Is a georgia bank allowed to make a loan secured by its own stock?

Are you state chartered? If so, there are some rules. I'll try to dig them up and post here for you.

Here is what I got from our Controller:

Based on reading code section 7-1-288 (b)(3) can a bank receive a pledge or other security interest, as security for a loan, of its own bank stock? If so, is it limited to the 30% of statutory capital base or other restrictions? A bank may not lend on its own stock. It may take its own stock in an abundance of caution. The 30% wording applies to limit on lending on stock of other corporations and is not an exception to the prohibition on a bank lending on its own stock.

For bank stock, if you cannot take as collateral in the primary sense, can it be taken in abundance of caution situations? If so, are there limitations? Bank stock may be taken as an abundance of caution. There are no limitations; however, we would caution bankers in this regard. If the bank is originating the credit, and truly taking the stock in an abundance of caution, it will be imperative that they demonstrate that the stock is truly just an abundance of caution. If the examiners feel that the loan is poorly underwritten, they could determine the loan to be primarily secured by the stock, and then we could have a violation. If the bank has a struggling loan customer that they are trying to work with, we would be less worried about the abundance of caution issue because it would make strong business sense to improve the bank's position in any way possible. Please be reminded if the bank winds up taking their own stock as part of a foreclosure/repossession, this may create complications with GAAP even though Georgia law/DBF rules are fairly straight forward (Other Asset that must be disposed of in six months).

3) Based on reading Department regulation 80-1-5.06, it appears a bank may lend monies to borrowers, which is primarily secured by the stock of its own bank holding company, if the shares are traded over the counter or on an exchange, prices are regularly quoted and there is an active resale market. Also appears that if those conditions are not met, they can still lend on the book value of the shares if the amount of the shares doe not exceed 10% of the total outstanding shares and the credit extended upon the basis of such shares as security does not exceed the book value of such shares. For holding company shares, it appears they can be taken as collateral in abundance of caution situations or to remediate previous collateral deficiencies. Are we correct in this interpretation? Basically correct, need to add second part of 10% exception.