Mr. Rousselot

September 19, 1977
Page Two

the Atlanta Federal Reserve Bank or credited to one of our correspondent accounts in Atlanta. As soon as this notification is received by the Calhoun First National Bank the customer is credited with the proceeds. While it sounds quite complex we have been doing this for so many years that it is a relatively routine matter and from the time we contact a manufacturing facility it is usually only a couple of hours before the funds are actually credited to their account.

Due to the volume of checks written and the amount of funds which clear through Mr. Lance's various personal accounts during any given calendar year we basically operate his individual accounts in exactly the same manner as we would a corporate checking account. In other words, we are only extending to him the same courtesy we do our other customers and rather than his funds coming from a factor, they are simply immediately transferred to our credit by the National Bank of Georgia. I certainly hope that this information will help clear up your question, and if we may be of any further service do not hesitate to let me know.

Yours truly,

JEDJr:bw

John E. Davis, Jr.
President

As you know, on September 7, the Comptroller of the Currency issued Volume 3 · Supplemental Report "Inquiry into Certain Matters Relating to T. Bertram Lance and Various Financial Institutions," a major section of which referred to various transactions with your bank. The document raises several additional questions which we would like answered in connection with this Subcommittee's continuing oversight and legislative responsibilities..

1. In the September 7 report regarding the relations of Fulton National Bank and Mr. Lance's Calhoun First National Bank, the Comptroller concludes:

"The Fulton-Calhoun transaction show a pattern of loans to
Mr. and Mrs. Lance and associates from a correspondent bank. The
correspondent bank looked in some measure to the maintenance of
satisfactory correspondent balances in determining whether to
make the loans and in calculating the profitability of loans
after they were made. In addition, there is some evidence tending
to support the view that, but for the correspondent accounts,
the loans would not have been made."

Would you please provide the Subcommittee with your bank's written loan policies for the periods mentioned in the report, that is from 1963 to 1977?

2. Were the loans to Mr. Lance, Mrs. Lance, Lancelot Company, and the several directors of the Calhoun First National Bank, made between 1963 and 1977, ever criticized by national bank examiners at your bank? Please provide the Subcommittee with specific details about any ratings national bank examiners might have applied to these loans.

losses?

3. Did the Fulton National Bank write off any of these loans as
If so, please provide the Subcommittee with the dates and details.

Mr. Gordon Jones

Page Two

September 20, 1977

4. The Comptroller's report, in referring to your bank's expectations for a compensating balance, states:

"Notwithstanding Fulton's possible expectations, available
information discloses that the services provided by Fulton
exceeded Fulton's calculated return on the Calhoun deposits.
In fact, Fulton provided Calhoun with correspondent services
at a net loss."

Were the correspondent bank relationships of your bank examined by national bank examiners during this period? Were the correspondent accounts of your bank criticized by bank examiners?

5.

Please provide the Subcommittee with copies of your annual reports for the years 1970 to 1977.

6. Please provide the Subcommittee with copies of the written policies at your bank regarding the separation of departments, i.e., how is information shared among your lending officers, your trust department, your correspondent bank department, and your real estate department?

7. In discussing a conversation with Mr. Lance, your officer J. L. Phillips noted for the record on December 31, 1974:

"He had offered 57 acres of land worth, he said, minimum of
2 to $3,000 an acre in lieu of additional stock in the bank;
however, this offer was conditioned on our not recording the
deed. For this reason, we preferred additional stock which
he will send us in the next few days." (Emphasis added)

Please provide the Subcommittee with your bank's written policies regarding recordation of deeds taken as collateral.

8. The Comptroller's records reflect that on May 14, 1975, the Fulton National Bank transferred loans of the following people to the National Bank of Georgia: Mr. James B. Langford; Mr. Bill Mathews; and Mr. R. Merrill Dobbs.

Why were the loans transferred and at whose initiative?

9. Please provide the Subcommittee with a copy of your bank's internal regulations regarding the deposits required in a correspondent account in order to justify dollars spent in providing services.

Because of ongoing legislative hearings, your earliest response will be appreciated.

Sincerely,

FJSTG:mLr

et nahd Chairman

Germain

Mr. Gordon Jones has requested that I respond to your letter of September 20, 1977, seeking certain information in connection with your subcommittee's contiming oversight and legislative responsibilities.

While we wish to cooperate with your subcommittee, it is against the policy of this Bank to voluntarily disclose to third parties information with respect to transactions of the Bank's customers without the consent of such customers. Our policy in this regard applies equally to former customers, such as those which are the subject of your inquiry, as it does to our current customers. As I am sure you recognize, all bankers receive numerous inquiries from various governmental entities seeking to investigate the activities of their customers. While we are sympathetic to the difficulties which may be encountered in obtaining information through legal process, we take the position, and that position is concurred in by our counsel, that our customers are entitled to privacy in their business and personal financial dealings and that their confidences expressed to us should remain inviolate absent legal compulsion.

The Comptroller of the Currency has the legal authority to examine and make
copies of our records and, in general, to insist upon our cooperation in pro-
viding information for purposes of evaluating our banking practices.
of
necessity, we must then disclose to the Comptroller the confidences of our
customers. The information referred to in your letter was obtained by the
Comptroller in connection with such an investigation. We played no part in
disclosing the information obtained by the Comptroller to the public. We
cannot, consistent with our policy relating to the confidentiality of our
customers' affairs, supplement and explain data released by third parties
without appropriate legal process.

Though we must respectfully refuse to voluntarily provide any information regarding the Bank's customers, we are more than willing to cooperate with your

THE FULTON NATIONAL BANK

OF ATLANTA
CONTINUATION SHEET

The Honorable Fernand J. St Germain

-2

October 3, 1977

subcommittee in providing information regarding Fulton National's internal operations and procedures. Accordingly, we are enclosing the following documents covered by your request:

I.

Relevant sections of Fulton National Bank's
Loan Manual which contains its written loan
policies (Fulton National's Loan Manual con-
sists of two loose-leaf volumes and is several
hundred pages in length).

II. Copies of the annual reports of Fulton National
Corporation for the years 1970-1976 (There is no
1977 annual report since the year is not yet
completed.)★

Responding to paragraph 6 of your letter of inquiry, Fulton National Bank has no "written policies. regarding the separation of departments" as such. Fulton National's Trust Department is operated as a separate division of the Bank supervised by the Trust Committee of the Board of Directors of the Bank in accordance with applicable banking laws. Communication between the Trust Department and other divisions of the Bank is limited principally to business referrals. For example, if a lending officer of the Bank learns that one of his customers is in need of trust services, we would hope he would communicate that fact to a Trust Department officer. Other departments of the Bank communicate and share information with each other when necessary to serve the needs of the Bank's customers. For example, if a commercial customer of the Bank approached a commercial lending officer with a proposal for a real estate loan, the commercial officer and an officer from the Bank's Real Estate Department would probably work together to service that customer's needs.

The seventh paragraph of your letter requests information on the Bank's written policies with respect to recordation of security deeds. Fulton National has no written policy dealing specifically with that limited subject. However, Fulton National's Loan Manual does provide instructions to lending officers with respect to perfection of security interests in any collateral taken, and it is assumed in those instructions that Fulton National's security interests in such collateral will be perfected. It is our understanding that to perfect a security interest in land in Georgia, a security deed must be recorded.

Finally, paragraph 9 of your letter requests information regarding Fulton National's "internal regulations regarding the deposits required in a correspondent account in order to justify dollars spent in providing services". Here again, there are no internal regulations as such relating to this subject. Fulton National periodically reviews all correspondent bank accounts and compares benefits derived by Fulton National from the deposit with the cost of providing services to the correspondent bank. This analysis is based on the then current value of interest-free deposits and an approximation of the actual costs incurred in providing services during the period covered by the analysis.

*-Annual reports available at Subcommittee.