Mr. DAVIS. There is something wrong, sir.

Chairman ST GERMAIN. This is taken from "D," exhibit 2 in the Comptroller's report. We can have that brought down to you and you can see it for yourself.

You had a correspondent relationship with C. & S. which in October 1976 was $9,900; in December, $80,000, and at that time the loans to Mr. Lance and Lance-related interests were $85,000. And then Mr. Lance's loan increased to $160,000, and then in December 1975 and in January 1976 your amounts went from $33,000 to $11,000 to $15,000, and once it went up to $87,000, but in July it went from $59,000 in June, $54,000 in May, to zero in July. Mr. HENDERSON. I don't understand that.

Chairman ST GERMAIN. Do you think maybe the Comptroller's report is inaccurate?

Mr. HENDERSON. I believe something is in error.

Chairman ST GERMAIN. For Calhoun as well as for-—

Mr. DAVIS.We have been with C. & S. for over 25 years and it has always been an active account and there have been no changes. I am positive of that.

Chairman ST GERMAIN. In July and August this year, the Comptroller's report, NBG deposit at C. & S. is zero.

Mr. DAVIS. Could you tell us what you are reading from once again?

Chairman ST GERMAIN. Exhibit 2. This is in volume 2 continued, section "D." exhibit 2.

Mr. BLOOM. The report may indicate the information wasn't available to us.

Mr. ROUSSELOT. If it were not available, would it not be "NA?" Chairman ST GERMAIN. Let us get back to the National Bank of Georgia and Citizens & Southern corresponding balance. All I can say is, when I look at that chart-and I understand the explanation you gave us about the consultant's report and the check clearing services being performed by Citizens & Southern, but nonetheless it seems peculiar that at the same time as the amount of the loan, your corresponding balance increases, there is a rather substantial increase, almost triple-there is a tripling of the loan to Mr. Lance and Lance-related interests. It may just be a coincidence perhaps. Would you consider that a coincidence?

Mr. GUYTON. I think it would have to be. This consultant study done for the National Bank of Georgia was started in the middle part of 1976 and was apparently completed the latter part of 1976 and action was taken at that time.

Chairman ST GERMAIN. Mr. Cleveland, would you say those figures are coincidental, the increase in the corresponding balance and the increase in the loan?

Mr. CLEVELAND I have no knowledge to the contrary, other than they would be coincidence.

Chairman ST GERMAIN. Tell me this: Was there any reason-as a result of this consultant's report, for National Bank of Georgia to go to Citizens & Southern right there in Atlanta-that is a competing bank, is it not, a prime competitor?

Mr. CLEVELAND It is a competitor, yes.

Chairman ST GERMAIN. You had a choice of other banks where you could have established this relationship, is that not a fact?

Mr. CLEVELAND That is true.

Chairman ST GERMAIN. Do you know who entered into negotiations to bring about this increased relationship with Citizens and Southern?

Mr. CLEVELAND. I do not know who did that, but I do know that we had relationships with another bank in Atlanta extending over a 25- or 30-year period of time.

Chairman ST GERMAIN. How long have you had your relationship with Citizens and Southern?

Mr. CLEVELAND. I would judge from this somewhat less than a

year.

Chairman ST GERMAIN. You were president at the time?

Mr. CLEVELAND. I was chairman of the board without executive administrative responsibilities, which was relatively inactive.

Chairman ST GERMAIN. As chairman of the board, you had no knowledge and have no knowledge as to how come, what or who made the choice of Citizens and Southern?

Mr. CLEVELAND. I know who made the actual choice and recommendation; it was the executive committee of our bank and approved by the executive committee of the board of directors.

Chairman ST GERMAIN. Who made the recommendation?

Mr. CLEVELAND. I don't know.

Chairman ST GERMAIN. Would you know, Mr. Guyton?
Mr. GUYTON. No.

Chairman ST GERMAIN. Who could it have been?

Mr. CLEVELAND. It would be the president or chief financial officer of the bank.

Chairman ST GERMAIN. Who was president at the time?

Mr. CLEVELAND. Mr. Lance.

Chairman ST GERMAIN. I guess it is very coincidental then.

Mr. CLEVELAND. I might point out correspondent bank relationships in our bank and most banks of our size normally are instituted and administered by the chief financial officer of the bank. Chairman ST GERMAIN. Is it normal that there be an increase in loans to one of the principal officers of the bank and a correspondent bank where there is all of a sudden increase in activity with that correspondent bank?

Mr. CLEVELAND. I couldn't answer that, Mr. Chairman.

Mr. GUYTON. If I might add one point to this, as I say, I wasn't there, but I have inquired and asked questions about certain accounts and it is my understanding that in that particular relationship the consultant did recommend that we change our clearings to one correspondent bank. They also recommended that that bank be the C. & S. Bank because they had had similar services and good services that they had seen coming from them and that recommendation was made. The executive vice president of our bank is Bill Green, who is the chief financial officer, and he has told me that that was when the decision was made to go to C. & S. and put all of our sendings there.

Chairman ST GERMAIN. Could the gentlemen from Calhoun, Mr. Davis, and Mr. Henderson, reply to this? When there was a question of the injection of capital under the agreement signed with the Comptroller's Office, the Comptroller this morning said he didn't

know where the $400,000 came from. Could you tell us where that $400,000 came from?

Mr. HENDERSON. We borrowed it initially from another Georgia bank. I don't know if I should reveal the name. The Georgia Railroad Bank & Trust Co. in Augusta, Ga.

Chairman ST GERMAIN. So you borrowed money. Then who owed that money, the individuals who signed the note, or the bank? Mr. HENDERSON. Calhoun Unifirst is a corporation made up of the board of directors of our bank and each of them hypothecated sufficient shares of the bank to go with the shares which we purchased to fully secure the loan.

Chairman ST GERMAIN. That $400,000 loan was taken out when? Mr. HENDERSON. Right after we signed the agreement to furnish it. In December 1975.

Chairman ST GERMAIN. Was there another $400,000 loan to Calhoun Unifirst later on to repay the Georgia Railroad?

Mr. HENDERSON. Yes, it was moved to C. & S. The first loan had a year's maturity on it and we moved it to C. & S., so we could work out arrangements to pay it off, which we are working on right now.

Chairman ST GERMAIN. Mr. Henderson or Mr. Davis, on April 28, 1975, an examination was made at Calhoun.

[In regards to the above colloquy of Chairman St Germain, the following was submitted for inclusion in the record:]

DATES OF EXAMINATIONS BY THE COMPTROLLER OF THE CURRENCY OF THE NATIONAL BANK OF GEORGIA OF ATLANTA AND THE CALHOUN FIRST NATIONAL BANK OF CALHOUN, GEORGIA: