Financial institutions today, Dec. 2011

Inside this issue:

The Control

2

Environment...

(continued)

DBF Outreach

2

and Upcoming

Speaking

Engagements

2012 State

3

Holidays

Georgia

3

Residential

Mortgage Act Fee

Reminder

Action on

4

Applications for

the Month of

December

Contact

7

Information

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

Monthly Bulletin #12

December 2011

The Control Environment: Regulatory Standards for Internal Audit (part 4 of a series)

"Reality is merely an illusion, albeit a very persistent one." Albert Einstein
The quote from Albert Einstein implies that perception and reality are not always one and the same, but reality persists because it is based on facts that we all have to face at some point. An effective internal audit function helps the board of directors align perception of a financial institution's condition to the facts. This article will focus on regulatory standards and expectations for an effective internal audit function.
The FDIC Risk Management Manual of Examination Policies (Exam Manual) outlines basic regulatory expectations for the control environment, including an effective internal audit function. The Exam Manual states that the board of directors and senior management should have reasonable assurance that the system of internal controls prevents or detects significant inaccurate, incomplete, or unauthorized transactions; deficiencies in the safeguarding of assets; unreliable financial reporting (which includes regulatory reporting); and deviations from laws, regulations, and the institution's policies. The board and senior management are responsible for ensuring that the system of internal controls operates effectively (this responsibility cannot be delegated to others, either within or outside the institution), and the internal audit function is an important element in assessing effectiveness of the internal control system. The internal audit function of each institution should be appropriate to its size, complexity, and nature of operations. An effective internal audit function provides clear, concise, and timely information on weaknesses so that management can implement prompt and appropriate corrective actions. Minimum standards for safety and soundness are codified in Part 364 of FDIC Rules and Regulations, which includes the following requirements for internal audit:
1) Adequate monitoring of the institution's internal control system; 2) Independence and objectivity; 3) Qualified personnel; 4) Adequate testing and review of information systems; 5) Adequate documentation of tests and findings of any corrective actions; 6) Verification and review of management's actions to address material weaknesses; and 7) Review by the audit committee or board of directors of internal audit effectiveness.
(Continued on page 2)

"Safeguarding Georgia's Financial Services"

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The Control Environment: Regulatory Standards for Internal Audit (part 4 of a series)
(Continued from page 1)
Similar standards for credit union supervisory committee audits are addressed in Part 715 of NCUA Rules and Regulations and Rule 80-2-6 of the Department of Banking and Finance. Each of the required elements listed earlier is important, but elements #2 and #3 deserve additional comment. An internal audit function is only as good as the quality of personnel staffing that function. To be effective, internal audit should be staffed by personnel with background, experience, and training capable of timely identification of material risks embedded within the financial institution's unique operating model; with ability to clearly communicate the corrective actions needed; and stature within the organization to ensure that timely and appropriate corrective actions are implemented. To be effective, independence and objectivity of the audit function is crucial. The internal audit function should be positioned so that the board of directors, audit committee, and/or supervisory committee (oversight body) has confidence that internal audit will perform its duties with impartiality and not be unduly influenced by managers of day-to-day operations. The oversight body should oversee the internal audit function, evaluate its performance, and assign responsibility for design and execution of the audit program to a member of management independent of conflicting operational responsibilities. Ideally, the internal audit manager should report directly and solely to the oversight body regarding both audit issues and administrative matters, including resources, budget, appraisals, and compensation.
An effective internal audit function serves as an indispensible check and balance. Well designed, targeted reporting from this function informs sound decision making by executives and boards of directors thereby promoting healthy, successful financial institutions. In the next article, we will outline regulatory standards and expectations for the independent loan review function.
DBF Outreach AND UPCOMING SPEAKING ENGAGEMENTS
Commissioner Braswell will be speaking at the GBA's Legislative/Economic Forum being held on January 11th at the Ritz-Carlton Hotel, Atlanta. He will also be speaking on January 24th at the GCUA's 2012 Grassroots Academy in the Empire Room, 20th Floor, James H. Sloppy Floyd Building, Atlanta, and on January 25th at the CBA's "Day at the Capitol" held at the Georgia Freight Depot just across from the Capitol in Atlanta. Commissioner Braswell will also be participating on a regulatory panel at the CBA Regulation & Taxation Committee meeting on February 2nd at CBA Headquarters in Atlanta, GA.

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2012 State Holidays

In accordance with O.C.G.A. 1-4-1, Governor Nathan Deal proclaimed the following dates in 2012 as public and legal state holidays when the Capitol and all State agencies will be closed:

Holiday Name
New Years Day 2012
Martin Luther King Jr.'s Birthday Robert E. Lee's Birthday
Washington's Birthday
Confederate Memorial Day
Memorial Day Independence Day Labor Day Columbus Day Veterans' Day Thanksgiving Day
Christmas Day

Date Observed
January 1st Sunday was observed Monday, Jan 2nd January 16th Monday
January 19th Thursday Will be observed on Friday, November 23rd
February 20th - Monday Will be observed on Monday, December 24th
April 26th Thursday Will be observed on Monday, April 23rd
May 28th Monday
July 4th Wednesday
September 3rd Monday October 8th Monday
November 12th Monday
November 22nd Thursday Lee's Birthday will be observed on Friday, November 23rd
December 25th Tuesday Washington's Birthday will be observed on Monday, Dec. 24th

Georgia Residential Mortgage Act Fee Reminder
The $10.00 per loan fees required by O.C.G.A. Section 7-1-1011(b)(2) and Department Rule 80-5-1-.04 are due no later than March 1, 2012, for residential mortgage loans closed during the period July 1, 2011, through December 31, 2011.
Per Department Rule 80-5-1-.04(b), GRMA per loan fee reporting / remittance must be completed online through the Department's secure website. Reporting is required even if no residential mortgage loans were made and no fees are due. To avoid fines for failure to report / remit GRMA fees, reporting must be completed by the deadline noted above.
With the on-line payment process, the Department accepts either ACH drafts on a checking account or payments by Visa, MasterCard, AmericanExpress, or DiscoverCard credit cards. Reporting and fee payment must be done online from our secure website at: https://bkgfin.dbf.state.ga.us/GRMAFee.html.

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Action on Applications for the Month of December:
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 December 2011.

FINANCIAL INSTITUTION CONVERSIONS

PREVIOUS NAME DOCO Regional Federal Credit Union

CONVERTED TO DOCO Credit Union Albany Dougherty County

APPROVAL EFFECTIVE 11-10-2011 12-30-2011

Fort Gordon Federal Credit Union

Fort Gordon and Community Credit Union Fort Gordon Richmond County

12-09-2011 12-30-2011

APPLICATIONS TO ESTABLISH A BRANCH OFFICE

FINANCIAL INSTITUTION First Bank of Georgia Augusta

BRANCH OFFICE Evans Branch Office 4349 Washington Road Evans, GA 30809 Columbia County

APPROVAL 12-28-2011

United Community Bank Blairsville

Arden Branch Office 2349 Hendersonville Road Arden, NC 28704 Buncombe County

09-08-2011

Metro Bank Douglasville

Kennesaw Branch Office 2454 Kennesaw Due West Road Kennesaw, GA 30144 Cobb County

07-05-2011

BEGIN BUSINESS 12-19-2011 12-12-2011

NOTICE OF CHANGE IN NAME

PREVIOUS NAME Albany Federal Employees Credit Union Albany

NEW NAME Members United Credit Union

APPROVAL 12-07-2011

EFFECTIVE

FINANCIAL INSTITUTION (SURVIVOR) Atlanta Postal Credit Union Atlanta, GA
Georgia's Own Credit Union Atlanta, GA

FINANCIAL INSTITUTION MERGERS

MERGED INSTITUTION Human Services Employees' Credit Union Atlanta, GA

APPROVAL 12-28-2011

The Thrift Credit Union Atlanta, GA

12-09-2011

EFFECTIVE 12-31-2011

FINANCIAL INSTITUTION

(SURVIVOR)

MERGED INSTITUTION

Georgia Bank & Trust Company of Augusta Southern Bank & Trust

Augusta, GA

Aiken, SC

Peoples State Bank & Trust Baxley, GA

Citizens State Bank Kingsland, GA

The Farmers Bank Forsyth, GA

The Bank of Perry Perry, GA

The Farmers Bank Forsyth, GA

The Peoples Bank Covington, GA

The Farmers Bank Forsyth, GA

Spivey State Bank Swainsboro, GA

Glennville Bank Glennville, GA

Tippins Bank Claxton, GA

Bank of Upson Thomaston, GA

The First National Bank of Polk County Cedartown, GA

Bank of Upson Thomaston, GA

Peachtree Bank Maplesville, AL

Bank of Upson Thomaston, GA

Bank of Chickamauga Chickamauga, GA

Page 5

APPROVAL 12-01-2011

EFFECTIVE 12-05-2011

Pending

Pending

Pending

Pending

12-09-2011

Pending

Pending

Pending

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

FORMATIONS ONLY

BANK HOLDING COMPANY Sterne Agee Group, Inc. Birmingham, AL

TO ACQUIRE SUM Financial Corporation Pearson, GA

APPROVAL Pending

CREDIT UNION Five Star Credit Union Dothan, AL

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

RESIDENTIAL GROUP COMMON BOND Seminole County, GA

APPROVAL 12-14-2011

Page 6

CHECK CASHER LICENSES ISSUED

CITY Atlanta Newnan Fort Valley Atlanta Athens Walnut Grove Garden City Carrollton Dalton Dalton Fitzgerald Sandy Springs

APPLICANT NAME Blessings FYI, LLC * Carniceria Del Valle LLC Chong Hui Mok * Ciera Knox * Clemente Garcia * Elite C Store, Inc. * Garden City Snack N Go, Inc. * Juan Rodriguez * Maria J. Cervantes * Miguel A. Silva * Rajnick, Inc. Yogi 11, Inc.

TRADE NAME Red Carpet Package Store Carniceria Del Valle Jason's Mini Mart CeCe's Business Services Costa De Jalisco #2 Walnut Chevron Amit Food Mart #4 Tienda Centro America Taxi Veloz Frontera Income Tax Super Mart Spirits Exxon Food Mart

* =Registered (O.C.G.A. 7-1-700 et al)

MONEY TRANSMITTER Smart Plus USA LLC Minneapolis, MN

MONEY TRANSMITTER LICENSES ISSUED
APPROVAL 12-21-2011

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 7
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/processors, lenders and loan originators, 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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