TITLE 7 BANKING AND FINANCE

Section 1. Financial Institutions, 7-1-1 through 7-1-1021.

ARTICLE 2 BANKS AND TRUST COMPANIES

7-1-606. Bank holding companies - Actions unlawful without prior approval of commissioner; exceptions.

1. On and after July 1, 1976, it shall be unlawful, except with the prior approval of the commissioner:
  1. For any action to be taken that causes any company to become a bank holding company;
  2. For any action to be taken that causes a bank to become a subsidiary of a bank holding company;
  3. For any bank holding company to acquire direct or indirect ownership or control of any voting shares of any bank if, after such acquisition, such company will directly or indirectly own or control 5 percent or more of the voting shares of such bank;
  4. For any bank holding company or subsidiary thereof, other than a bank, to acquire all or substantially all of the assets of a bank;
  5. For any bank holding company to merge or consolidate with, or enter into a share exchange with, any other bank holding company; or
  6. For any bank holding company to take any action which would violate the federal Bank Holding Company Act of 1956, as amended.
2. Notwithstanding paragraph (1) of this subsection, this prohibition shall not apply to:
  1. Shares acquired by a bank:
    1. In good faith in a fiduciary capacity, except where such shares are held under a trust that constitutes a company as defined in paragraph (2) of subsection (b) of Code Section 7-1-605 and except as provided in paragraphs (2) and (3) of subsection (c) of Code Section 7-1-605; or
    2. In the regular course of securing or collecting a debt previously contracted in good faith, but any shares acquired after July 1, 1976, in securing or collecting any such previously contracted debt shall be disposed of within a period of two years from the date on which they were acquired;
  2. Additional shares acquired by a bank holding company in a bank in which such bank holding company owned or controlled a majority of the voting shares prior to such acquisition; or
  3. Transactions for which the department has established by rule, regulation, or written policy a streamlined or alternative procedure, if such procedure specifically dispenses with the need for approval by the commissioner.
    For the purpose of this paragraph, bank shares acquired after July 1, 1976, shall not be deemed to have been acquired in good faith in a fiduciary capacity if the acquiring bank or company has sole discretionary authority to exercise voting rights with respect thereto; but, in such instances, acquisitions may be made without prior approval of the commissioner if the commissioner, upon application filed within 90 days after the shares are acquired, approves retention or, if retention is disapproved, the acquiring bank disposes of the shares or its sole discretionary voting rights within two years after issuance of the order of disapproval.
1. The commissioner shall not approve nor shall any other procedure authorize:
  1. Any acquisition or merger or share exchange or consolidation under this Code section which would result in a monopoly or which would be in furtherance of any combination or conspiracy to monopolize or to attempt to monopolize the business of banking in any part of the State of Georgia; or
  2. Any other proposed acquisition or merger or share exchange or consolidation under this Code section whose effect in any section of the state may be substantially to lessen competition, or to tend to create a monopoly, or which in any other manner would be in restraint of trade, unless it finds that the anticompetitive effects of the proposed transaction are clearly outweighed in the public interest by the probable effect of the transaction in meeting the convenience and needs of the community to be served.
2. In every case, the department shall take into consideration the financial and managerial resources and future prospects of the company or companies and the banks concerned and the convenience and needs of the community to be served.
Nothing contained in this Code section shall affect the obligation of any person or company to comply with the provisions of any order of any court or of the commissioner entered prior to July 1, 1976.
The commissioner shall not grant any such contemplated approval until he or she shall first cause reasonable public notice of the proposed action to be given in the area to be affected and until he or she shall first afford to the public an opportunity to submit, for the commissioner's consideration, information, objections, and opinions as to the proposed action and its effect. The notice requirement may not apply in the case of a streamlined procedure where the holding company meets certain qualifying criteria established by rule, regulation, or written policy of the department.
Notwithstanding any other provisions of this part, a bank holding company which lawfully controls a bank or has received the requisite approvals under this Code section to acquire control of a bank may, with the approval of the commissioner, or as otherwise provided in this chapter or by departmental rule or regulation, either at the time such control is obtained or at any time thereafter, merge or consolidate such bank with another of such bank holding company's banking subsidiaries or have another of such bank holding company's banking subsidiaries acquire all or substantially all of the assets of such bank and consequently operate as a branch office of such other banking subsidiary. Nothing in this subsection shall be deemed to supersede, rescind, or modify any provision, requirement, or condition of this Code section which would otherwise be applicable to any acquisition of a banking subsidiary by a bank holding company under this Code section, nor shall it be deemed to supersede, rescind, or modify any provision, requirement, or condition of Part 14, 15, 16, 19, or 20 of this article which would otherwise be applicable to the merger of banks or the acquisition or sale of all or substantially all of the assets of a bank.

(Code 1933, § 13-207.1, enacted by Ga. L. 1976, p. 168, § 3; Ga. L. 1980, p. 542, § 1; Ga. L. 1985, p. 1506, § 1; Ga. L. 1997, p. 143, § 7; Ga. L. 1998, p. 795, § 27; Ga. L. 1999, p. 674, § 17; Ga. L. 2007, p. 502, § 14/SB 70.)

U.S. Code.

- The federal Bank Holding Company Act, referred to in subparagraph (a)(1)(F) of this Code section, is codified as 12 U.S.C. § 1841 et seq.

Law reviews.

- For annual survey of law of business associations, see 43 Mercer L. Rev. 85 (1991).

JUDICIAL DECISIONS

Purpose of subparagraph (a)(1)(C).

- It is unlawful for any bank holding company to acquire or hold direct or indirect ownership or control of more than five percent of the voting shares of any bank. The purpose of the law is to preserve independence of such banks from the holding company. Independent Bankers Ass'n v. Board of Governors, 516 F.2d 1206 (D.C. Cir. 1975) (decided under former Code 1933, § 13-207(a)(2) as it read prior to revision by Ga. L. 1976, p. 168, § 3).

Acquisition and operation of branch banks by holding company's subsidiary.

- Although a bank holding company may change the corporate structure of its banking subsidiaries through merger, consolidation, or purchase, and may continue all of the banking activities of the component banks, a bank holding company may not, through its banking subsidiary, acquire "branch banks" and continue to operate them as such. First Nat'l Bank of Commerce v. Community Bankers Ass'n, 260 Ga. 371, 394 S.E.2d 95 (1990).

"Branch" not necessarily interchangeable with "bank".

- Term "branch", as used in O.C.G.A. § 7-1-606(e), is not necessarily interchangeable with "bank". Community Bankers Ass'n v. First Nat'l Bank of Commerce, 193 Ga. App. 569, 388 S.E.2d 387 (1989), aff'd, 260 Ga. 371, 394 S.E.2d 95 (1990).

Merger with branch not approved without merging entire bank.

- Nothing in the Code expresses or implies any intent to permit approval of a bank holding company's merging or consolidating with, or acquiring control of, a branch bank by itself without merging or consolidating with, or acquiring control of, the entire bank. Community Bankers Ass'n v. First Nat'l Bank of Commerce, 193 Ga. App. 569, 388 S.E.2d 387 (1989), aff'd, 260 Ga. 371, 394 S.E.2d 95 (1990).

OPINIONS OF THE ATTORNEY GENERAL

Exemption to branching prohibition under

§ 7-1-601(c). - It seems clear that O.C.G.A. § 7-1-606(e) creates at least a limited exception to branching prohibition of O.C.G.A. § 7-1-601(c). 1981 Op. Att'y Gen. No. 81-74.

Operation of savings and loan across county lines.

- Only branch of a savings and loan association located in the county affected, which is lawfully controlled by a bank holding company or as to which the bank holding company has received the requisite approvals to acquire control, may be lawfully acquired by a banking subsidiary of a bank holding company through a purchase and assumption and operated across county lines as a branch of the banking subsidiary; provided, such acquisition is approved by the commissioner of banking and finance. 1988 Op. Att'y Gen. No. 88-13.

Merger of subsidiaries of holding company across county lines.

- With respect to circumstances under which a bank holding company may merge two subsidiaries across county lines, there are two requirements: (1) the commissioner must approve, and (2) merger must take place at the time the holding company acquires the bank which is to become a branch bank following merger. 1981 Op. Att'y Gen. No. 81-74.

Careful phrasing of O.C.G.A. § 7-1-606(e) and its placement into existing statutes are inconsistent with an intent to authorize bank holding companies generally to merge their subsidiaries across county lines. 1981 Op. Att'y Gen. No. 81-74.

RESEARCH REFERENCES

Am. Jur. 2d.

- 10 Am. Jur. 2d, Banks and Financial Institutions, §§ 21, 194 et seq., 234.

Cases Citing O.C.G.A. § 7-1-606

Total Results: 2 | Sort by: Relevance | Newest First

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Clark v. Wade, 544 S.E.2d 99 (Ga. 2001).

Cited 130 times | Published | Supreme Court of Georgia | Feb 16, 2001 | 273 Ga. 587

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First Nat'l Bank of Com. v. Cmty. Bankers Ass'n of Georgia, Inc., 394 S.E.2d 95 (Ga. 1990).

Cited 1 times | Published | Supreme Court of Georgia | Jul 16, 1990 | 260 Ga. 371

...merge or consolidate such bank with another of such bank holding company's banking subsidiaries or have another of such bank holding company's banking subsidiaries acquire all or substantially all of the assets of such bank and consequently operate as a branch of such other banking subsidiary. *373 [OCGA § 7-1-606 (e).] It is of critical importance to this case that the provisions contained in subparagraphs (a), (b) and (c) of Division 1 came into existence with the enactment of Ga....

...in order to obtain approval to operate one of its branches. 1. The majority holding is premised on essentially two grounds: (A) First, the majority concludes, in essence, that its holding is mandated by an interpretation of OCGA §§ 7-1-602 (e) and 7-1-606 (e) in pari materia....

...arent and branch banks were located. OCGA § 7-1-602 (e) is thus tied to transactions under Parts 14 and 15, where the constituent banks have a parent or branch bank located in the same county. In contrast, mergers or other consolidations under OCGA § 7-1-606 (e) constitute an independent exception to Georgia's general prohibition against the establishment of new or additional branch banks....

...OCGA § 7-1-601 (c) (1), (2), and (3) recognize three exceptions to *378 Georgia's general prohibitions against the establishment of new or additional branch banks. OCGA § 7-1-601 (c) (1) expressly states that the establishment of branch banks pursuant to mergers or other consolidations under OCGA § 7-1-606 (e) constitutes one of these exceptions....

...§ 13-207.1 (now OCGA § 7-1-605), which allows bank holding companies to acquire banks throughout the state, with the approval of the commissioner, subject to the condition that the acquired bank has been in existence and continually operating for five years. In 1980, the branch banking exception now contained in OCGA § 7-1-606 (e) was enacted as Code Ann. § 13-207.1; and in 1985, OCGA § 7-1-606 (e) was amended to its present form. Finally, in 1987, the branch banking exception contained in OCGA § 7-1-606 (e) was formally recognized as an independent exception to Georgia's general branch banking prohibition through the enactment of OCGA § 7-1-601 (c) (1)....

...In view of the foregoing expressions of legislative intention enacted subsequent to the 1960 Act, I do not understand how the resolution of the question for decision in this case can be predicated, as stated in the majority opinion, upon "the expressed legislative intent of the 1960 Act." 2. As amended in 1985, OCGA § 7-1-606 (e) provides: Notwithstanding any other provisions of this part, a bank holding company which lawfully controls a bank or has received the requisite approvals under this Code section to acquire control of a bank may, with the approval of t...

...wing: (a) the holding company, (b) the bank over which the holding company has acquired control, (c) the subsidiary *381 of the holding company, and (d) the bank to be operated as a branch of the subsidiary. Based upon the arrangement of § 7-1-606 (e) and its sentence structure, it is fairly clear to me that in referring to (b) the bank over which the holding company has acquired control , and in referring to (d) the bank to be operated as a branch of the subsidiary , § 7-1-606 (e) is referring to the same banking entity, i.e., a branch bank; so construed, § 7-1-606 (e) does authorize the commissioner to approve a bank holding company's acquisition of a single branch bank, as well as a parent bank, to be operated as a branch of a holding company subsidiary. In addition, none of the parties in this case contests the fact that § 7-1-606 (e)'s introductory phrase, "Notwithstanding any other provisions in this part," in essence means, "Notwithstanding Georgia's general prohibition against the establishment of new or additional branch banks." As previously stated, under OCGA § 7-1-601 (c), there are three exceptions to the ban on new or additional branch banks; OCGA § 7-1-606 (c) (1) expressly states that OCGA § 7-1-606 (e) is one of the exceptions. Consequently, I would hold that under § 7-1-606 (e) a bank holding company may, with the approval of the Commissioner, acquire a branch bank of a federal savings and loan association or a savings bank and operate it as a branch of a subsidiary bank. 3. For basically two reasons, the Court of Appeals concluded otherwise: (A) First, the Court of Appeals held that since § 7-1-606 (e) requires the holding company to have "control" over the bank to be operated as a branch and since a holding company has control over a bank under § 7-1-605 (a) (2) when it controls the voting securities, directors or trustees, or management or policies of the entire company the holding company must control the entire banking company before being authorized to operate one of its branches. Although it is certainly arguable that the branch-banking exception contained in § 7-1-606 (e) is tied to the acquisition of control over an entire banking company within the meaning of § 7-1-605 (a) (2), in the final analysis I find this argument unpersuasive, because I interpret § 7-1-605 (a) (2) as addressing itself to thos...

...k' shall include `bank office,' `bank facility,' `parent bank,' and `branch bank,' unless the context indicates that it does not," the pyramidal structure of Part 18 demonstrates that the term "bank" does not mean "branch bank" within the context of § 7-1-606 (e)....

...s within Part 18 in which only the term "bank" is used. The application of this rule, however, is only the starting point. The ultimate question is whether the legislature actually intended the term "bank" to mean "branch bank" within the context of § 7-1-606 (e)....

...nd complexity, ... all the words of the legislature, however numerous, ought to be preserved, and effect given to the whole, if it can be done." In my opinion, the majority has not "given effect to the whole" in this case. 4. The predecessor of OCGA § 7-1-606 (e) was Code Ann....

...r under § 13-207.1 (e) was subject to two conditions: first, the commissioner had to give his approval; second, the merger had to take place at the time the bank holding company acquired the bank to be merged into the subsidiary. *383 In 1985, OCGA § 7-1-606 (e) was enacted in its present form. In our opinion, the 1985 reenactment approved the Attorney General's 1981 opinion and liberalized OCGA § 7-1-606 (e) by allowing the acquired bank to be merged into the holding company's subsidiary "with the approval of the commissioner, either at the time such control is obtained or at any time thereafter...." 5....

...Although not conclusive, it has been held that such interpretations are entitled to great weight. E.g., Nat. Advertising Co. v. Dept. of Transp., 149 Ga. App. 334 (2b) (254 SE2d 571) (1979). 6. Where a bank holding company obtains regulatory approval for the acquisition of a branch bank under OCGA § 7-1-606 (e), the number of competitors in the county wherein the branch bank is located has not changed....

...n his ability to approve or disapprove bank acquisitions in this area. See OCGA § 7-1-3 (a) (7). In my opinion, the majority denies the regulatory agency the flexibility which the statute extends. As a final matter, the majority's interpretation of § 7-1-606 (e) creates an anomalous and untoward result. In this regard, once a bank holding company has purchased another bank with operations in only one county, merged it into one of its subsidiaries, and begun operating it as a branch, all in accordance with § 7-1-606 (e), the holding company is unable, even with the approval of the Commissioner, to sell the acquired bank to another banking institution unless it is a parent or branch bank within that county....

...al estate, furniture, fixtures and equipment; the acquisition of deposit accounts and assumption of liability for such accounts; and for the prohibition of competition. These do not make up "all or substantially all of the assets of such bank" (OCGA § 7-1-606 (e)), but are only a portion of its assets that the selling bank had devoted to its branch operation....

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