In November 1769,  the Ayr Bank was established, under the designation of Douglas, Heron & Co., with a capital of £150,000; and, numbering among its shareholders some of the most wealthy and influential men in the country, the concern began business under the happiest auspices, and with the fairest prospects of success.

Its career, however, was short and its effects ruinous. In the history of banking scarcely an instance is to be found of greater mismanagement. In little more than two years the company was under the necessity of suspending payments (June 1772); and though a farther advance was at that time obtained from the proprietors, the bank finally closed its transactions on 12th August 1773, having thus scarcely completed three full years from the date of its commencement.

Many families of Ayrshire were buried in the fall of Douglas, Heron & Co., and among these unhappily was the laird of Dalfram. “In an evil hour,” says Cunningham, “when the love of making ‘meikle mair’ came upon him, he purchased shares in what Burns called ‘that villainous bubble the Ayr bank,’ and was involved in its ruin.”

Though true in the main particular, this is not altogether a correct statement. Lapraik, we believe, never was a shareholder, but what was equally ruinous, he became a victim to the mania for speculation created by the lavish credits of the bank. He not only obtained discounts himself, but guaranteed others to a heavy amount; and when the “bubble burst” he found himself involved beyond the possibility of extrication. 

A poem, written apparently at this juncture, or shortly afterwards, embodies the author’s sentiments, somewhat quaintly expressed, relative to the Douglas and Heron Bank, and the wide-spread ruin occasioned by its fall:-

IN the year Sixty-nine and Sev'nty,
The Notes amongst men were too plenty:
They took their glass and were right canty;
They little thought,
That plenty, when 'tis misimproven,
Brings men to nought.

The cry went through from poleto pole,
There's credit here for ev'ry soul;
If he's well back'd, without control,
He shall have Money:
'Tis bitter sauce to each one now,
That then was honey.

This credit went o'er all the County;
It was as ready as King's Bounty:
But now there is not one of twenty
That can get rest;
Hornings are going every day,
They're so opprest.

If I might pick some men by name,
Wha did lay out a decent scheme:
They're foolish folk wha those men blame;
For their intention.
Was to ev'ry crown a pound
By this invention.

In midst of their industr'ous scheme,
Their money is requir'd again:
He now is fad wha then was fain;
The secret's kent;
His profits he has not got in,
And's money's spent.

And then what Creditors he has
Come running on him with a blaze;
Each telling that he must have his,
Or caution get;
Then diligence against him goes;
Syne he's laid flat!

The mismanagement on the part of the company chiefly existed in the lavish manner in which their notes were thrown into circulation, and the granting of loan on long credits, whereby the capital was withdrawn from the immediate use of the bank.

This evil, proceeding partly from ignorance, was augmented by the circumstance of a number of adventurers having found their way into the directorship, who, at once needy and imprudent, set at defiance all the regulations of the establishment.

(This was particularly the case at the office in Ayr. The Report of a Committee of Inquiry, published in 1778, states that “at Air, which was the principal office, and where the business commenced the 6th of November 1769, it was unfortunate that a variety of enterprising companies, engaged in different kinds of foreign and domestic t6rade, had, about this time, been established in that place, under different firms indeed, but all of them closely connected and linked together; and that the members which composed these several trading companies became all of them partners of Douglas Heron and Company. It was still more unfortunate, that the cashier and most of the directors, chosen for the management of the Air office, were deeply connected with, and concerned in, one or more of these trading companies; and thus the wise and salutary regulation of the general meeting, November 1769, prohibiting above one member of any trading company from being in the direction at any of the offices at one and the same time, was disregarded in the very first proceeding. Such were the companies under the firms of Oliphant and Company – Whiteside and Company – Maclure and Maccree – Campbell and Company – Montgomery and Company – Campbell, Crawford and Company, and some others. The same connections, and, in general, the same individuals, composed those trading societies. They were a set of the partners of Douglas, Heron and Company associated together; and four or fie of the chief acting directors of this office were deeply engaged in those commercial schemes.

The common desire and necessity of promoting mutual credit could not fail to unite this confederacy in the closest manner; and the access to credit being rendered easy, the conseque4nces were such as might have been expected, - Most exorbitant and profuse credits were immediately given out, in various forms to the individual members of those trading companies, and to the companies themselves, under their respective firms, - The same set of people became securities for each other; and, in the granting of cash accounts in particular, this abuse immediately became so great with respect to the Board of Directors, and was so evidently inconsistent with the proper rules of management, that, so early as the 20th November 1769, a regulation was made, ‘That none of the directors who had already been bound should afterwards be received as securities in any cash-account; and thereafter, on the 8th January 1770, the abuse having been complained of by the other offices, it was further resolved, ‘That no person whatever should be received as cautioner in more than three cash-accounts.’” These resolutions, however, had little effect, the mismanagement they were intended to check continuing, according to the Report, nearly to an equal extent. Besides the office at Ayr, there was one in Edinburgh and another in Dumfries).

The result was the speedy dissipation of the company’s funds – the contraction of an equivalent debt, especially in London, to meet the return of their own notes – and a commercial panic occurring at the time, the money market suddenly became depressed, and all who were struggling for existence were speedily overwhelmed.

At this crisis the desperate efforts made by the sale of the redeemable annuities plunged the company into still farther difficulties; and the attempt to save the concern from legal bankruptcy ended a few months afterwards in a voluntary one, the evils of which were considerably augmented by the very means adopted to avoid such an alternative.

(At the stoppage in June 1772, the debts due to the three bank offices amounted to nearly £700,000, £400,000 of which had been contracted by the partners themselves. The whole amount of assets, including debts and bills of exchange, amounted to £1,237,043, 7s. ld. The debts due by the company exceeded this sum. In 1789, the committee appointed to wind up the affairs of the bank, found it necessary to make a fresh call of £1400 per share upon those partners who still continued solvent. From the state of affairs at this time, it appeared that after deducting the debts due to the company, the firm remained debtor in the sum of £366,000! The whole loss upon each share was calculated to amount to £2600, exclusive of interest.)

It now became a matter of necessity, on the part of the company, to realize every available debt; hence the hornings and diligence alluded to by Lapraik.

In consequence of approaching difficulties, the Poet let his own lands of Dalfram, and retired to Muirsmill, where he remained for a few years. From thence he removed to Netherwood a farm on the water of Greenoak, still retaining the lease of the mill, however; and here he continued for nine years, struggling in vain to overcome the losses he had sustained.

At the end of that period he sold off his property, and again returned to Muirs mill; but the sale of his lands having failed to rid him of his liabilities, he still found himself the victim of legal prosecution, and at length, to heap the full measure of wretchedness on the devoted head of an unfortunate but honest man, he was thrown into prison.

Douglas, Heron and Company (the 'Ayr Bank'), a joint stock bank formed in November 1769, with numerous subscribers or shareholders, and with a paid-up capital of £96,000, closed its doors on 25 June 1772. The subscribers' liability amounted to more than £2,000 for each £500 share they held, and many lost their estates in the years following the collapse. According to Ward, 'among Ayrshire lairds totally or partially ruined were Patrick Douglas of Cumnock,
Hugh Logan of Logan,
Robert Kennedy of Pinmore,
Archibald Craufurd of Ardmillan,
Sir John Whitefoord of Ballochmyle and Blairquhan,
John Christian of Kinning Park,
George McCrae of Pitcon, and
David McLure of Shawood.' 

According to a 1770 list of the 'Proprietors of Stock' in the company, William Logan of Camlarg was one of its directors, and he too, a nephew of Craigengillan and son-in-law of Waterhead, faced ruin. He had borrowed money from Craigengillan to improve his small estate, A letter to the latter from David Limond in 1773 reveals his unsentimental attitude to his nephew. Limond wrote, ' spoke to Mr Fergusson about your multure Process against Camlarg, which he promisses to push on. I wish he may be as good as his Word, & shall not fail to dunn him as much as in my power.'  Although these were Limond's words, he was confident of the temper of the man to whom he addressed them. Logan lost his estate, 'ruined by his merciless uncle' . Georgina McAdam, whose comment this was, described the situation thus:

While John McAdam was making money on all hands came the disastrous failure of the Ayr Bank - it was entirely set going by the landed proprietors of the Counties round - and the effect was far worse than the present state of Ireland with the encumbered estates. Estates changed hands for nothing! They were engulfed and wherever our Ralph Nickleby held the smallest mortgage he squeezed the last drop of blood out of the victim, between himself and the bankruptcy, Barbeth - where his granddaughter Mrs McAdam Cathcart now lives - became his, Camlarg and many large estates. Uncle Gilbert's estate went at last with this shock and meantime Mammon was silently acquiring Waterhead.

Patrick Heron of Kirroughtree (1736 - 1803) was a Scottish banker and politician. From 1794 to 1803 he was a Whig member of Parliament for Kirkcudbright Stewartry.

He married Jean Home, in 1761, daughter of Henry Home, Lord Kames, but the couple were divorced in 1772. In 1775, he married Elizabeth Cochrane, cousin to the diarist James Boswell.

He was a founder of a bank in Ayr, Douglas, Heron & Company, which went bankrupt in 1773.

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