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Chairman ST GERMAIN. National Bank of Georgia, correspondent bank balances with Citizens and Southern National Bank, March 1976, $50,000. That is $50,000, $61,000 and then, as I say, in December 1976, your amount goes to $1,779,000. You then go to in January, $4,349,000. That is $4 million, $3 million, $2,611,000 and then you drop to zero in July.

We note also that in November 1976 there was a loan to Mr. Lance and Lance-related interests of $335,000 in November to Lance and Lance-related interests. Then in December it jumps to $935,000. At the same time there is the correspondent balance which jumps to $1,779,000 and then it goes up a little further, the loan to Lance and Lance-related interests—Ioans, I should say$1,155,000 and at January 1977 the correspondent balance is $4,349,000.

Now, the loans to Lance and Lance-related interests remains the same and that correspondent balance remains rather high.

Now, what we would like is an explanation because it seems peculiar and the other peculiar aspect is how come zero in a correspondent balance in July of this year when a lot of investigations began? Would you explain that to the subcommittee?

Mr. GUYTON. Let me first of all start by saying I am not familiar with the loans that are in the bank and in fact at that particular time I was not with the bank. I have only been with the National Bank of Georgia for 4 months.

Chairman ST GERMAIN. We have Mr. Cleveland here. He can help you out.

Mr. GUYTON. I can speak to that point though, I think.

It is my understanding that back in the latter part of 1976 that the National Bank of Georgia employed an independent banking consultant to study the sendings of our checks and the possibility of savings for the bank because of the various operations that might be employed in these sendings of checks for collection. That particular study was done in the latter part of 1976. It was recommended in the study that there be a consolidation of all sendings made by the National Bank of Georgia and it was determined that the Citizens and Southern Bank would be the one that would be the correspondent bank to which all sendings and all clearings would be addressed and that started in December 1976 and that is the reason that the balance as shown there went from $61,000, which was to cover services such as loan participations, advice and counsel, and this sort of thing, but it went from there up to the larger amount, which was the general ledger balance, I might add, sir, and was not the collected balance in that particular account.

I know in the Wall Street Journal last week, and it has been reported here today, as to why the account jumped to $1.7 million in December, and $4.4 in January, that came, I am sure, from the analysis sheets prepared by the C. & S. Bank of Atlanta which did indicate that was the average general ledger balance for that particular month.

However, if the people looking at that report had looked even further down that analysis sheet, they would have found that that was not collected money; that that represented checks that were in the process of collection around the country, and C. & S. was sending these checks around the country to have them collected. So, if you take that balance and deduct the so-called float from it, it comes down to a considerably smaller balance that is available for services and in fact in December, according to that same analysis sheet, the average collected balance was just a little over $200,000 and it did not cover the cost of that account to C. & S., and then in January 1977 the average collected balance on that same sheet which shows that figure indicated that the collected average balance was a little over $1 million.

Here again, it did not cover the services provided the National Bank of Georgia by C. & S. for that particular month.

Chairman ST GERMAIN. So you have a deficit position there?

Mr. GUYTON. For those 2 months, yes. We tried to collect those and we do try to and in the following months we tried to get in on a basis whereby the balances we are keeping there cover the cost and cover the services that they are providing for us and allows them to break even or have a very small profit remaining for that particular month.

Chairman ST GERMAIN. Is anyone else performing check clearing services and giving you advice on foreign investments and so forth? Do you have another correspondent bank giving similar services and participating in loans?

Mr. GUYTON. Yes, we have a total of 17 correspondent accounts. We have probably three or four accounts that we would call major type correspondents who provide more services for us but there is only one account at this point that we send regular daily sendings for collection.

Chairman ST GERMAIN. That is C. & S.?
Mr. GUYTON. Yes, it is.

Chairman ST GERMAIN. Now, in July we have a zero balance going to the Comptroller's report. Can you explain that to us?

Mr. GUYTON. I cannot. I don't understand that, sir. We are still sending our checks to them monthly for collection and I don't understand that particular balance.

Chairman ST GERMAIN. You say you can't explain why—this is from the Comptroller's report. Would you dispute the accuracy of that figure?

Mr. GUYTON. I don't dispute it. I don't understand it. I don't see how that could occur unless the balances had—there was enough activity to where there was no balance left at all in that particular account. That is news to me, sir.

Chairman ST GERMAIN. You know the peculiar thing is, Mr. Guyton-and I will ask Mr. Henderson and Mr. Davis this question-the Calhoun-though we don't have it up on a chart, it is also a fact in July this year Calhoun First National Bank withdrew its correspondent relationship with C. & S. or it appears so, so we look at Calhoun.

[In regards to the above colloquy of Chairman St Germain, the following table re correspondent bank balances between Calhoun First National Bank and Citizens & Southern National Bank is inserted. Also following is written response by Mr. Guyton to questions on relationship with C. & S.]

98-440 0 - 77 - pt. 2 - 2

CALHOUN FIRST NATIONAL BANK CORRESPONDENT BANK BALANCES

WITH CITIZENS AND SOUTHERN NATIONAL BANK

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C&S had $85,000 in loans outstanding to Lance and Lance-related interests.

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During my appearance before your Committee on Tuesday,
September 6, 1977, you requested that I provide you with copies
of the analysis sheets regarding our correspondent relationship
with The Citizens and Southern National Bank for the months of
December, 1976, and January, 1977.

Please note that the amount used in the Comptroller's
report is the average ledger balance for the period and is not the
average collected balance which is the appropriate amount to use.
This is in view of the fact that we clear a large number of items
through C&S and this creates a considerable amount of uncollected
funds termed float in the analysis. Please also note that for each
of these two months the collected balances were less than the balances
required to offset the charges against the account.

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$_1,778,653.08
1,533,132.83
245,520.25

Average Ledger Balance for Period
Less Average Actual Float
Average Collected Balance
Less Reserve Requirements
Average Available Balance
Net Available Balance
Additional Collected Balances Required to pay for Services or
Additional Fees in lieu of Balances
Collected Balances Available to Support Credit or Other Services
Earnings Valued at 5.09

Percent on Available Balances

34,986.64 210,533.611

431,518.55503,150.62

LOAN INFORMATION

AMOUNT

OUTSTANDING

Collected Balances Required To Support Credit

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