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From preceding page
is that this bank had a lot of things wrong. They have plenty to sustain a case."
The final version of the minutes of this meeting are shorter than the draft and contains none of the above. The minutes say only that the banks councel was authorized to negotiate a settlement if possible, and if not, to oppose the order.
After this meeting management and directors met several times with stockholders impatient to know why the annual meeting was being postponed so long. A small group of dissident stockholders, representing about 30 percent of the outstanding stock, tried unsuccessfully to get three additional representatives onto the board of directors, according to one of the shareholders.
It was not until shortly before Oct. 15, when the FDIC-approved proxy material was sent out in anticipation of the annual some of the stockholders learned what had been going on at State Bank.
Stockholder Floyd Bagley, a delegate to the Virginia House, recalled, "I woke up at 2a.m. and found my wife reading the report. After she finished I read it until 4a.m."
When the stock was originally issued in 1972, it had a par value of $40 and sold for $50. It split 5 for 1 that year, and dividends were paid until December 1980. Consequently, for an original investor the cost per share, adjusted for splits and dividends, is $7.77, according to a bank official. The current market value is $9 to $10 per share.
Moreover, through the use of proxy votes, management passed a floor resolution which in effect indemnifies all the officers and directors of any personal financial liability for any bank problems between March 18, 1980 (10 days before the first alleged embezzlement) and Oct 15, 1981, date of the delayed annual meeting.
For the first nine months of 1981 the bank had a loss of 184,000. A call report shows the bank had total equity capital and liabilities (deposits) of $8.8 million at the end of October 1981, compared with total capital and liabilities of $12.4 million at the end of September 1980, or down nearly a third in a year.
State Bank acquired a new president and CEO in late July. P. Richard Malloy, 52, a veteran of 25 years in banking, had most recently worked for the banking commisioner of West Virginia. He was approved by the FDIC. In an interview, Malloy was optimistic about State Bank's future.
The staff has been trimmed and deposits, which had been declining since September 1979, have edged back up to $8.2 million from $7.7 million in October 1981. The bank, which has branches in Woodbridge and Manassas, has $9.3 miilion in assets. It now has $838,000 in capital as a result of the realignment voted upon.
"The road to recovery will begin in 1982," Malloy said, noting its loan portfolio and bond accounts were "in excellent shape." The FDIC once again permits it to accept uninsured depodits over $100,000, State Bank remains on the FDIC's problem list, however. The consent order to case and desist will be lifted when an acceptable internal audit program is developed and the bank passes examination, he added. Virginia state commissioner of financial instituttions, Sidney Baily, who had warned State Bank against unsafe and unsound practices in March 1981, said recently he was satisfied the bank's difficulties have been cleared up.
The board of directors had voted back in April to seek a merger. Malloy last week declined to comment on possible merger activity. Among those who are said to be interested in taking over state banks areTranslator
Rachel Hughes