Bank of Smithtown class action settled
The Bank of Smithtown, owned by Smithtown Bancorp, is being converted to a People's United Financial bank after the parent corporation was taken over by the Connecticut-based company in July. Credit: Newsday, 2010 / Audrey C. Tiernan
The final chapter of the Bank of Smithtown's demise ended Monday with approval of a settlement in a class-action suit.
Last year several shareholders sued over the takeover of the troubled bank by Connecticut-based People's United Financial announced in July. State Supreme Court Judge Emily Pines said in a Riverhead courtroom Monday that the final agreement was "a fair and reasonable settlement."
Plaintiffs had alleged that Smithtown Bancorp's board of directors failed to fulfill their fiduciary duty when seeking a fair price for the bank after it teetered under the weight of bad loans and losses that totaled $63.5 million in the first three quarters of 2010.
Smithtown shareholders received $3.77 per share in the deal, based on a formula derived from a baseline dollar amount and Peoples United's stock price.
In 2006, when the economy was still white hot, Smithtown's stock traded north of $26 a share.
The bank last year agreed to more fully disclose the efforts and strategies it employed to find a buyer before putting the takeover to a shareholder vote. A financial consultant hired by the plaintiffs determined that the deal was about as good as they could get, and shareholders approved the transaction, valued at $60 million, in November.
The parties reached a preliminary settlement to the suit in January. Monday's hearing gave shareholders a final opportunity to object to the settlement, but none did.
The defendants admitted no wrongdoing and agreed to pay $395,000 for the plaintiffs' legal fees.
"It was a good outcome," said William Regan, an attorney representing former Smithtown board members.
David Leventhal, who represented the plaintiffs, agreed that the outcome was reasonable.
People's United's attorney Peter Kazanoff declined to comment.
