The Board of Directors
Carolina Commercial Bank
118 Main Street
Allendale, South Carolina 29810
Dear Board Members:
Subject: Carolina Commercial Bank, Allendale, South Carolina
We have reviewed your request filed pursuant to section 362.4(a) of the FDIC's Rules and
Regulations in which you seek permission to continue the activity of pledging bank assets to
collateralize the portion of two individuals' aggregate nonpublic deposit accounts in excess of the
FDIC deposit insurance limitations until the next maturity of the underlying deposit accounts
The pledging of bank assets to secure non-public deposits represents an activity which is not
permissible for a national bank.
For the reasons contained in the enclosed Statement, your application is approved subject to the
1. That the bank may continue to pledge assets to secure the nonpublic Individual
Retirement Account deposits which are currently collateralized for two individuals only
until the next maturity of the underlying deposit accounts. The bank may not increase the
amount of security pledged on these accounts or initiate any new activity on other
2. That the consent granted herein is based on the facts and circumstances presented or
otherwise known to the FDIC in connection with this application. The bank shall notify
the FDIC of any significant change in facts or circumstances by the end of the month
following such occurrences. If the facts and circumstances change significantly, the FDIC
shall have the right to alter, suspend, or withdraw its approval.
Should you have any questions regarding this matter, please contact Review Examiner Michael D.
Schutt in the Atlanta Regional Office at (404) 817-2540.
Nicholas J. Ketcha Jr.
FEDERAL DEPOSIT INSURANCE CORPORATION
IN RE: Carolina Commercial Bank
Allendale, South Carolina
Application Pursuant to Section 24 of the
Federal Deposit Insurance Act for Consent to
Continue to Engage as Principal in an Activity Which
Is Not Permissible for a National Bank
Pursuant to the provisions of Section 24 of the Federal Deposit Insurance Act ("FDI Act"),
Carolina Commercial Bank, Allendale, South Carolina ("Bank"), has filed an application with the
Federal Deposit Insurance Corporation ("FDIC"). The Bank requests the FDIC's consent to
continue to collateralize the portion of two individuals' aggregate non-public deposit accounts
that exceeds the FDIC insurance limits.
The activity of pledging assets to secure non-public deposits is not a permissible activity for a
national bank. State-chartered, FDIC-insured banks may not engage as principal in an activity
prohibited to nationally-chartered banks unless they obtain consent from the FDIC. Consent may
not be granted unless the bank is in compliance with applicable capital standards and the FDIC
determines that the activity poses no significant risk to the deposit insurance fund. South Carolina
state law allows, by interpretation, state banks to pledge bank assets to secure both public and
The Bank began the activity of pledging assets prior to the enactment of the Federal Deposit
Insurance Corporation Improvement Act of 1991, which first imposed the activity limitations on
state-chartered banks. The Bank engages in the activity in only two instances, to secure the
uninsured portion of the aggregate Individual Retirement Account ("IRA") deposits of two
customers. One of the account holders is a director, officer and shareholder of the Bank. The
second account holder is the partner in a medical practice with the first account holder. The Bank
has no written policies regarding this activity; however, the Bank does not wish to expand the
activity beyond the current level nor continue the activity past the next maturity of the underlying
The Bank has made application pursuant to Part 362 of the FDIC's Rules and Regulations and
requests permission to continue the activity for the current account holders at the current level of
pledged assets but only until the next maturity of the underlying IRA deposits. The Bank has
pledged assets with an aggregate value of $1.3 million ($650,000 to each account holder). The
IRA deposits are collateralized by Federal Farm Credit Bank Notes held in safekeeping by a
correspondent bank subject to a recorded pledge to the respective depositors. The depositors do
not have physical possession of the underlying assets.
The Bank, which meets the definition of "well-capitalized" within the meaning of Part 325 of the
FDIC's Rules and Regulations, is in compliance with applicable capital standards with Tier I
leverage, Tier I risk-based, and Total risk-based capital ratios of 12.33 per cent, 31.80 per cent
and 33.06 per cent, respectively, as reflected in the March 31, 1997, Report of Condition and
Income. The Bank is in overall sound condition and is satisfactorily managed.
The FDIC has reviewed all available information and has also taken into consideration the
financial and managerial resources and future earnings prospects of the Bank. The FDIC also
considered the risks associated with the activity of collateralizing deposits in excess of the FDIC
deposit insurance limits and evaluated the specifics of the Bank's application.
For the reasons outlined above, the Director of the Division of Supervision, pursuant to delegated
authority, has concluded that the proposed activity of pledging Bank assets to secure the amount
of two depositors' ERA deposits in excess of the deposit insurance limit until the next maturity of
the underlying ERA deposits does not pose a significant risk to the Bank Insurance Fund nor
safety and soundness concerns and, therefore, approval of the application is warranted. It should
be noted, however, that had the request been to initiate this activity de novo activity or to
continue the present activity indefinitely, the FDIC's decision may have been different.