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Court OKs Bank of Smithtown demise

Bank of Smithtown headquarters

Bank of Smithtown headquarters Credit: Audrey 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 Peoples United Financial announced in July. State Supreme Court Judge Emily Pines said in a Riverhead courtroom yesterday 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 its 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 plaintiff’s legal fees.

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