Magazine article American Banker

Tiny Bank Rises from Ashes of Embezzlement, Lawsuits

Magazine article American Banker

Tiny Bank Rises from Ashes of Embezzlement, Lawsuits

Article excerpt

It's been a long eight years for Bill Beall.

Since taking the helm of a bruised First State Bank of Miami in 1988, the 62-year-old banker has nursed the tiny Texas institution back to health and repaired a public image battered by a small-town scandal and multiple lawsuits.

The $13.6 million-asset bank, a subsidiary of Miami Bancshares, suffered losses of about $6 million in the late 1980s because of embezzlement by the bank's top three officers.

The scandal divided the small community, as friends of the former bank officials refused to acknowledge their guilt, even after convictions. And the negative publicity caused some of the bank's business to walk out the door, temporarily.

After several years of recapitalization, collecting on sour loans, and settling litigation stemming from the former officials' deeds, bank officials have now brought First State back into the black.

And its performance since 1992 earns its ranking as the top survivor among community banks, according to a study by American Banker.

"We've made a very nice turnaround," Mr. Beall said. "Most of our customer base is stable, and our loan demand is quite strong for a small country town."

For 1995, the bank reported net income of $188,000 and return on assets of 1.46%. The bank still has more than $2.5 million of net tax-loss carryforwards but did not use much of them in 1995, Mr. Beall said.

With a Tier 1 leverage capital ratio of more than 12% and no foreclosed property or other repossessed assets, the bank now sports a healthy balance sheet. Even the $400,000 of nonperforming loans are 90% guaranteed by the Farmer's Home Administration.

"We're very pleased. We have a good board and an excellent staff and a fine community in which to do business and live," Mr. Beall said. "We feel that our stockholder base and our customer base is extremely happy with the results at the bank. …

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