Community & Southern Bank Acquires the Assets and Deposits of Three Georgia Banks from the FDIC

/PRNewswire/ -- Community & Southern Bank has acquired certain assets and deposit accounts and other liabilities of Bank of Ellijay, Ellijay, Georgia, First Commerce Community Bank, Douglasville, Georgia and The Peoples Bank, Winder, Georgia, from the Federal Deposit Insurance Corporation ("FDIC"), as receiver for Bank of Ellijay, First Commerce Community Bank, and The Peoples Bank. Bank of Ellijay, First Commerce Community Bank, and The Peoples Bank were closed by the Georgia Department of Banking and Finance at the close of business on Friday, September 17, 2010, and the FDIC was appointed receiver. Community &Southern Bank will begin operating Bank of Ellijay, First Commerce Community Bank, and The Peoples Bank branch offices as Community & Southern Bank offices immediately.

These are the third, fourth, and fifth acquisitions that Community &Southern has completed. On January 29, 2010, Community & Southern acquired certain assets and deposits of First National Bank of Georgia, Carrollton, Georgia. That acquisition established Community & Southern Bank as one of the market leaders in West Georgia. On March 19, 2010, Community & Southern completed its acquisition of Appalachian Community Bank, Ellijay, Georgia, making Community & Southern the 6th largest Georgia-based bank.

"We're very pleased to announce the acquisition of Bank of Ellijay, First Commerce Community Bank, and The Peoples Bank from the FDIC. The addition of these banks will allow us to serve a wider community throughout Georgia. As we stated previously, our goal is to build a new banking franchise for Georgia, with the strong traditions of service excellence and community support," said Community &Southern Bank's President and Chief Executive Officer, Patrick M. Frawley. "As we integrate these acquisitions, we will first and foremost focus on our customers, our employees, and the communities we serve."

John Spiegel, Chairman of the Board of Directors of Community & Southern Bank and former Chief Financial Officer of SunTrust Bank, added, "The customers of Bank of Ellijay, First Commerce Community Bank, and The Peoples Bank can rest assured knowing that there will be no disruption to the operations and services provided by their bank. Community &Southern Bank looks forward to building upon the traditions and values that are the foundation of our bank. These acquisitions further strengthen our position in our North and West Georgia Regions and establishes us in several new markets in Canton, Winder, and Athens. We welcome all of our new customers into the Community & Southern Bank family as we work to develop the premiere banking franchise across North Georgia."

Bank of Ellijay, First Commerce Community Bank, and The Peoples Bank customers should be aware that their accounts have been automatically converted to Community & Southern Bank accounts. All deposit accounts will continue to be fully insured to the maximum limits allowed by the FDIC. Bank of Ellijay, First Commerce Community Bank, and The Peoples Bank customers should continue to visit existing branches and use their existing checks and ATM/Debit cards to access their funds. All direct deposit and electronic bill pay transactions will continue to be processed normally.

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FDIC Urges Stronger Debit Card and Overdraft Oversight; Other Bank Regulators Should Take Action

/PRNewswire/ -- Statement of CRL president Michael D. Calhoun: "American families, especially those most vulnerable financially, could save millions of dollars a year in costly overdraft fees if guidelines the FDIC proposed today are adopted. The guidelines would encourage the banks the FDIC oversees to offer customers lower-cost overdraft alternatives rather than charge unlimited high-cost overdraft fees--as many banks do, even on small debit card transactions.

Under the proposal, a bank would contact a customer who incurs six overdraft fees within 12 months and offer--and explain--less costly options. The bank would be encouraged to provide the customer with a reasonable opportunity to choose one of them. Banks the FDIC oversees also would be discouraged from re-ordering transactions to maximize overdraft fees.

Banks and credit unions frequently promote their most expensive form of overdraft coverage, which typically imposes a $34 fee per overdraft--twice the amount of the typical debit card purchase that triggers an overdraft--rather than reasonably priced options like a low-interest line of credit or an affordable small-dollar loan. Financial institutions earn $24 billion annually from these high-cost programs.

The proposal comes just days before new Federal Reserve's August 15th rules take effect requiring banks and credit unions to obtain a customer's signature before enrolling them in a costly overdraft program for debit cards. But many banks don't give consumers real choices among alternatives; instead, they steer customers into the highest cost overdraft coverage they offer. The FDIC's proposed guidance indicates the Fed's rule is not sufficient to stop unfair and abusive overdraft practices by lenders: The Fed addresses neither the size of the fees nor how many can be charged.

A decade ago, most banks declined debit card transactions, and at no charge, when a customer's account lacked sufficient funds. Citibank has never charged overdraft fees on debit cards, and Bank of America is stopping the practice. But another big bank, Wells Fargo, continues to charge over a billion dollars a year in debit card overdraft fees. Wells also continues to market a cash advance product that, like payday lending, carries triple-digit annual interest rates.

To comprehensively address abusive short-term loan products, including unfair overdraft practices, the Federal Reserve and the Office of the Comptroller of the Currency must join the FDIC's efforts and explicitly limit overdraft fees to no more than six per year. In addition, all regulators should require that the size of the overdraft fee reflect a lender's cost and risk, and they should ban the manipulation of transaction postings."

For CRL's research on banks' overdraft marketing efforts, see http://www.responsiblelending.org/overdraft-loans/research-analysis/banks-targ et-mislead-consumers-as-overdraft-deadline-nears.html.

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Bankers Mislead, Cajole Customers on Overdraft Fees as Opt-In Deadline Nears

/PRNewswire/ -- As the August 15th deadline nears for bank and credit union customers to opt in to high-cost overdraft programs, a new CRL analysis finds these firms market most aggressively and often misleadingly to their most vulnerable customers. Banks target these customers because they likely live on the edge financially and therefore are most likely to repeatedly overdraw accounts. To induce these customers to accept overdraft coverage, many marketing campaigns use scare tactics or incomplete information. For example, they fail to emphasize customers can have debit card transactions declined at no cost rather than incur a $34 overdraft fee. [For the full report, go to http://www.responsiblelending.org/overdraft-loans/research-analysis/banks-targ et-mislead-consumers-as-overdraft-deadline-nears.html.]

CRL's report includes:

-- Bank consultant pitches on pinpointing customers who will overdraft
most.
-- Evidence these customers are likely to be low-income, single,
nonwhite.
-- A cost comparison of overdraft programs.


Under new federal rules, banks must obtain explicit consent from existing customers by the 15th before enrolling them in a costly overdraft program for debit cards. Banks have had to obtain consent from new customers since July 1. These opt-in rules provide a first-line defense against high-cost overdraft fees, but the Federal Reserve Board and, eventually, the new Consumer Financial Protection Bureau must end all unfair overdraft practices, especially those that disproportionately hurt the most vulnerable.

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Consumers Union Urges Fed to Require Banks to Roll Back Recent Unfair Credit Card Interest Rate Hikes

/PRNewswire/ -- After Congress passed legislation last year reining in some of the worst credit card lending practices, many banks responded by hiking interest rates before the new rules went into effect, including on customers with perfect bill paying records. Now Consumers Union, the nonprofit publisher of Consumer Reports, is calling on the Federal Reserve Board to require banks to roll back those unfair interest rate hikes and to put stronger limits on the size of penalty fees and interest charges.

The Fed has already proposed new regulations that would limit penalty fees and require banks to reconsider interest rate hikes imposed during the year leading up to the enactment of key CARD Act protections on February 22, 2010. But the proposed regulations don't go far enough according to Consumers Union and should be strengthened to ensure consumers are more likely to see their old interest rates reinstated and don't face unfair penalty fees and charges in the future.

"Last year's shameful frenzy of credit card interest rate spikes has saddled millions of Americans with high cost debt, including many consumers who always paid their bills on time," said Lauren Bowne, staff attorney for Consumers Union. "The Fed should undo that damage by requiring banks to lower interest rates for customers who were treated unfairly before the new credit card protections went into effect."

The Fed's proposed regulations would require banks to review interest rate hikes made on customers between January 2009 and February 22, 2010 and to reduce those rates "as appropriate." But under the proposal, banks are allowed to keep secret their review process with no oversight by the Fed.

Banks could keep the higher interest rate if the reason for the old rate hike still exists, or if the bank decides to come up with a new reason for the higher rate. Banks would not be required to start this "look back" process until six months after the regulations go into effect - in other words, starting in late February 2011.

Consumers Union urged the Fed today to strengthen the rate review proposal by:

-- Requiring banks to reinstate the old interest rate if the reason for
the rate hike would not have been allowed under the new protections
afforded by the CARD Act.
-- Requiring banks to disclose the methodology they use to review rates
and to report to the Fed twice each year the number of rate increases
reviewed and the number of rate reductions that result.
-- Requiring banks to begin reviewing rate increases on August 22, 2010,
when the rate review provision goes into effect.


Thousands of consumers have contacted Consumers Union over the past year to complain that their credit card interest rates were raised unfairly. Many consumers reported that their banks acknowledged that interest rates were raised because of the economy or a change in market conditions and not because of anything wrong done by the consumer. Other consumers reported that their interest rates doubled or tripled after they were a day or two late making their payment or for other minor mistakes. Before the new credit card protections started on February 22, banks were allowed to raise interest rates on existing balances at any time for any reason.

Starting on February 22, banks were prohibited from raising interest rates on a credit card customer's existing balance unless the customer has a variable rate card, a promotional rate has expired, or if the customer is more than 60 days late making the minimum payment.

The Fed also has proposed regulations required by Congress under the CARD Act that are meant to ensure penalty fees and charges are "reasonable and proportional" to the customer's violation of the credit card contract. However, the Fed's proposed rule only applies to penalty fees such as those imposed for going over the limit or being late with a payment and not penalty interest rates.

Under the Fed's proposal, penalty fees would be allowed only if a bank can show the fee is a reasonable proportion of the total cost to the bank caused by the customer's violation of the credit card agreement or if the bank proves that the fee amount is necessary to deter the same kind of violations in the future. The rule also proposes a complicated "safe harbor" provision which allows a bank to pick a permissible fee amount without doing the cost or deterrence analysis.

Consumers Union urged the Fed to broaden its proposed regulation so it extends to the size of penalty interest rate hikes in addition to fees and to limit those rate increases to no more than seven percentage points above the non-penalty interest rate. Consumers Union called on the Fed to simplify and strengthen the "safe harbor" provision for penalty fees by setting it at five percent of the violation or no more than $10.

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Commercial Mortgage Defaults in 2010: Hard Times for Some Banks

/PRNewswire/ -- Commercial mortgage defaults will be highly elevated in 2010 and could wipe out profits at a number of U.S. banks.

But it does not appear that this problem will morph into a true crisis that would endanger U.S. or global financial systems.

These are the key conclusions of a research study published today by SMR Research Corp. It is entitled The Commercial Mortgage Dilemma: Banking's Next Credit Challenge.

"The saving grace for the financial system is that most really large U.S. banks are modestly exposed," said SMR President Stuart A. Feldstein.

For example, highly delinquent commercial mortgages recently were only 0.1% of Citigroup's assets. JP Morgan Chase also appears "walled off" from the dilemma. Exposure at Bank of America is just slightly higher. None of the nation's largest banks risk failure due to commercial mortgage defaults, SMR noted.

The same cannot be said for some medium-sized and smaller banks. At small banks with less than $1 billion of assets, commercial mortgages recently were 32.5% of total assets - a level of dependence six-fold higher than at big banks with $50 billion or more of assets.

As of September 30, 2009, 154 banks had highly delinquent commercial mortgages equal to 3% or more of their total assets. In a reasonably good year, banks earn profits of only about 1% of assets. Many of these institutions will be hard-pressed to make any money in 2010, SMR said. Some could become insolvent.

The study includes specific 2010 risk rankings for each of the nation's 477 largest bank holding companies.

As of late 2009, the 90-day-plus delinquency rate on all commercial mortgages (including multi-family apartment building loans and commercial construction loans) was rising fast. It reached 5.59% on September 30, up from 3.51% just six months earlier.

Meanwhile, the vacancy rate on apartment buildings had reached its highest level since at least 1965. Vacancy rates were high as well at shopping centers and office buildings. The total commercial mortgage loan market was $3.4 trillion as of the third quarter of 2009.

Despite the gloom, SMR found reasons for cautious optimism.

Among them: The early-stage delinquency rate on commercial mortgages appears to have peaked in the first quarter of 2009.

In addition, overall delinquency and write-offs on commercial mortgages were still below levels seen in the last commercial lending crisis in 1991.

"If the economic recovery continues apace, the new commercial mortgage crisis may peak in 2010 and improve in 2011," Feldstein said.

SMR utilized more than 150,000 regulatory financial reports from banks and thrifts to present an 18-year history of commercial mortgage credit figures, from 1991 to 2009.

The firm also tapped its property records database to calculate recent foreclosure rates on commercial properties by type, by state, and by metro area.

Multi-family apartment buildings had the highest foreclosure rate. Properties dependent on consumer discretionary spending - including greenhouses and car washes - also showed high foreclosure rates.

Foreclosure rates were low at churches, medical buildings, funeral homes, and private schools.

Some local markets with high home foreclosures also had high commercial foreclosures, including Arizona and Florida. But the correlation wasn't perfect. Hawaii, for example, showed a high commercial foreclosure rate as the falloff in tourism clobbered hotels and restaurants.

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Banks Uncomfortable With Spending Restrictions of Taxpayer Bailout Money

/PRNewswire/ -- As history has shown and continues to prove, every time the U.S. government gets involved with something, whatever it is becomes slower, costs more, and satisfies less. James Wilson from ForeclosureWarehouse.com stated that our recent taxpayer-backed funds known as the economic stimulus plan has too little oversight according to citizens and many in government, and too many restrictions and controls according to some recipients. Because of executive pay restrictions, several banks of varying sizes have decided to give the money they received back or refuse it.

The funds were originally needed, it was proposed, to avoid collapse of financial institutions, but has exposed the willingness of banks to spend the money as they see fit, on corporate extravagance like jets and executive bonuses, and supporting local community projects like zoos and opera companies, for example.

The banks dislike being told that in order to receive the money from the stimulus plans intended to keep them from collapsing, the banks must postpone evictions, modify mortgages for distressed homeowners, slash dividends, cancel employee training and morale-building exercises, withdraw offers of employment to foreigners, and allow shareholders to vote on their executive pay packages.

If the government were restricted in the same way by the citizens, such as the repeated use of military aircraft to fly willy-nilly at the discretion of the speaker of the House, Nancy Pelosi, at the taxpayers' expense, for example, it is certain that the government would loudly complain.

And who can blame the citizens for wanting to rein in the spending of the government, something the government has never done and continues not to do.

Some say that the stimulus package conditions don't go far enough, while others complain of fascism - privately owned companies controlled by the government.

James Wilson agrees with banking experts who warn that expecting weak banks to carry out the policies of the government could exacerbate the situation, forcing banks to engage in lending practices that cause them more losses and places them into more precarious positions, involving the government even more, or closing their doors for good.

It has been reported that some in government, like Barney Frank and Chris Dodd, had for years, encouraged or pressured lending institutions Freddie Mac and Fannie Mae, to approve loans to more people that traditionally would not qualify for loans for the purpose of allowing more people to own their homes. Now that the government controls these two companies, these lenders have been told to spend billions of dollars buying bundles of mortgages (of which there are no buyers), and to allow homeowners to refinance their loans even with no equity on the part of the borrower. In other words, the banks will lose less money than by receiving foreclosed properties that would have to be sold at a discounted price resulting in a greater loss.

This scenario is similar to a gangster putting a gun to someone's head and telling them to "buy, or else." But public outrage over the continuously growing size of not one but several stimulus packages has pressured politicians to exercise more control over how the taxpayers' money will be used, or will not be used by the banks and businesses receiving part of the bailout.

Government mandates that banks must approve loans and must wait longer to collect their repayment, yet must not evict people who cannot repay their obligations leading to further bank losses and expenses. Keeping insolvent banks operational merely prolongs the inevitable collapse due to the weakening of the banks and their inability to collect money owed to them from borrowers.

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Fed Urged to Require Banks to Get Customers' Permission First Before Enrolling Them in Expensive Overdraft Programs

/PRNewswire-USNewswire/ -- Banks shouldn't be allowed to automatically enroll their customers in expensive overdraft loan programs, according to Consumers Union, the nonprofit publisher of Consumer Reports. The group urged the Federal Reserve Board in a letter today to require banks to get their customers' permission first before signing them up for high fee overdraft loan programs for overdrafts triggered by ATM and debit transactions.

The Fed is currently considering whether consumers should be given the right to opt-in before banks can enroll them in overdraft programs covering ATM and debit transactions or simply a right to opt-out after the bank has signed them up for overdraft coverage. The Fed is accepting public comment on these two proposals through March 30. For a copy of Consumers Union's letter to the Fed, see: http://www.consumersunion.org/pub/pdf/overdraft-comments-309.pdf

"Most banks automatically enroll their customers in so-called 'overdraft protection' programs, which are really high-cost loans that cost consumers billions of dollars every year," said Lauren Zeichner Bowne, Staff Attorney for Consumers Union. "The Federal Reserve Board should protect consumers from unfair overdraft loan programs by stopping the fees unless the consumer makes the choice to opt-in to the loan program."

Banks collect an estimated $7.8 billion in fees from overdrafts triggered by debit and ATM transactions. These overdrafts could be prevented with a simple warning or if the transaction was declined. Instead, most banks let these transactions go through and charge consumers a fee for each overdraft. The FDIC found that the median fee for overdrafts is $27, even though the average overdraft is triggered by transactions totaling $17.

A national poll by the Consumer Reports National Research Center found that many consumers do not understand how overdraft programs work. According to the poll, 39 percent of consumers thought that their bank would either deny a debit transaction or allow it to proceed without charging a fee if it would overdraw their account. Nearly half of those polled (48 percent) thought their ATM card would not work if they attempted to withdraw more money than was available in their account.

Consumers Union released the poll results in comments filed in support of the opt-in proposal with the Federal Reserve Board. The group opposes the opt-out proposal because the evidence suggests that most consumers will not change their status if banks automatically enroll them in overdraft programs.

The vast majority of consumers have accounts at banks that automatically enroll customers in programs that allow debit and ATM transaction to trigger overdrafts. An FDIC study found that "institutions that use automated programs to cover overdraft obligations accounted for almost 73 percent of deposit dollars held in the study population banks."

Automatic fee-based overdraft programs are the most expensive option for consumers so banks don't have an incentive to sell lower cost services, such as linked accounts or lines of credit. The FDIC has concluded that the fees assessed for these other types of programs are significantly lower than for automatic overdraft loan programs.

The Consumer Reports poll found that the overwhelming number of consumers want a real choice when it comes to overdraft programs. The poll found that two-thirds of consumers (66 percent) said they prefer to expressly authorize overdraft coverage, so that there would be no overdraft loan -- or fee -- until they opted in to the service. Similarly, two thirds (65 percent) said that banks should deny a debit or ATM transaction if the checking account balance is too low.

In its comments to the Federal Reserve Board, Consumers Union also urged the Board to declare that fee-based overdraft loans are extensions of credit that should be subject to the Truth in Lending Act and Regulation Z requirements to disclose their cost in terms of an annual percentage rate. For the average overdraft, the APR would equal 4,140 percent.

The FDIC has found that banks commonly process transactions from largest to smallest, which increases the number of overdrafts. Consumers Union urged the Fed to restrict this practice when it issues its new overdraft regulations. In addition, the group called on the Fed to prohibit banks from charging fees if the overdraft was triggered because the bank placed a hold on a customer's deposit, and to cap the daily and monthly totals for allowable overdraft fees.

"If banks believe that overdraft programs are truly beneficial, then they should be required to persuade their customers to sign up before they can charge them such high fees," said Zeichner Bowne. "The Fed should end automatic enrollment in costly overdraft programs by giving consumers the choice to opt-in. Consumers concerned about high cost overdraft fees have until March 30 to support these important new rules." Consumers can learn more and submit comments to the Fed at: http://cu.convio.net/OverDraft

The Consumer Reports National Research Center conducted a telephone survey using a nationally representative probability sample of telephone households. 679 interviews were completed among adults aged 18+ who reported having a checking account with an ATM card or a debit card. Interviewing took place over February 5-8, 2009. The sampling error is +/- 3.8% at a 95% confidence level.

Consumers Union, publisher of Consumer Reports, is an independent, nonprofit testing and information organization serving only the consumer. We are a comprehensive source of unbiased advice about products and services, personal finance, health nutrition, and other consumer concerns. Since 1936, our mission has been to test products, inform the public, and protect consumers.

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