Volume 2 continued, Section J, Exhibit 1, page 3 of 3, in June, 1976: appearing as "$1,428" in columns designated "Hi" and "Lo" should be "$1,469" in May, 1977: appearing as "$3,745" in columns designated "Hi" and "Lo" 2. Request from OCC to counsel of Manufacturers Hanover Trust Company for answers to specific questions by an appropriate official; and, testimony of R. Bruce Brougham, vice president, MHT, concerning MHT's policy on bank stock loans (Exhibit 1) 3. Letter from Mr. Joseph G. Migely, First National Bank of Chicago lending officer, indicating in Volume 2, Section A, Exhibit 6, page 2 of 2, paragraph 2, the last line: appearing as "Presidential" should be "Gubernatorial" (Exhibit 2) Comptroller of the Currency Washington, D. C. 20219 August 28, 1977 Mr. George A. Balamut, Esquire Simpson, Thatcher & Bartlett 350 Park Avenue New York, New York 10020 Dear Mr. Balamut: " On August 17, 1977, you forwarded to the Office of the Comptroller of the Currency, at my request, two pages from the Manufacturers Hanover Trust Company, National Division Loan Manual, entitled "Bank Stock Loans." A copy of these pages is attached as Appendix A to this letter. To assist this Office in its examination into matters affecting the affairs of national banks under the jurisdiction of the Comptroller, I request that you, as counsel to Manufacturers, provide an affadavit executed by an appropriate official of the bank answering the following questions: (1) At any time during the period March, 1975, through "Rates Depending upon the size of the loan, the repayment program, and the importance of the correspondent relationship, the rates will generally range from prime to prime plus 1/2 of 1% but generally are above prime." "Balances a. We should have adequate compensating balances," Were these provisions in effect and considered to be operating policy of the bank during the period March, 1975, through December, 1976? If so, describe the procedures followed by the bank to assure itself that the bank secured and maintained adequate compensating balances," C Ex. 1 Mr. George A. Balamut, Esq. b. C. over the term of any bank stock loan during What procedures, if any, were followed by the bank Were the procedures and policies stated in response If possible, the affadavit should be returned to me no later than September 2, 1977. APPENDIX A NATIONAL DIVISION LOAN MANUAL GENERAL BANN STOEX LOINS In order to develop closer relationships with our correspondent banks, we make loane to officers, directors and kay employees of well manged banks. These loans are usually for one of the fe'lowing purposes: (1) To permit officers, directors and key employees to acquire stock in their (2) To assist individuals in acquiring stock is a newly organized bank. (3) La rate instances, to assist individuals in acquiring control of an existing bank. MINIMUM LOAN No minimue. RATES Depending upon the size of the loan, the repayment program, and the importance of the correspondent relationship, ratas will generally range from prime to prime plas 1,2 of 15, but generally are above prime. BALANCES We should have adequate compensating balances. REPAYMENT (A) For Purpose (1), above, maximum term is 5 years with amortization on a periodic basis. Loans can be put on demaod, if we bill for periodic payments. (Often, we bave authorization to charge the correspondent's account for the amount of the periodic payments). (B) For Purposes (2) and (3), it may be necessary to make loans to carry stock pending redistribution in friendly bands. In these instances, loans are drawn with matarities of 6 months with the understanding that they will be renewed for an additional period of 6 months, thus allowing 1 year to distribute the stock. Stock to be held permanently by the borrower can then de linsaced as in (A) above with a maximum term of 5 years. COLLATERAL Loans should be limited to a maximum of 90% (but less if there is no definite repayment program) of the bid market vaing of the bank stock. There there is no quoted maricet the Loan Officer will establish a value for losa purposes with reference to book value and his appraisal of the bank management. For newly established banks, loans are usually related to the issue price of the bank stock (maximam - 90%) with the understanding that subsequently the loan will at no time exceed a stipulated percentage (maximum - 90%) of the bid market value. NATIONAL DIVISION LOAN MANUAL 6.B Bank Stock Concentration (See memorandum of the Vice President and Controller dated September 22, 1964 attached). In additice to the above limitation, any baak stock loan(s) where we hold 10% in the aggregate or more of the cutstanding stock must have the clearance of the Chairman of the Board. CAZDIT CONSIDERATIONS The primary credit consideration is our complate confidence in the ability and capacity of the management of the bank in question. We should have a current financial statement of the borrower and be completely satisfied that he has the ability to liquidate the loan in accordance with the proposed repayment program. If the loan is for carrying purposes pending redistribution, the Loan Officer should satisfy himself completely as to the feasibility of such a program. * PROCEDURES The Loan Officer should obtain the following: (1) The amount and purpose of the loan. (2) The source and timing of repayment. (3) A current personal financial statement of the borrower. DOCUMENTATION Standard documentation of a secured loan. (Sze Sectica 104.31) CREDIT DECISION Loans in excess of $50,000, (delines as "Unusual" loans in Lending Authorities - Section 101.01) require the approval of a General Loan Officer. See also Note under COLLATERAL, above. • In view of the fact that a faw bank stocks are now listed on a National Securities Exchange (as defined under Regulation U) and this may become a trend, possible application of Regulation U should be considered. |