In Wednesday's editions it was incorrectly stated that National Savings & Trust Co. was losing about $100,000 a month in defaulted student loans. The figure refers to the amount of the defaults experienced by all D. C. banks participating in the loan pool. Also, Douglas R. Smith has resigned as NS&T's chief executive officer, but remains as chairman.
National Savings and Trust Co. Chairman Douglas R. Smith announced at yesterday's annual meeting he planned to step down as the bank's chief executive officer after 18 years in order to devote more time to his home and family. His successor will be NS&T President Joseph H. Riley.
Smith's resignation comes after the bank's most successful year in its 111-year history. Record highs were reached in all areas. Net income in 1977 was $2.9 million, up 34.5 percent over the previous year. And dividends topped $1 million for the first time.
In his prepared remarks, Smith, 62, assured stockholders that directors, officers and employes of NS&T are not permitted free overdrafts or preferential loans. In fact, he said, "All officers must report to the board the amount, purpose and security of any loans made at another banking institution.
"Loans to our directors, subject to the most extraordinary scrutiny, are made under the most objective arm's length manner. Terms and rates not unlike those to any other responsible borrower."
The chairman added the bank was willing to have "the brightest spot-light" turned on every area of its activities.
The statement was prompted by revelations during the Bert Lance affair that preferential loans and free overdrafts were not untypical in banking.
A recent survey of 13,743 banks by the Federal Deposit Insurance Corp., showed that 30 percent of them reported at least one interest-free over-draft in excess of $500 to an officer, director or major stockholder of the bank. Moreover, the average interest rate on loans to insiders of banks that maintained a correspondent balance was 7.76 percent compared with 8.41 percent for those without a correspondent balance.
In response to a stockholder question, Smith said NS&T was losing about $100,000 a month on defaulted student loans until the loan program was halted in July 1976. After long negotiations, city and federal officials finally agreed earlier this month to repay $4 million in defaulted loans to D.C. banks.
Application for loans again will be accepted by NS&T and other banks starting June 1. About $5 million will be available for new loans for city residents attending college this fall.