriff's office, Annan Horner retained former State's Attorney Samuel Lewis, while Andrew Annan retained Reno Harp. The pair were subsequently transported to Frederick, where they were arraigned before a judge and formally charged with false pretense, larceny and embezzlement. By 6:30 p.m., bail had been posted and both men were on their way home.

On Thursday, September 25th, Andrew Annan's trial began. The courtroom was filled to capacity, mostly with residents of Emmitsburg. From the very beginning, the prosecution and defense clashed over how facts were to be interpreted. It is called one of the most completed cases ever to be brought before the court because much of the testimony involved intricacies of reporting roles and responsibilities of the Annan-Horner Bank to its new owners the Farmers State Bank. Following the Farmers State Bank's take takeover of the Annan-Horner Bank, the books and records of the two were separate. Many of the questions posed by the prosecution involved why one account was débuted or credited vice another.

The complexity of the case was demonstrated by the contention of the defenses to the effect that the transactions in question were between a creditor and debtor and, therefore, could not legally be construed as embezzlement.

The State's case:

"While Horner was employed as cashier of the Farmer's State Bank, which was the agent for the Baltimore Commercial Bank, he was the recipient of two notes aggregating $1,100, sent by the Baltimore Bank to be collected from the Annan-Horner Bank, which was in the process of liquidation. The notes are alleged to have been received by Horner in May 1922. One note was that of Francis Matthews for $900 and the other was that of Albert Wetzel for $200.

Nothing was heard from the Farmers State Bank until the following December at which time the Baltimore bank is alleged to have gotten into communication with officials of the Farmers' Bank. The transactions between the two banks involving the notes is alleged not to have been known by the other banking officials until then.

When Horner was questioned about the matter by his superiors he is alleged to have said that the transaction was "O.K.," but it is alleged Horner was told that he "would be given until morning to make good," or the Farmers' State Bank would sue his bond. Horner then paid the money, but the charge was, however, pushed."

The Defense's case

"When the Farmers' State Bank of Emmitsburg took over the business of the Annan-Horner Bank, the State Bank Examiner instructed that the accounts of the two firms be kept separated. Before this transaction however, the Annan-Horner had borrowed a sum of money from the Baltimore Commercial Bank in which it was required to post a 20% collateral as added security. Among the collateral deposited with the Baltimore Bank were the two notes of Francis Mathews and Wetzel, money that had been borrowed from the Annan-Horner Bank.

Upon receipt of the notes, Horner noticed the pair. Mathews and Wetzel went to the Farmers State Bank, of which Horner was the cashier, and applied for a loan to cover the original loans. With the money form these new loans, Mathews and Wetzel paid off the Annan-Horner notes.

Horner then deposited the money into the account of the Horner-Annan Bank vice returning the funds to the Baltimore Commercial Bank. The justification for this action according to the defense was the Annan-Horner Bank was not required to turn the money over to the Baltimore Commercial Bank as that bank still had in excess of 20% collateral assurance. The money was subsequent used to pay off the Annan-Horner's debts during liquidation."

The Baltimore bank is then alleged to have threatened the Farmer's State Bank at Emmitsburg with suit because the money was not paid. The Baltimore bank claimed that the Farmers State Bank was their agent and, as such, was to have made the collection. When the suit was threatened it was alleged that the $1,100 involved was paid over to the Baltimore Bank by the Farmers State Bank, which in turn demanded that Horner make redress. Horner and his wife then borrowed the $1,100 from another bank in Emmitsburg, and turned the money over to the Farmer's State Bank.

On September 28 Andrew Horner got the first good news in what probably seemed a life time. "Not guilty of Intent to defraud" was the verdict of the court.

In presenting his basis for the conclusion, the judge noted:

"The Annan Horner Bank and the Farmer's Bank had been instructed by the State Bank Examiner, after the failure of the Annan, Horner & Co. To keep all accounts separate. He explained that the Baltimore Commercial Bank held 20% more collateral security than the amount of the Annan-Horner loan and, for this reason, it was appropriate to apply the proceeds of the Mathews and Wetzel notes to the insolvent bank."

In November, the referee took up the case of sale of the families' holdings in the Emmitsburg Water Company, of which the members of the bankrupt firm were large shareholders. It was revealed that the stock was pledged to the Baltimore Commercial Bank. The Baltimore bank agreed to sell the stock to a group of citizens in Emmitsburg led by the Hays family, and to allow the proceeds above and beyond its loan be applied to settle account with the banks depositors.

On Dec 4, the J. Stewart Annan's property on the north side of West Main Street, a two and ˝ story brick dwelling, was sold at a sheriff's sale to Elizabeth N. Annan for $4,025. Andrew Annan Horner's house, a two and ˝ story brick dwelling, located on what is know as Shield Addition, was sold to Helen Bruce Horner for $3,025. The 234-acre Annan farm situated about 3.5 miles southeast of Emmitsburg on Keysville road was withdrawn from the sale, as the auctioneer deemed the prince offered too little.

On March 8, 1924, Edgar Annan and Andrew Horner finally got their day in court for the remaining charges and were found not guilty.

The embezzlement charges were based on the non-payment of claims aggregating $154. The largest claimants were Dr. B. Jamision and Dr. John Brawner.
It was shown by the testimony that a large number of claims were paid by the trustees and that four or five claims remained unpaid. The unpaid claimants, it was alleged, owned the estate, and for this reason it was testified and the trustees refused to settle the claims. It also showed that the trustees had ample funds on hand from the estate in its hands to pay the claims. Furthermore, it was to shown that the commissions of the trustees were not drawn from the trustee funds, but remained and constituted a balance above the amount of the claims.

The prosecution, assisted by Author Willard, set forth that the trustees did not have from the estate sufficient funds to pay all claimants the charge of embezzlement was based upon the amount to the unpaid claims. However, the prosecution's arguments didn't win over the court.

In their finding for the defendants the court said:

"Upon the evidence we can have no hesitation in rendering a verdict of 'not Guilty' The funds to which the charge of embezzlement in this case refer to were aggregating about $154 audited upon the claims of two creditors of an estate which the defendants were administering as trustees. The testimony clearly shows that the pavement of the two dividends was suspended by the trustees because the creditors were indebted to the trust estate. It was solely for that reason and not because of any criminal or fraudulent purpose that the checks for the sums mentioned in the indictment were not delivered. The dividends on claimed of numerous other creditors were dully paid. The trust funds were deposited by the trustees in the bank of Annan, Horner & Co, which was then solvent. There was no misappropriation of any part of the money by the defendants, and they did not even withdraw for the bank account the commission to which they were entitled. There was sufficient balance in the account to the credit of the trustees to pay the dividends in question. And, if the two creditors had adjusted or disapproved the counter-claims against them, the checks for the amount audited to them would have been delivered and pain at any time during the period of several years that elapsed before the failure of the bank in which the funds were deposited. It would be plainly unjust to deprive the defendants of their liberty for the conduct which has been presented by the testimony in this case."


While Andrew Horner and Edgar Annan were found not guilty of the charges brought against them, they and their families never recovered the good will of the residents of the town and moved on.

Proud men, they were terribly humiliated to be forced to walk through town in handcuffs in front of people they had known all their lives. Less than three days later, Anna E. Annan Horner, the wife of Major Oliver Horner, and the matriarch of the families, died. According to Polly Baumgardner Shank, the youngest daughter of Thomas and Mary Morrison Baumgardner, and niece of Andrew Horner and Edgar Annan, and the oldest remaining relative, "Aunt Anna died of a broken heart over the whole thing."

Polly Baumgardner oldest brother, Carl Baungardner drove Andrew Annan and his family to Ohio where they joined up with his cousins the Agnews. The Agnews had a very profitable potter works and, with their help, Andrew rebuilt his life. In 1931, he returned to Washington where he built a reputation as a highly successful and respected lawyer. According to family legend, he held the bible during the swearing in of one of the presidents.

All of Andrew Annan's brothers and sisters moved to their summer home in Lynn Massachusetts following the collapse of the bank and proceed on with their lives. Andrew's brother "O. A." would eventually rise to the position of president of Pittsburg Glass. Andrew Annan died in 1945.

Edgar Annan stayed in Emmistburg, but disappeared from public life.

While never charged, nevertheless, J. Steward Annan's personal fortune and land were ceded to cover the debts of the bank. As noted above in 1921, he was forced to sell his Fort Henry mansion. In 1924, he lost all his farms, including the Long Field, which had resided in the family for well over 100 years.

As few people in the area had sufficient funds to purchase J. Stewart Annan's property, or the other farms forced into bankruptcy because of the repercussions of the bank's failure, many local farms passed into the hand of outsiders and, with it, many old names that had been uttered since the first settlement vanished.

J. Stewart Annan and his family moved to Hagerstown where he and wife lived a more modest lifestyle. He eventually opened up an insurance business.

In 1931, J. Stewart Annan, a man who single-handily did more to enhance the quality of life in Emmitsburg, died.

Read other stories by Michael Hillman