Financial institutions today, Mar. 2008

Inside this issue:

Best Practices for

2

Dealing with

Heightened Levels

of Asset Quality

Issues

Credit Repair Scam 5 Alert

Action on

6

Applications for the

Month of March

DBF's Customer

10

Service Stars for the

Month of March

News and topics of interest to financial institutions regulated by the Department of Banking and Finance

Monthly Bulletin #3

March 2008

GeorgiaFIRST Recovery Coalition
The Georgia Department of Banking and Finance, along with the federal financial regulatory agencies, is encouraging all financial institutions to participate in the establishment of the GeorgiaFIRST Recovery Coalition. The Department of Homeland Security has identified the Financial Sector as one of eighteen critical infrastructures, and as such has encouraged the establishment of regional coalitions. If you are responsible for Emergency Preparedness, Disaster Recovery, or Business Continuity within your organization, you will want to be involved in this initiative.
The GeorgiaFIRST Recovery Coalition is an organization dedicated to ensuring the resiliency and availability of Georgia's financial services community by:
Establishing an alliance with local GEMA offices and other public safety agencies of state and local government which have emergency preparedness responsibilities for exchange of information, ideas, and resources in order to act more quickly following a disaster or an event affecting financial services;
Addressing homeland security issues which require a collective response on the part of Georgia's financial institutions to provide financial services;
Protecting the people working in the Georgia financial community while they safeguard their families;
Making certain the public sector is aware of the importance placed on financial services availability by Georgia's financial community; and
Establishing the methods and procedures for credentialing the crisis management teams of Georgia's financial institutions.
For the purposes of the GeorgiaFIRST Recovery Coalition, the State has been organized into eight regions to allow more structure, coordination with GEMA regions, and for more defined response capabilities in the event of a disaster.
If you are interested in participating, please contact Ted Hansen with the Financial Services Information Sharing and Analysis Center (FS-ISAC) via e-mail at thansen@fsisac.us or phone at 770664-4207 or Rick Kelly with Synovus via e-mail at richardkelly@synovus.com or by phone at 706-6444316.
There are plans for three more "kick-off meetings" over the next 45 days. One will be in North Georgia, one in Macon, Georgia, and one in South Georgia. Details will be released as soon as they are finalized.

"Safeguarding Georgia's Financial Services"

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Best Practices for Dealing with Heightened Levels of Asset Quality Issues
With the recent trends experienced in the residential real estate market, which have resulted in an increased level of nonperforming assets, the Department has noted that a number of banks have formulated and executed some effective strategies and best practices for monitoring and managing increased exposures in these areas. We thought that we would outline some of these practices in order to assist banks in effectively meeting these challenges.
Board and Committee Involvement with Asset Quality Issues
One of the hallmarks of an effective bank management team is having frequent communication and involvement with the Board of Directors particularly when a bank is experiencing increased asset quality issues. Certainly the status of identified problem assets should be discussed with the Board of Directors at the monthly board meetings. One of our bankers indicated to us recently that he provides his Board Members with copies of the results of the weekly reviews of identified problem assets.
Another measure being taken by a number of Boards of Directors in the current market environment is to reduce loan approval limits, so that credit approvals over a certain dollar amount receive either Loan Committee or Board approval before funding. Having more sets of eyes reviewing large credits can be effective, particularly when Boards of Directors have knowledge of the marketplace, which is often the case. Committee and Board involvement should not just focus on loan approvals but also collection strategies for large non-performing credit relationships.
One of the best practices regarding the Board of Director involvement is having an effective procedure in place to ensure that loan policies established by the Board of Directors are complied with on a consistent basis and that there are significant consequences for non-compliance with policy. This can be done by incorporating policy compliance with the loan operational area (which is ideal since it can prevent non-compliant loans from being funded) or alternatively having a review process to check credits for policy compliance.
Identification of Problem Loans
It has been noted that many experienced bankers are "scrubbing" their loan portfolios to identify problem credits on a proactive basis. This means looking not only at non-performing loans but also at borrowers that have structural or operational issues, even where payments may have been kept current through interest reserves or payments from other sources. By identifying such loans, management can then establish appropriate strategies to strengthen these credits and initiate the collection strategy that is the most effective in minimizing potential loss exposure to the bank.
Management Oversight of Identified Problem Loans
Effective bank management has increased their level of supervision of identified problem assets. In some banks, a management loan committee is reviewing loans on the bank's watch list on a weekly basis to determine the status of the loan, identify action items that need to be accomplished and establish timelines for these action items. In addition, some of these banks are reviewing all residential construction and development loans on a monthly basis to monitor the condition of the borrower, housing or lot sales, and the condition of collateral. It is important that bank management be aware of the condition of their collateral. If a borrower is not maintaining the physical upkeep and security of the collateral, the bank may need to take possession of the property to safeguard the condition of the collateral.

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Best Practices for Dealing with Heightened Levels of Asset Quality Issues (continued)
Another issue is delineating who has management responsibility regarding identified problem credits. Several banks have established a special assets structure for problem loans that transfers collection responsibility away from the originating loan officer once the credit has been moved to a Special Mention or Adversely Classified Status. This permits a more objective, and often times, a more seasoned loan officer to supervise the collection of impaired or non-performing assets.
It is particularly important that senior management assess the adequacy of loan staffing during this period of increased asset quality issues. It is vitally important that staffing be both adequate in number and experience to meet the challenges of properly managing asset quality issues.
Appraisals
One of the key issues that bankers are noting in the current market environment is a decline in appraisal market values on construction loans, and more particularly, on values of developed residential lots in certain markets. Bank management is choosing in many cases to have reappraisals performed in order to better quantify their bank's potential loss exposure on residential real estate loans. Bank management is also looking more closely at the qualifications of the appraisers performing these updated appraisals, and in some cases, decreasing the number of qualified appraisers being used by the bank in order to maintain quality control. Several banks have also contracted to have third party reviews of appraisals, to ensure that the appraisals meet Interagency Guidelines on Real Estate Appraisals and Evaluations and USPAP requirements and appear appropriate based on the reviewer's knowledge of the market.
External Loan Review
It cannot be stressed strongly enough that strong independent external loan review is one of the most necessary and costeffective strategies that bank management can utilize to identify asset quality issues in a timely and effective manner. The Board of Directors of a bank should make certain that the firm hired to perform this function is experienced and that they are independent in their judgment. Many banks have chosen to increase the frequency of these reviews; where they might have once had an annual review, they may now be having reviews performed semi-annually.
Loan Operational Issues
Experience has shown that when large loan losses are examined in detail, their common characteristics often include:
Loan documentation problems, including the lack of perfected collateral or other structural issues, A misunderstanding or misanalysis of the bank's collateral position, Funding of the loan prior to the receipt of complete collateral and/or credit documentation, Weak or poorly analyzed financial information, and/or An undocumented or poorly understood plan of repayment.
In order to address these issues, bank management in many banks has recognized that they need proper loan operational staffing, policies and procedures in place to ensure that these issues are addressed properly on the front-end. In other cases, bank management has recognized that these issues may not have been properly addressed in the past, and they have

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Best Practices for Dealing with Heightened Levels of Asset Quality Issues (continued)
subsequently addressed these concerns with increased staffing. In such cases, it may be necessary to perform operational reviews on the existing loan portfolio to identify and correct documentary and operational deficiencies, where possible.
The Allowance for Loan and Lease Losses (ALLL)
Obviously, during a period where greater impairment of assets is being experienced, it is important that bank management increase their focus on maintaining a proper and adequate ALLL. It is an expectation that bank management will establish a proper and adequate methodology that establishes an ALLL that is sufficient to meet the level of impaired assets on the bank portfolio. Bank management should work effectively with their CPA's in the preparation of their FAS 114 and FAS 5 assessments. The best practice in this area is to establish a sound and well documented methodology that is reflective of the condition of the bank and which is affirmed as satisfactory during the examination process and independent audit. Effective banks are primarily focused on the adequacy of the ALLL, and recent experience reflects that it is difficult to be overreserved in the current market environment.
Strategies for the Disposition of Problem Assets
The Department and the federal regulators expect banks to properly reflect the valuation of assets on their books and records. This means establishment of a properly funded and documented ALLL as discussed above. It also means reflecting Other Real Estate (ORE) at a proper valuation when loans are taken into bank ORE.
Having recognized the need for proper and accurate financial reporting, the actual strategies for disposition of problem assets need to be made at the bank management level. These strategies need to consider the individual circumstances of each bank, and may vary depending on the status and condition of the borrower, the location of the property, and bank management's assessment of the real estate market.
Best Practices in this area include having a structured work-out strategy and timeline for each impaired credit in the bank. These strategies need to make sense based on the structure of the bank and the total volume of impaired assets in the bank. In assessment of the work-out strategies for problem assets, Department examiners will consider the following:
Are the strategies outlined realistic and do they appear to maximize the collectibility of the loan or other real estate? Are they realistic when taken as a whole with the condition of the bank, including the level of the ALLL, and Capital in
the Bank? Is there a proper assignment of management responsibility for the work-out strategies and proper oversight? Is there an established time-line for these strategies and are these time-lines being met? Are the strategies regarding the disposition of collateral (ownership by the borrower or taking possession of the
collateral by the bank) appropriate based on the circumstances, conditions and valuation of the collateral?
Operational Issues
Many banks are facing significant earnings pressures as a result of a combination of tightened net interest margins, increased provisions for loan losses and increased collections expenses. While it is important during a period such as this to carefully monitor expenses and perhaps even reduce expenditures, banks are also determining that it is imperative that competent

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Best Practices for Dealing with Heightened Levels of Asset Quality Issues (continued)
and seasoned loan officers and loan personnel with experience in collections are a prudent and necessary area of expenditure. As a result, a number of banks have actually increased staffing in the lending area during this challenging period in order to help them manage, and hopefully reduce, the level of problem assets and loan losses.
Another area of operational focus is liquidity and funding management. It is axiomatic that banks that are experiencing higher levels of non-performing assets must focus on their funding structure, and if dependent on more volatile sources of funding, they must seek to increase core deposit funding. This involves analyzing the market and the competition; seeking to offer products that better meet the needs of the bank's customers; and, increasing the focus of business development on relationship banking, where obtaining the total business relationship including both loans and deposits is stressed to frontline personnel. Liquidity and funds management also involves seeking various sources of secondary and back-up liquidity and actively monitoring and managing the liquidity of the bank on a daily basis.
These best practices are being shared with both bank management and with our examination and professional staff. Commissioner Braswell has indicated that he believes that there has never been a greater need for timely and effective communication with Department personnel both during the examination process and in other communications with the Department. If there are additional questions regarding any of these matters or if you would like to share additional best practices with the Department of Banking and Finance, please contact either George Reynolds, Senior Deputy Commissioner at (770) 986-1629 or Grace Lurry, Deputy Commissioner for Supervision at (770) 986-1646.
Credit Repair Scam Alert
The Department has become aware of a credit repair scam targeting banks, credit unions, finance companies and mortgage lenders. Creditors have reportedly granted loans to perpetrators based on "cleaned up" credit reports.
Perpetrators take advantage of the Fair Credit Reporting Act to dispute accounts that have negatively impacted their credit scores. They also may file police reports alleging they were victims of identity theft. The resulting police reports are then used to file disputes with the credit reporting agency.
Because the credit reporting agency has 30 days to verify the derogatory information or delete the information from the credit reports, derogatory information may be deleted if the agency cannot investigate the complaint within the specified time period. This results in an improved "cleaned up" credit score.
Closer scrutiny of loan requests may be appropriate where identity theft alerts are known to have been filed. Financial institutions suspecting activity of this nature should file a Suspicious Activity Report (SAR).

Page 6
Action on Applications for the Month of March:
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 March 2008.

APPLICATIONS FOR NEW FINANCIAL INSTITUTION

FINANCIAL INSTITUTION Community First Bank of Georgia 924 Elbert Street Extension Elberton, GA 30635 Elbert County

CAPITALIZATION $ 12,000,000

APPROVAL Pending

BEGIN BUSINESS

Chattahoochee Bank of Georgia 643 E E Butler Parkway Gainesville, GA 30501 Hall County

$ 20,000,000

Pending

Milltown Banking Company 305 East Main Street Lakeland, GA 31635 Lanier County

$ 10,000,000

03-28-2008

First Landmark Bank 48 Atlanta Street Marietta, GA 30060 Cobb County

$ 20,435,990

08-23-2007

03-24-2008

APPLICATIONS TO ESTABLISH A BRANCH OFFICE

FINANCIAL INSTITUTION Northside Bank Adairsville

BRANCH OFFICE Calhoun Branch Office 1300 Lovers Lane Road SE Calhoun, GA 30701 Gordon County

APPROVAL 11-02-2006

The Four County Bank Allentown

Eastman Branch Office 5122 3rd Avenue Eastman, GA 31023 Dodge County

03-07-2008

Providence Bank Alpharetta

Canton Branch Office 140 Riverstone Parkway Canton, GA 30114 Cherokee County

12-26-2007

SunTrust Bank Atlanta

Beacon Woods Wal-Mart Branch Office 12610 US Highway 19 Hudson, FL 34667 Pasco County

12-26-2007

First Madison Bank & Trust Colbert

Danielsville Branch Office 190-240 General Daniel Avenue Danielsville, GA 30633 Madison County

Pending

BEGIN BUSINESS 03-10-2008
03-12-2008 03-07-2008

Page 7

FINANCIAL INSTITUTION Metro City Bank Doraville

BRANCH OFFICE Old Peachtree Road Branch Office 1291 Old Peachtree Road, Suite 190 Suwanee, GA 30024 Gwinnett County

Community First Bank of Georgia (IO) Elberton

Hartwell Branch Office 249 East Franklin Street Hartwell, GA 30643 Hart County

Hamilton State Bank Hoschton

Oakwood Branch Office 3458 Winder Highway, Suite 110 Flowery Branch, GA 30542 Hall County

The Brand Banking Company Lawrenceville

Suwanee Branch Office 480 Peachtree Industrial Boulevard Suwanee, GA 30024 Gwinnett County

Atlantic Southern Bank Macon

Valdosta Branch Office 460 Norman Drive Valdosta, GA 31601 Lowndes County

Ameris Bank Moultrie

Houston Northcutt Branch Office 966 C Houston Northcutt Boulevard Mount Pleasant, SC 29565 Charleston County

Ameris Bank Moultrie

Murrells Inlet Branch Office 3955 Highway 17 Bypass Suite C Murrells Inlet, SC 29576 Georgetown County

Ameris Bank Moultrie

Summerville Branch Office 1708 Old Trolley Road Suite C Summerville, SC 29485 Dorchester County

First Choice Community Bank 1874 Senoia

Sand Hill Branch Office 3956 Carrollton-Villa Rica Highway Carrollton, GA 30117 Carroll County

First Covenant Bank Woodstock

Main Office 680 Engineering Drive, Suite 100 Norcross, GA 30092 Gwinnett County

APPROVAL Pending
Pending 01-15-2008 03-13-2008 12-17-2007 Pending Pending
03-17-2008
Pending Pending

BEGIN BUSINESS 03-03-2008 03-24-2008

Page 8

APPLICATIONS TO CHANGE LOCATION

FINANCIAL INSTITUTION

CHANGE LOCATION OF

Gwinnett Community Bank

Suwanee Branch Office

Duluth

From: 3463A #117 Lawrenceville- Suwanee Road

Suwanee GA 30024

Gwinnett County

To: 3893 Lawrenceville-Suwanee Road

Suwanee GA 30024

Gwinnett County

APPROVAL 01-17-2008

The Heritage Bank Hinesville

Kroger #688 Branch Office From: 9701 Ford Avenue
Richmond Hill GA 31324 Bryan County To: 53 Exchange Street Richmond Hill GA 31324 Bryan County

03-07-2008

EFFECTIVE 03-10-2008

PREVIOUS NAME RBC Centura Card Bank Atlanta
The Morris State Bank Dublin

NOTICE OF CHANGE IN NAME

NEW NAME RBC Bank (Georgia)

APPROVAL 03-18-2008

EFFECTIVE 03-19-2008

Morris Bank

03-11-2008

03-18-2008

FINANCIAL INSTITUTION (SURVIVOR) State Employees' Credit Union Atlanta, GA
United Central Bank Garland, TX
RBC Centura Bank Raleigh, NC
RBC Centura Bank Raleigh, NC

FINANCIAL INSTITUTION MERGERS

MERGED INSTITUTION Georgia DOT Credit Union Atlanta, GA
Jones County Bank Haddock, GA
Georgia State Bank Mableton, GA
The Peachtree Bank Duluth, GA

APPROVAL 03-11-2008

EFFECTIVE

Pending

03-20-2008

03-20-2008

Page 9

APPLICATIONS TO BECOME A BANK HOLDING COMPANY AND/OR TO ACQUIRE VOTING STOCK OF A FINANCIAL INSTITUTION

BANK HOLDING COMPANY

TO ACQUIRE

APPROVAL

FORMATIONS Resurgens Bancorp Atlanta, GA

Resurgens Bank (IO) Atlanta, GA

Pending

ACQUISITIONS Heritage Financial Group Albany, GA

Chattahoochee Bank of Georgia (IO) Gainesville, GA

Withdrawn 03-27-2008

First Citizens Bancorporation, Inc. Columbia, SC

Merchants and Farmers Bank of Comer, Georgia Comer, GA

Pending

Central Bancorp, Inc. Garland, TX

Jones County Bank Haddock, GA

Pending

NOTIFICATION OF APPROVAL OF APPLICATION TO SERVE A RESIDENTIAL GROUP COMMON BOND

CREDIT UNION Georgia's Own Credit Union Atlanta

RESIDENTIAL GROUP COMMON BOND Hall County, GA

APPROVAL 03-28-2008

CITY Atlanta Norcross Atlanta Austell Griffin Forest Park Valdosta Mableton Cuthbert Macon Perry Chatsworth Soperton Tifton Ellabell Atlanta Macon Red Oak Calhoun Waynesboro Douglasville Austell Powder Springs Mableton Forsyth

CHECK CASHER LICENSES ISSUED

APPLICANT NAME * 24/7 Enterprises LLC * Cho's Texaco Food Mart, Inc.
DJHill Enterprises, LLC * Deedar Ali Boricha
Feather Touch, Inc. * First Asia * Global Communications Network, Inc. * KISS, LLC * KP One Stop, Inc. * Krina & Chirag, Inc. * LAK Beverage, LLC * Maria Preciado * Marie C. Conner * Mohammad Irshad
Murray Hill Sand, Inc. * OGA's Enterprises, Inc.
Pok Ye Holbrook Riley's Cellar LLC Romaudo Rojo * Sakshi Inc. Saniha & Sameer, Inc. * Sebo, LLC * Seven Seas Bottle Shop, Inc. Sewani Enterprise, Inc. * Shlok, Inc.

TRADE NAME Marathon Food Mart
Piedmont at Lindbergh Exxon Petro Mart Fast Cash First Asia
Jacks Package Store One Stop Food Store Shivam Food Mart Crazy J's Party Shop La Estrella Sport & Gift Shop Conner Ventures G.T. Point B&B Check Cashing Big Bear Supermarket #1 Sportsman's Package Store #2 The Check Company Tienda Hidalgo Quick Stop Shell Food Mart Quick Serv Seven Seas Bottle Shop Mableton Bottle Shop Stop N Shop

* = Registered Exempt (O.C.G.A. 7-1-709)

Page 10

DBF's Customer Service Stars for the Month of March

It is the Department's goal to provide excellent customer service, meeting and exceeding the expectations of our customers. Along those lines, we would like to recognize the following individuals for going above and beyond in serving our customers:
Financial Examiner Vic Greene and his examination team in District 1: The Department received comments from a customer stating: We would like to thank the Department for its continued help with providing us with a thorough and fair review of our operations. We found examiner Greene and his team to be professional, hard working, and interested in assisting us in improving our performance. The counsel and guidance of seasoned examiners is always beneficial to an institution, and we are appreciative of the dedication such individuals bring to their careers."
Supervisory Examiner Diane Hester (NDFI Division): The Department received comments from a customer stating: "I worked with Diane Hester and this lady was impressive!! I had to get her some information and she went above and beyond to help me with getting started. She gave me some great information and some pointers that I know will help me succeed!"

CONGRATULATIONS AND GREAT JOB TO THIS MONTH'S CUSTOMER SERVICE STARS!!

GEORGIA
DEPARTMENT OF BANKING AND FINANCE
2990 Brandywine Road Suite 200
Atlanta, Georgia 30341-5565
Phone: (770) 986-1633 Fax: (770) 986-1654 or 1655 Email: dbfpress@dbf.state.ga.us

Page 11
The Department is the state agency that regulates and examines banks, credit unions, and trust companies chartered by the State of Georgia. The Department also has regulatory and/or licensing authority over mortgage brokers, lenders, and processors, money service businesses, international banking organizations, and bank holding companies conducting business in Georgia.
Our Mission is to promote safe, sound, competitive financial services in Georgia through innovative, responsive regulation and supervision.
Our Vision is to be the best financial services industry regulator in the country Progressive. Proactive. Service-Oriented.

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"Safeguarding Georgia's Financial Services"