They still call it Bert's bank here.
But since Bert Lance left the $400-million-asset National Bank of Georgia to join his old friend Jimmy Carter in Washington as the director of the Office of Management and Budget, things haven't been quite the same at the bank.
During Lance's two years at the helm of NBG, the fifth largest bank in Georgia, deposits and loans surged and earnings improved substantially. And the bank expanded into new national and foreign lending areas that seemed to signal a move into the banking big time.
But last week the bank reported a $1.4 million loss for the second quarter compared with a $395,000 profit for the same period last year, putting the bank into the red for the first half as well because NBG earned a slim $21,000 before securities transactions in the first three months of 1977.
The loss was essentially due to the bank's need to replenish its reserve for loan losses. The reserve was already at a low level compared with those of many other banks, though within the regulatory requirements set by the Comptroller of the Currency. And the reserve was substantially drained by the need to write down nearly $3 million in problem loans since the beginning of the year. Most of these loans were real-estate-related.
Robert P. Guyton, the man who succeeded Lance as president and chief executive officer of NBG, said in an interview that the bank almost surely will show a loss for the entire year as well and faces some further write-downs on its loan portfolio. He also indicated that the bank almost certainly will have to eliminate or reduce substantially its 80-cent-per share annual dividend. To retain even part of the dividend will require the permission of two life insurance companies that hold $5 million in notes from the bank.
Faced with the losses. Guyton has been trying as well to bring operating expenses at the bank -- which also surged under Lance -- under control. Since his arrival in April, Guyton has pruned the national and foreign lending divisions, and reduced the officer ranks at the bank.
Even before his arrival, the bank sold the $800,000 Beechcraft Kingair plane which Lance purchased for the bank last year and which he used to fly around the state in search of new business.
Lance came to Washington with credentials as a financially conservative Southern banker whose role it has been to emphasize the administration's commitment to balance the budget, and to build confidence among businessmen in the Carter Administration.
But the bank's loss and recent revelations about Lance's own highly leveraged personal finances have raised questions about how conservatively Lance ran the bank as well as the own financial affairs.
The loss has created some personal financial problems for Lance, too, because he owns 200,000 shares, or one-sixth of the outstanding NBG stock, financed by a $3.4 million bank loan from the First National Bank of Chicago.
Upon accepting the OMB job, Lance pledged to dispose of the bank stock holdings by the end of this year as part of the Carter administration's strenuous effort to avoid financial conflicts of interest for its officials.
But the sale of such a sizeable block of stock by a date certain into what is a thin market had depressed the shares, which Lance bought at an average price above $17, and the deteriorating earnings prospects of the bank further pounded the share price to a low of $8.50 recently.
President Carter last week asked the Senate to consider lifting the deadline Lance had pledged himself to, pointing to what he said was the excessive hardship that it imposed not only on Lance but on other shareholders in the bank. And this is now under consideration by the Senate Governmental Affairs Committee.
But the elimination or reduction of the dividend payable on the National Bank of Georgia stock could in itself prove to be a hardship to Lance, since it currently provides him with $160,000 a year in income on top of his salary as OMB chief of $57,500 which he presumably needs to service his sizeable bank debts.
In his personal financial statement which he filed at the beginning of this year. Lance listed $5.3 million in liabilities, mostly bank loans, against assets of $7.97 million, mostly in the form of securities, for a net worth of $2.62 million.
But the value of some of his assets, such as the NBG shares, has declined since the beginning of the year. And a drop in his dividend income could mean that some of his assets will have to be sold to meet the debt service payments.
A. Robert Abboud, chairman of the First National Bank of Chicago, Lance's single largest credit, last week expressed confidence that the $3.4 million loan to the OMB chief was "fully and satisfactorily collateralized," and represented "good business" for the bank.
Lance originally had taken out a $2.7 million loan from Manufacturers Hanover Trust Co. of New York to purchase 160,000 shares of NBG stock. Last January, just before beginning his government service, Lance switched his debts to the Chicago bank after putting his business out for bid, and raised the amount of the loan to $3.4 million to pay for the purchase of additional shares.
A spokesman for the First National Bank of Chicago said Lance's "business was offered and a number of banks bid, including ours. The loan was larger because he wanted to buy more stock."
Lance meanwhile last week confirmed reports that Tom Mitchell, who administers Lance's assets for him in a blind trust, in April exercised an option Lance held to buy an additional 9,900 shares of NBG stock, bringing the total to 200,000 shares even, though he faced the requirement that he sell the entire block by the end of the year.
Here in Atlanta, Lance's banking colleagues express sympathy for his financial dilemma. They give him high marks for his abilities as a banker. But they indicate that the main achievement of the voluble and likeable Lance was more in the nature of bringing new business to the bank through his many contacts, than in the day-to-day operations of the bank.
"Bert is a go-getter and he knows everybody," commented Daniel B. Pattillo, a director of NBG and the bank's single biggest shareholder with 225,000 shares. (Pattillo, along with John H. Stembler, now chairman of the bank, was asked by Lance in June 1975 to join him in purchasing controlling interest in the bank which was for sale by Financial General Corp., a Washington-based bank holding company.)
"He just naturally gets business and we don't have the entree to the same kinds of people since he left," Patillo added somewhat wistfully. He said that when Lance headed the bank, he "let others take care of details. He was never represented as a detail man, as long as he brought that business."
Pattillo said he was disappointed when Lance agreed to go to Washington, but said he understood that it was difficult to turn the President down.
(Lance had run a highly publicized but unsuccessful run for the Georgia governorship just before he became president of NBG in the beginning of 1975 and was well-known throughout the state. Earlier, he had been Georgia transportation director when Carter was governor of the state. He started in banking in 1951 as the clerk in his father-in-law's bank in Calhoun, becoming president 12 years later of the Calhoun National Bank. He made his mark there by aggressively expanding the bank's traditional business, though the bank's profit levels for a country bank were not particularly high.)
NBG chairman Stembler also said he invested in the bank's stock on the basis that "Bert was going to be here to run it." He said it was improbable, however, that if Lance had remained he could have averted the several large loans that turned sour and produced the bulk of the $2.3 million charged off in the second quarter. And he was emphatic that "the fleas were already on the dog," meaning the loans had been made before Lance joined the bank.
"But he might have produced additional growth to offset the losses," Stembler speculated.
One question troubling some in the Georgia banking community is why NBG is experiencing real-estate-related loan write-offs now when most banks went through this cycle beginning at the end of 1974. There is also the question of whether NBG in the past made sufficient provisions for loan losses, or whether it is now running losses because the reserves were never made large enough.
A. H. Stern, chairman of the Trust Company of Georgia, the state's second largest bank, said that "If they are related to real estate, it's puzzling why they surfaced now, because most of these surfaced in 1975" for other banks.
Asked about the conservative tag put on Lance, Stern said that, from a banking standpoint. "I would say he was more aggressive than conservative."
Bennett Brown, the head of the holding company for Citizens & Southern, the largest bank in Georgia, and an old acquaintance of the OMB director, agreed that Lance was aggressive as a banker "but aggressive does not mean irresponsible . . . it was not a go-go swinging bank under Bert's leadership." Brown said the charge-offs NBG is experiencing should "not reflect on the judgement or ability of Bert Lance at all."
There has been some speculation that NBG delayed taking some of the loan write-offs in order to avoid embarrassing Lance during last year's presidential campaign. This is denied.