Frederick H. Jackson III and Pamela S. Jackson - Page 6

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          interest and principal will be paid over the term of the note,              
          and the purpose of the note is to buy a warehouse.  The note is             
          secured by a mortgage.  The note is signed on behalf of the                 
          corporation by “R.L. McKale”, “President”.  Petitioner and his              
          father guaranteed the note.                                                 
          Testimony of Vice Chairman of Bank                                          
               William Sunderland is the vice chairman of the bank.  He is            
          an officer of the bank who approved the bank’s participation in             
          the loan agreement and the note (together, the loans).  He                  
          testified, and we find, as follows:                                         
               The bank followed its ordinary practices in making the                 
          loans.  Among other things, it considered the assets, debts, and            
          liabilities of the corporation.                                             
               In evaluating the loan, the bank believed the corporation’s            
          financial statements to show a negative net worth of $80,072 and            
          the guarantors’ financial statements to show a positive net worth           
          of $5,534,455.  The value of the mortgaged property had been                
          established by appraisal to be $1,240,000, which, when compared             
          with the amount of the loan, $1.2 million, established a loan-to-           
          value percentage of 96.7 percent.  That percentage exceeded the             
          bank’s supervisory limit.  The bank had a loan policy, and making           
          the loan deviated from that policy.  The bank made the loan based           
          not only on the value of the collateral securing the loan but               

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