Little Rock-based One Bank & Trust will receive more than $3 million in a partial settlement of a case involving $17.7 million that the federal government seized last year from an insurance policy on the bank's former chairman and chief executive officer, U.S. District Judge Brian Miller ruled Tuesday.
The money, about $3.03 million, represents premiums the bank paid on a $20 million life insurance policy on Layton Stuart, who died in March 2013. Under the order of federal regulators, Stuart had been fired from his positions as chairman and chief executive officer at the bank in 2012.
One Bank had argued that it was entitled to about $3.5 million for premiums paid, but the federal government and Richard Torti Sr., the trustee of the 1997 Stuart Family Trust, which included the life insurance policy, argued that the bank was entitled to only $3.026 million. The bank agreed to settle for the lesser amount, Miller said.
Stuart died at age 62 from cardiovascular disease.
In July, the federal government seized almost $160,000 from Stuart's bank accounts and almost $17.7 million in death benefits from a $20 million John Hancock Life Insurance policy. The government claimed that the money it seized was tainted by Stuart's purportedly illegal activities.
The $3 million in settlement money comes at a good time for One Bank.
The bank has $377 million in assets. It lost $1.2 million in the first quarter this year and another $11 million combined in 2012 and 2013. Its assets have fallen from about $440 million at the end of 2012.
With One Bank's capital at $13.8 million in the first quarter, its tier 1 capital percentage had fallen under 4 percent, which is considered by regulators to be significantly undercapitalized, a banking expert said.
Tier 1 capital is calculated by dividing a bank's equity by its average assets.
The $3 million from the lawsuit will raise the bank's capital level to about 4.4 percent, still considered undercapitalized but not as severely. Banks generally are considered to be well capitalized at 8 percent, the banking expert said.
The bank's losses are connected to the purportedly illegal activities involving Stuart, said Jerry Pavlas, One Bank's president and chief executive officer.
"We have a recapitalization plan underway and this $3 million represents a significant step forward in meeting our recapitalization goals," Pavlas said.
Even with the settlement, One Bank still has claims to almost $18 million with the U.S. Justice Department, Pavlas said.
Torti said he offered the bank an opportunity to settle a year ago, but the bank declined.
"It was just an argument over two different scenarios on accounting [on the policy]," Torti said.
Pavlas said, however, that by taking the $3 million settlement, the bank did not give up any of its legal rights to the almost $500,000 more that it originally sought.
Business on 05/15/2014