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Georgia DBF Explanation of Lending Limit Changes

September 3, 2009

Authors

Robert Klingler

Georgia DBF Explanation of Lending Limit Changes

September 3, 2009

by: Robert Klingler

As we’ve previously discussed, the Georgia Department of Banking and Finance had proposed to modify the way in which loans to related entities are treated, among other changes.  No material changes to the proposed rules have been made, and the new final rules are effective on September 7, 2009.  The new final rules are available from the DBF’s website.

The new rules, effectively consolidating many related party loans, may cause the consolidated relationships to become in technical violation of Georgia’s loans to one borrower rule upon renewal.  However, the DBF, in recognition of the current economic environment, has allowed for a transitional phase for loans that were previously made and separately remain in compliance with the DBF’s prior rule on an unconsolidated basis.  Those loans should be reworked to comply with the new regulations if feasible, but will otherwise be treated as grandfathered under the prior rules.  So

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Georgia DBF Clarifies Guidance on Loan Renewals

August 10, 2009

Authors

Jerry Blanchard

Georgia DBF Clarifies Guidance on Loan Renewals

August 10, 2009

by: Jerry Blanchard

Georgia Department of Banking and Finance Commissioner Rob Braswell has advised us that the Department’s announcement last week was intended to provide relief only in the context of “loan stacking” under the Department’s proposed new Rule 80-1-5-.11.  Accordingly, the Department will permit renewals of loans which had originally been made in conformity to the loan to one borrower, but would otherwise not be in conformity with the loan to one borrower rule solely due to the the Department’s proposed new “loan stacking” rules.

Renewals and extensions of loans where the loan to one borrower issues arises solely because of capital losses since the loan was originally made are NOT covered by the Department’s announcement.  We are continuing to pursue this issue with the Department, but in the meantime, our recommendation is that banks should NOT extend or renew loans to borrowers where the extension or renewal would violate the

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Georgia DBF Provides Guidance on Legal Lending Limits for Loan Renewals

August 6, 2009

Authors

Jerry Blanchard

Georgia DBF Provides Guidance on Legal Lending Limits for Loan Renewals

August 6, 2009

by: Jerry Blanchard

The Georgia Department of Banking and Finance (“DBF”), announced today a significant change in the way in which the legal lending limit will be applied in the context of loan renewals.  Due to a shrinking capital base, a large number of banks have been struggling with the issue of what to do with loans whose renewal would cause a violation of the legal lending limit.  These were loans that met the requirements when the loan was made but could not be made today due to the bank’s smaller capital position. The position of the DBF has been that a bank should not renew such a loan.  In the current economic environment this places banks in an untenable situation because borrowers are unable to pay off the loans due to a lack of liquidity and no other financial institutions are willing to take over the credits.  The only option left for

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TLGP and Public Funds

December 4, 2008

Authors

Robert Klingler

TLGP and Public Funds

December 4, 2008

by: Robert Klingler

As noted in the FDIC’s latest Frequently Asked Questions on the TLGP, the FDIC will fully guarantee public funds deposits in NOW accounts so long as the interest rate does not exceed 0.5 percent and the institution has committed to maintain the interest rate at or below 0.5 percent (assuming the institution has not opted out of the Transaction Account Guarantee).  The amount of collateral required for such guaranteed public funds, if any, is imposed by state law and not by the FDIC’s regulation.  As noted by the FDIC, the amount of collateral will depend upon the wording and meaning of each state’s laws.

As noted below, the Georgia statutes are not 100% clear, but we believe that Georgia depository institutions should not be required to provide collateral for public funds that are fully guaranteed by the FDIC under the Transaction Account Guarantee portion of the TLGP.  We believe

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Georgia DBF Waives Approval for Blank Check Preferred Articles Amendment

October 28, 2008

Authors

Robert Klingler

Georgia DBF Waives Approval for Blank Check Preferred Articles Amendment

October 28, 2008

by: Robert Klingler

On October 24, 2008, the Georgia Department of Banking and Finance issued a press release waiving approval of a state financial institution seeking to amend its articles to facilitate the issuance of preferred stock to the U.S. government as part of its participation in the Treasury program.  Shareholder approval is still required, but this news provides some regulatory relief for Georgia banks without holding companies that must amend their articles to provide for blank check preferred stock.

De novo Georgia banks would still be required to submit changes to their business plan for Department review and approval, although such review related to participation in the Treasury program will be expedited.

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