Autobiography - The Galindo Group

Ram Galindo THE MAKING OF AN AMERICAN Page 132
it, we incorporated Brazos Valley Bancshares (BVB), owned by the founding directors.
We were more interested in forming a stronger bank capable of doing more for the
community than in paying dividends. Thus, we plowed all the earnings right into the
capital account. Mr. Callan found a bank willing to lend BVB, with our personal
guaranties, 58 % of the capital we had invested in Western and with these funds
purchase from the five of us a prorated share of our ownership in the bank. Thus BVB
became the principal owner of Western and we released some of the direct debt we had
incurred to capitalize the bank. The transaction closed May 1, 1985, in total ignorance of
what changes were lurking ahead in real estate legislation and OPEC’s attitude
regarding production rates in its member countries.
When these new factors collided with the economy, Western began to feel the strain.
Real estate assets that were in high demand in January 1986 couldn’t be given away by
November of the same year. Oil and gas based properties worth $360,000 in February
went down to $60,000 by December. Suddenly loans that just a few weeks before had
been amply collateralized were now classified as inadequate. The borrowers
themselves lost their income and therefore went in default. Despite all the scrambling
and imaginative ways to maintain solvency employed by our management, by the end
of 1986 our capital base was becoming marginal.
In 1984, I borrowed from Western a significant loan to develop a single-family
subdivision in the former BCMUD1 area. In early 1986 I sold the whole project to a
Houston developer who assumed the liabilities without releasing my guaranty on the
loan. When in the fall of 1986, he failed to make his payments I resigned to my seat on
the board of Western to let events take their legal course. Former good loans in former
safe industries given to former stout borrowers were now too frequently in default. My
loan fell in these three categories. Following the insolvency of many borrowers, we, the
owners of Western, lost all our capital in the bank and could not find funds to inject more
equity to offset the losses. The Federal Deposit Insurance Corporation (FDIC) ultimately
closed the bank down on October 23, 1987, before the matter related to my guaranty of
the Houston developer was settled.
All the investors in Western lost all their money and the directors were left with
additional deficiency liabilities. This event left each director with the obligation to pursue
the best solution that could be carved out for his own settlement. Rather than blaming
management, especially our latest president, Jim Keller, the Callan estate and I chose
to take our lumps and settled on a plan to pay our debts. In the 1960s, Jim Keller had
been one of the athletic superstars of Texas A&M and as a result had a high profile in
the community. He came to us as a business promotion officer and climbed the ranks
until he became president of the bank. Jim was always outstanding in his performance,
honesty and dedication. In my eyes, his fault in the bank’s misfortunes, if any, was no
greater than the directors’. I couldn’t see why he should be the sacrificial lamb. I settled
with the federal officials who had closed the bank and began paying on my stock debt
and my share of the holding company’s debt to the creditor bank. It would be August 19,
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