The news about the troubles at the Aquia Bank and Trust Co. first came over the radio about two weeks ago while John Pruitt was at home eating dinner. Within minutes, the burly engineer was on his way to withdraw his life's savings.

"I know my money was supposed to be insured, but you never know what might happen," said Pruitt. "I kept thinking--panic, Great Depression."

Pruitt wasn't the only one whose mind was filled with thoughts of the 1930s that Friday night. Hundreds of nervous depositers in this sleepy bedroom community 65 miles south of Washington lined up in Aquia's (pronounced A-kwah-ya) lobby in a Depression-style run on the bank. Aquia officers frantically called neighboring banks to secure enough cash to pay their customers.

The next morning, by order of the State Corporation Commission, the bank's doors were locked. State and federal officials stepped in and, after negotiations that lasted until 2 a.m. April 5, arranged a last-minute sale of what remained of the bank's assets to a Danville bank.

The bank's doors were opened in time for business that Monday. But not before Aquia Bank and Trust, a genial little bank with a long history of financial difficulties, had become the first Virginia bank to fail in 18 years.

Aquia bank is seen by some here as a victim of the depressed real estate market and ruinous interest rates afflicting hundreds of small banks and savings and loans nationwide. While bank failures usually run about 10 a year nationally, 12 already have closed in 1982, federal banking officials say.

Aquia's problems, however, ran far deeper than an ailing economy.

State examiners said they had found forged documents, apparently fraudulent land deals and millions of dollars in loans involving a well-known local developer, some of which had long since soured, according to a letter written last September by Deputy State Bank Commissioner George W. Petry to the Stafford County commonwealth's attorney, who was also the bank's board chairman.

Former Aquia president and chief stockholder, Byron L. Phillips, has acknowledged borrowing more than $100,000 for his personal use, exceeding a loan ceiling for chief stockholders imposed by federal bank regulations.

Aquia's lending practices were so lax, according to Petry's letter, that one $118,000 loan was made to a mysterious Northern Virginia businessman who Petry concluded apparently never existed. The FBI and the state police are investigating the bank's transactions, former Aquia bank officials and law enforcement authorities say.

"The whole thing has been a nightmare," said Phillips, who presided over the bank for six years until he resigned under fire a few weeks before its failure. "If I had to do it all over again, I'd have gotten myself an oyster boat."

Aquia's problems began not long after it opened in 1973. Phillips said that when he arrived three years later the bank's books were unbalanced, accounting practices were confused and bad loans were being charged off regularly. "The parking lot looked like a used car lot, we had so many repossessed cars," said William Oeters, who came as a junior executive the same year as Phillips, succeeded him as president last month and remains an official of the newly reorganized bank.

But Aquia was always a popular institution in this county of 42,000. It was a small bank--the bookkeeping department worked out of a trailer behind the building--and its board was made up of prominent local citizens, including Daniel Chichester, the county commonwealth's attorney and former bank chairman. It was the first bank in town to open on Saturdays, and it quickly gained a reputation as the scrappy underdog competing against the somewhat stodgy and larger People's Bank of Stafford, just down the block.

"This was a place where people could come in to talk to us about anything they wanted, problems they were having with their marriage, their children, whatever," said Oeters. "It was just like sitting in a bar somewhere."

Few got a friendlier reception at the Aquia bank than developer L. Franklin Sealy, a gregarious, tobacco-chewing good old boy from Spotsylvania County whose beat-up Ford pickup was frequently seen in the bank's parking lot just down the road from the county courthouse here. At the time of Aquia's demise, nearly 40 percent of its $9.7 million portfolio was tied up in property developed and sold by Sealy, Phillips said.

"Whenever he would come in, everybody would say, 'Here comes good old Frank,' " said Phillips, who said he was the developer's principal contact at the bank. "But he was a slick-tongued devil. Even if you had him on the worst thing in the world, he could turn it against you."

Sealy, who earlier this year was convicted by a Spotsylvania County judge for failing to pay state withholding taxes on his employes, declined comment on his business dealings with Aquia bank. He laughed off Phillips' depiction of him as a slick real estate salesman who took advantage of bank officials.

"That's very flattering," Sealy said of Phillips' description. "All I can do is tell you right now we're in pretty bad financial shape. I don't own any land anymore, anywhere. Zero."

Sealy said he has lost his $300,000 English Tudor home in Spotsylvania and is now about $750,000 in debt. "I'm just a guy who really didn't tend to his business and consequently lost it," he said.

Aquia's loans to Sealy started in the mid-1970s, Phillips said, during the peak of the area real estate bonanza that transformed Stafford from a rural backwater of farms and pulp mills to a commuter county with shopping centers, schools and subdivisions. The boom-town psychology also had its impact in nearby Spotsylvania, where land that had once been worth $100 an acre was suddenly selling for as much as $5,000.

It was in his native Spotsylvania that Sealy capitalized on the boom. Buying up tracts throughout the county for development, Sealy said in an interview that he would then sell individual lots to families and speculators, mostly from the Washington area. The Aquia bank financed many of the purchases, generally making loans on Sealy's recommendation without even meeting the borrowers, Phillips said. The bank took in exchange a first mortgage on the properties in case of default. Or at least thought it did.

Phillips said it was in the fall of 1979 that the bank first discovered problems with title searches on these transactions. Two years later, Petry reported in his letter to Chichester that there were at least 13 forged title opinions and irregularities involving 35 to 40 other Sealy-related title searches.

The examiners also found other irregularities, including "improper assignments, incorrect recordation of deeds for trust and in one or two instances, it was determined that the bank had no collateral," Petry reported to Chichester.

Citing the ongoing FBI investigation, Chichester and other former bank directors declined to comment on what steps they took at the bank after they received Petry's report.

Chichester said he referred the letter to the Spotsylvania commonwealth's attorney because of his potential conflict as bank chairman and because most of the alleged offenses occurred in that county. Spotsylvania prosecutor Mark Gardner said yesterday he, in turn, referred the letter to the state police, which is still investigating along with the FBI.

In most of the instances involving the questionable title searches, it turned out the bank did not have the first priority in case of default. "We were as low as fourth or fifth on some," said Phillips.

The clouded titles turned out to be a disaster for the bank. When the economy slumped and many of the lot buyers failed to make payments on their property, the bank decided to spend $1.3 million in cash to buy out those with prior claims, Phillips said. The bank gained title to the property, but it then held thousands of acres in noninterest-bearing real estate.

Attempting to dispose of the property in a now-stagnant economy, the bank financed property sales at 10 to 12 percent interest when prevailing rates on mortgage loans were 17 percent, said Phillips.

The bank also ran into trouble because it did inadequate credit checks on some of Sealy's land buyers, Phillips said. One borrower was listed on loan documents as a Springfield lawyer named R. Robert Thoms, who received a $118,000 loan.

Thoms never made any payments and the bank was unable to locate him, court records indicate. According to a deposition in a foreclosure suit in Spotsylvania last year, Sealy said under oath that he was introduced to Thoms, whom he described as a baldish, heavy-set man, through a third party he refused to identify. Sealy met Thoms three or four times in Northern Virginia hotels, he testified, but had no idea where to find him. State bank examiner Petry concluded in his letter last year that Thoms apparently did not exist.

At the former Aquia Bank and Trust these days, it is pretty much business as usual since The People's Bank of Danville took over two weeks ago. After the Federal Deposit Insurance Corporation assumed all liabilities, the Danville bank agreed to buy the little bank, which had more than $12.7 million in deposits, for $125,000.

Aquia's fall is often blamed here not on its own managers, but on lean times. "It's almost impossible for these little banks to exist," says John Torrice Jr., chairman of The People's Bank of Stafford, whose daily new accounts jumped tenfold during the final days of Aquia. "What happened to Aquia could happen to thousands of little banks across the country in the next six to nine months. It's going to be real pathetic."

Aquia's old customers, meanwhile, have returned slowly to the tellers' windows of what is now the new branch of the People's Bank of Danville, where they sometimes mourn the passing of their friendly local bank. "It was a good country bank," said customer John Pruitt, as he waited in line to redeposit his savings the other day. "They were the nicest bunch of people."