. . . .BULLETIN. . . .BULLETIN. . . .BULLETIN. . . .BULLETIN. . . . STATE OF GEORGIA DEPARTMENT OF BANKING AND FINANCE 2990 Brandywine Road, Suite 200 Atlanta, Georgia 30341-5565 DAVID G. SORRELL, ACTING COMMISSIONER Phone: (770) 986-1633 Fax: (770) 986-1655 Internet Address: http://www.gadbf.org February 28, 2003 The following is a summary of official action taken on applications by State Financial Institutions under Chapter 7-1 of the Code of Georgia and petitions for Certificate of Incorporation of Financial Institutions and other matters of interest during the month of February 2003. IN THIS ISSUE: IRS Unveils Offshore Voluntary Compliance Initiative Purchase of Bank Owned Life Insurance (BOLI) Products 1 FINANCIAL INSTITUTION Midtown Bank & Trust Company 712 West Peachtree Street Atlanta, GA 30308 Fulton County APPLICATIONS FOR NEW FINANCIAL INSTITUTION CAPITALIZATION $ 10,500,000 APPROVAL DATE Pending BEGIN BUSINESS DATE Community Bank of Georgia 692 West Parker Street Baxley, GA 31513 Appling County $ 5,000,000 Pending Freedom Bank of Georgia 3165 Maysville Road Commerce, GA 30329 Jackson County $ 7,500,000 Pending American Trust Bank 880 Holcomb Bridge Road, Building C Roswell, GA 30076 Fulton County $ 9,000,000 02-05-2003 Homestead Bank 1380 Peachtree Industrial Boulevard Suwanee, GA 30024 Gwinnett County $ 12,000,000 03-18-2002 02-24-2003 Local Bank of Middle Georgia 532-550 N. Davis Drive Warner Robins, GA 31093 Houston County $ 6,000,000 Pending PREVIOUS NAME Fidelity National Bank FINANCIAL INSTITUTION CONVERSIONS CONVERTED TO Fidelity Bank APPROVAL DATE Pending Norcross Gwinnett County EFFECTIVE DATE FINANCIAL INSTITUTION AmTrade International Bank of Georgia Atlanta, GA 30309 2 APPLICATIONS FOR DISSOLUTION APPROVAL DATE Bank is in Receivership Click here for further information EFFECTIVE DATE FINANCIAL INSTITUTION SunTrust Bank Atlanta SunTrust Bank Atlanta SunTrust Bank Atlanta SunTrust Bank Atlanta SunTrust Bank Atlanta SunTrust Bank Atlanta Main Street Bank Covington Main Street Bank Covington 3 APPLICATIONS TO ESTABLISH A BRANCH OFFICE BRANCH OFFICE Westside Village Branch Office 825 Martin Luther King, Jr., Drive, Suite C Atlanta, GA 30314 Fulton County West Pratt Safeway In-Store Branch Office 1205 West Pratt Street Baltimore, MD 21223-2600 Baltimore County Eustis Village Branch Office 15375 US Highway 441 Eustis, FL 32726 Lake County Killian Hill Marketplace Publix In-Store Branch Office 4051 St. Mountain Highway South Lilburn, GA 30047 Gwinnett County Orlando International Airport Branch Office 9259F Airport Boulevard Orlando, FL 32827 Orange County Hillsborough Square Branch Office 6704 Memorial Highway Tampa, FL 33615 Hillsborough County Lawrenceville-Suwanee Branch Office 850 Lawrenceville-Suwanee Road Lawrenceville, GA 30043 Gwinnett County Crossville Road Branch Office 525 East Crossville Road Roswell, GA 30075-3034 Fulton County APPROVAL DATE 02-13-2003 BEGIN BUSINESS DATE 01-24-2003 02-21-2003 01-06-2003 02-18-2003 12-12-2002 02-06-2003 10-18-2002 02-10-2003 01-06-2003 02-18-2003 02-20-2003 02-21-2003 FINANCIAL INSTITUTION First Georgia Community Bank Jackson BRANCH OFFICE Locust Grove Ingles Branch Office 4920 Bill Gardner Parkway Locust Grove, GA 30248 Henry County APPROVAL DATE 12-23-2002 BEGIN BUSINESS DATE 02-15-2003 Security Bank of Bibb County Macon Brunswick Branch Office 103 Scranton Connector Brunswick, GA 31525 Glynn County 12-02-2002 02-03-2003 The Bank of Georgia Peachtree City Tyrone Branch Office Highway 74, Tyrone Intersection Tyrone Road Tyrone, GA 30290 Fayette County 02-26-2003 Georgian Bank Powder Springs Acworth Lending Center Branch Office 3451 Cobb Parkway, NW Acworth, GA 30101 Cobb County 01-23-2003 02-26-2003 Altamaha Bank and Trust Company Uvalda PROPOSED NAME Fidelity Bank Vidalia Downtown Branch Office 206 Jackson Street Vidalia, GA 30474 Toombs County 02-13-2003 APPLICATIONS FOR RESERVATION OF A NAME COUNTY Gwinnett County APPLICANT Mr. James W. Stevens, Attorney Kilpatrick Stockton LLP 1100 Peachtree St., Suite 2800 Atlanta, GA 30309 Montgomery Bank & Trust Montgomery County Mr. Edward J. Harrell Martin, Snow, Grant & Napier, LLP Post Office Box 1606 Macon, GA 31202-1606 4 PROPOSED NAME PRIMESOUTH BANK FINANCIAL INSTITUTION (SURVIVOR) Citizens Trust Bank Atlanta COUNTY Pierce County APPLICANT Mr. Neal L. Conner, Jr. Attorney Post Office Box 1278 Waycross, GA 31502 FINANCIAL INSTITUTION MERGERS MERGED INSTITUTION Citizens Federal Savings Bank Birmingham, AL APPROVAL DATE 02-25-2003 EFFECTIVE DATE 02-28-2003 United Community Bank Blairsville First Georgia Bank Brunswick, GA Pending Dalton Whitfield Bank Dalton Premier National Bank of Dalton Dalton, GA Pending Farmers and Merchants Bank Lakeland The United Banking Company Nashville, GA Pending APPLICATIONS TO BECOME A BANK HOLDING COMPANY AND/OR TO ACQUIRE VOTING STOCK OF A FINANCIAL INSTITUTION BANK HOLDING COMPANY TO ACQUIRE APPROVAL DATE FORMATIONS Georgia Commerce Bancshares, Inc. Atlanta, GA Georgia Commerce Bank (In Organization) Atlanta, GA Pending Piedmont Bancshares, Inc. Atlanta, GA Piedmont Bank of Georgia Atlanta, GA Pending Buford Banking Group, Inc. Buford, GA Lanier Community Bank (In Organization) Buford, GA 02-17-2003 Mountain Bancshares, Inc. Dawsonville, GA Mountain State Bank (In Organization) Dawsonville, GA Pending First Commerce Community Bankshares, Inc. Douglasville, GA First Commerce Community Bank (In Organization) Douglasville, GA 02-06-2003 Eagle National, Inc. Stockbridge, GA Eagle National Bank Stockbridge, GA Withdrawn 02-06-2003 5 FORMATIONS North Georgia Bancorp, Inc. Watkinsville, GA North Georgia Bank Watkinsville, GA Pending ACQUISITIONS SunTrust Banks, Inc. Atlanta, GA Lighthouse Community Bank Hilton Head Island, SC United Community Banks, Inc. Blairsville, GA First Central Bank Lenoir City, TN United Community Banks, Inc. Blairsville, GA First Georgia Bank Brunswick, GA Main Street Banks, Inc. Kennesaw, GA First Colony Bank Alpharetta, GA SNB Bancshares, Inc. Macon, GA Bank of Gray Gray, GA CITY Hawkinsville Albany Fairburn Macon Forsyth Perry Marietta Gainesville Atlanta Albany Marietta Macon Macon Jacksonville Dublin Macon Jacksonville Jacksonville Jacksonville CHECK CASHER LICENSES ISSUED APPLICANT NAME Brahmani, Inc. TRADE NAME So-Lo Food Mart Consolidated Loan Company of Albany, Inc. Consolidated Loan Company Eritrea Enterprises, Inc. Cork n Jug & Fred's Market Gray Highway Pawn, Inc. Shurlington Jewelry & Pawn HP Package, Inc. Forsyth Package To Go Ishan, Inc. Squire Package JAI KOTYARK, INC. Universal Exchange JJoy Cashing Checks Services, L. L. C. JJoy Cashing Checks Kim, Byong C. Super Check Cash Luper, Gary L. Albany Bargain and Pawn Mail Suite, Inc. Mail Suite McBrearty, Mike Shurlington Package Store Ron-Rich, Inc. Sportsman's Liquor Store #2 Save Rite Grocery Warehouse, Inc. Winn Dixie #2702 Shree Mataji, Inc. Southside Package Shop Silly Willy's, Inc. Silly Wily's Package Store Winn Dixie Charlotte, Inc. Winn Dixie Charlotte, Inc. Winn Dixie Raleigh, Inc. Winn Dixie Raleigh, Inc. Winn Dixie Stores, Inc. Winn Dixie 6 Pending 02-25-2003 Pending Pending Pending FINANCIAL INSTITUTION Performance ESV, Inc. Stockbridge, GA APPROVAL OF ELECTRONIC DATA PROCESSING SERVICER APPROVAL DATE 02-13-2003 NOTICES IRS UNVEILS OFFSHORE VOLUNTARY COMPLIANCE INITIATIVE; CHANCE FOR 'CREDIT-CARD ABUSERS' TO CLEAR UP THEIR TAX LIABILITIES The Internal Revenue Service wishes to bring the following information to the attention of state chartered financial institutions and their customers and members, regarding tax liabilities related to "offshore" payment cards. Internal Revenue Service officials have announced the launch of an initiative aimed at bringing taxpayers who used "offshore" payment cards or other offshore financial arrangements to hide their income back into compliance with tax law. Under the Offshore Voluntary Compliance Initiative, eligible taxpayers who step forward will not face civil fraud and information return penalties. However, taxpayers will still have to pay back taxes, interest and certain accuracy or delinquency penalties. The Initiative reflects an attempt to bring taxpayers back into compliance quickly while simultaneously gathering more information about the promoters of these offshore schemes. As part of the request to participate, the taxpayer must provide full details on those who promoted or solicited the offshore financial arrangement. The IRS will use this information to pursue promoters. Under the Initiative, eligible taxpayers will have to file or amend their returns and pay interest and certain civil penalties, as well as the tax. For example, a taxpayer who understated his income to avoid $100,000 in taxes in 1999 would wind up paying $149,319 to the government. This includes the tax liability plus $29,319 in interest and an additional accuracy-related penalty of $20,000. If a taxpayer did not step forward, his tax liability generally would include the civil fraud penalty of $75,000, and therefore higher interest of $42,758. The total amount due would be $217,758, without considering probable additional civil penalties for failure to file certain information returns. To apply for the Initiative, taxpayers must notify the IRS in writing and provide their name, taxpayer identification number, current address, daytime phone number and certain promoter information. The last day a taxpayer can apply is April 15, 2003. Written requests for the Voluntary Compliance Initiative can be sent to: Regular Mail National Offshore Voluntary Compliance Initiative Coordinator P.O. Box 480 Bensalem, PA, 19020 Overnight/ National Offshore Voluntary Compliance Initiative Coordinator Special Delivery 11601 Roosevelt Blvd. Philadelphia, PA 19154 DP S6005 Those seeking information by telephone should call: 215-516-3537 (not toll-free). In addition, a special e-mail address, VCI@irs.gov, has been set up for taxpayer inquiries. More information on the Initiative can be found on the IRS Web site at www.irs.gov. 7 PURCHASE OF BANK OWNED LIFE INSURANCE (BOLI) PRODUCTS LEGAL AUTHORITY FOR BANKS TO PURCHASE BOLI PRODUCTS The General Corporate Power provisions of the Official Code of Georgia (O.C.G.A.) contained in 7-1-260 include in Section (9) the following: "To procure, for its benefit, insurance on the life of any of its directors, officers or employees or any other person whose death might cause financial loss to the bank or trust company; or, pursuant to any contract lawfully obligating the bank or trust company as guarantor or surety, on the life of the principal obligor." Additionally, O.C.G.A 7-1-261 provides for incidental powers. The Department believes that the General Corporate Powers under 7-1-260 and the incidental powers provisions contained under 7-1-261 would authorize the purchase of BOLI insurance policies by banks, provided that all necessary safety and soundness considerations are met in the purchase of these products. It would not be anticipated that specific or prior Department approval would be necessary to purchase these products, except as noted below in the discussion of safety and soundness issues. Safety and soundness factors must be primary considerations in the purchase of BOLI products. These include several specific safety and soundness factors that should be actively monitored and reviewed in the consideration in these products during the examination and supervision process as noted below: De novo Institutions The Department has a substantial number of financial institutions that have been in business for five years or less. Several of these have contacted the Department, along with representatives of insurance companies that market BOLI products, regarding the appropriateness of these products for de novo institutions. The Department regards new banks as higher risk enterprises as compared to banks with an established operating history due to their earnings characteristics (including the lack of positive sustained earnings in some cases), lack of a sustained and proven business plan model, and constraints on providing additional capitalization and other uncertainties. The Department therefore would expect that such products would need to be demonstrated to be appropriate and non-detrimental to the bank, appropriate to the earnings and capital position of the bank and consistent with the business plan for the bank. Normally such a contractual obligation would need to be approved by the Department during the bank's first three years of operations. Problem Institutions Obviously, financial institutions with problem characteristics, particularly those subject to administrative actions, might not be appropriate purchasers of BOLI products. Banks with asset quality problems, earnings problems, insufficient liquidity or asset/liability mismatches or insufficient capital might find these problems exacerbated by the purchase of certain BOLI products. The Department might specifically require the approval of the purchase of such products as a condition of a Board Resolution, Memorandum of Understanding, or Cease and Desist Order. Issues regarding Excessive Compensation or Insider Abuse The written guidance provided to our examination staff requires that consideration be given to make certain that the purchase of BOLI products, when combined with other forms of compensation paid to bank officers, do not represent excessive compensation. Part 30 of Title 12 of the Code of Federal Regulations addresses safety and soundness standards, and contained within Appendix A to this regulation is a section prohibiting excessive compensation as an unsafe and unsound practice. Excessive compensation is based on a determination of the reasonableness of the benefit being provided by the BOLI, the reasonableness of the cost of providing that benefit and the reasonableness of total compensation being provided, including the benefits provided through the BOLI products. Additionally, the use of BOLI would not be appropriate if the use of the product represented insider abuse, fraud, or breach of trust, or if the use of such products could lead to material financial loss for the institution. Other Safety and Soundness issues related to BOLI products Additional factors might be identified as supervisory concerns during the examination process, if it were determined that these were material safety and soundness risks to the bank. These might include the following: 1. Concerns if substantial surrender charges on the BOLI products would effectively "lock in" the bank to the product. 2. Concerns regarding the financial strength of the Insurance Company offering the BOLI products. 3. If the bank was failing to properly meet the provisions of GAAP in accounting for these products. 8 4. If the bank is purchasing BOLI products on individuals other than "Key Persons" unless the product is otherwise demonstrated to be appropriate. 5. A failure to meet other applicable regulatory compliance issues, including FDIC Rules and Regulations and Federal Reserve Regulation O. 6. If the product appears to present the bank with potentially adverse tax consequences. 7. If policy endorsements and assignments that are required have not been properly executed. 8. If the BOLI products represent potential legal concerns with minority shareholders. USE OF OCC BULLETIN 2000-23 The Department has adopted OCC Bulletin 2000-23 as examination guidance and includes this memorandum as a part of our Supervisory Memos provided to examination staff on Bank Purchases of Life Insurance. Exceptions to Bulletin 2000-23 would normally be subject to adverse comment or criticism in a report of examination, and depending upon the degree of the exception at the time of purchase and the current impact upon the financial institution, such an exception could be the subject of an administrative response by the Department. If, as an example, it were determined that the cash surrender value of a bank's BOLI policies issued by one insurer exceeded the loans to one-borrower limitation under State Law (15% of statutory capital base), or if the cash surrender value of all BOLI policies issued by all BOLI insurers exceeded the concentration of credit limitation (25% of Tier 1 Capital plus the Allowance for Loan and Lease Losses), it should be reasonably anticipated that this would be commented upon in the report of examination. If it were determined that these products represented a material safety and soundness risk to the bank under these circumstances, then this could be the subject of an administrative action. While these are not statutory or regulatory requirements, we regard these as safety and soundness benchmarks which need to be observed in order to demonstrate that standards regarding diversification and moderation of risk are being maintained. If the BOLI product were in conformity with these standards at the time of purchase and subsequently moved outside of these standards due to changes in the cash surrender value of the BOLI products or changes in the financial institution's capital, the Department would not expect retroactive compliance with these provisions. Provided that this change does not represent a material safety and soundness issue to the institution, the Department would normally not require subsequent actions to bring the bank back into compliance with these standards, assuming that the decision to purchase the product was appropriate and documented at the time of purchase. SUMMARY OF THE DEPARTMENT'S POSITION ON THE PURCHASE OF BOLI PRODUCTS To summarize our Department's position on the purchase of BOLI products, we focus on the safety and soundness implications of BOLI purchases, utilizing the guidance issued by the OCC Bulletin 2000-23. Special Supervisory emphasis and attention is placed on purchases of these products by de novo financial institutions or problem financial institutions, due to the risk characteristics of these banks. Examiners have been further directed to review such arrangements to make certain that such products do not represent excessive compensation to executive officers and that such arrangements do not reflect an abusive insider situation that could adversely impact the bank. We recognize that there is a need for such products particularly in providing executive retirement plans needed to retain key executive officers. It has been our experience that the majority of BOLI plans that we have reviewed have not represented undue risk to the financial institutions purchasing the products and that companies offering these products have not sold products to banks that would be improper or detrimental to the safety and soundness condition of the institution. We do believe that safety and soundness benchmarks are needed to maintain diversification and moderation of risk and our position on these issues is outlined above. The Department would regard purchases of BOLI from one issuer in excess of the statutory loan limits or aggregate purchases of BOLI in excess of the concentration of credit guidelines to be potentially problematic and subject to adverse regulatory comment. While there are no statutory or regulatory limitations specified regarding the purchase of BOLI products, other than the safety and soundness benchmarks discussed above, we would expect compliance with these safety and soundness provisions in order to limit potential financial and operating risk to the bank or other financial institution. BACK TO TOP 9