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Central Carolina Bank and Trust Company

FEDERAL DEPOSIT INSURANCE CORPORATION

IN RE: Central Carolina Bank and Trust Company Durham, North Carolina

Application for Consent to Directly Acquire and Hold All of the Shares of a Foreign Financial Entity to be Organized Under the Laws of the British Virgin Islands

ORDER

The Board of Directors of the Federal Deposit Insurance Corporation ("FDIC") has fully considered all available facts and information relevant to the application of Central Carolina Bank and Trust Company, Durham, North Carolina ("Central"), for consent to hold all of the issued and outstanding shares of Sprunt Insurance Company, Ltd ("Sprunt"), a de novo foreign financial entity organized under the laws of the British Virgin Islands, and has concluded that the application should be approved under section 347.104(b)(13) and section 362.4(b)(1) of the FDIC's rules and regulations.

Accordingly, it is hereby ORDERED, that the application submitted on behalf of Central for consent to hold all of the issued and outstanding shares of Sprunt be and the same hereby is approved, subject to the following conditions:

1. In addition to the records, controls, and reports required by section 347.110(a) of
the FDIC's rules and regulations, Central shall take all steps within its control to
ensure that Sprunt and its officers, employees, agents, independent contractors,
and affiliates provide Central with access to information and records concerning
Sprunt's business operations and transactions as is permitted under British Virgin
Islands law. In addition to the requirements of section 347.110(b) of the FDIC's
rules and regulations, Central shall, upon request in connection with an FDIC
examination of Central, or otherwise, provide such information to the FDIC. To
the extent British Virgin Islands law impedes Central's ability to obtain such
information or to provide any information to the FDIC, Central and Sprunt shall
cooperate with the FDIC in attempts to obtain any third party waivers or consents
that would permit FDIC access to such information under British Virgin Islands
law.

2. Central shall ensure that consent provisions are included in appropriate and
relevant documents and instruments governing Sprunt's customer relationships to
permit Central to disclose to the FDIC all documents and information concerning
customer relationships and accounts.

3. All necessary and final approvals shall have been obtained from the appropriate
state, federal, and foreign authorities.

4. Central shall ensure that Sprunt develops and maintains a program designed to
determine the identity of its customers; to determine its customers' sources of
funds; to determine the normal and expected transactions of its customers; to
monitor account activity for transactions that are inconsistent with those normal
and expected transactions; and to report any transactions of its customers that are
determined to be suspicious, in accordance with the FDIC's existing suspicious
activity reporting regulation.

5. The consent granted herein is based on the facts, circumstances, and commitments
presented to the FDIC in connection with this request. The FDIC's action is
conditioned on its ability to alter, suspend, or withdraw its approval should any
development be deemed to warrant such action, or should any restriction on
access to information on the business operations and transactions of Sprunt
subsequently interfere with the FDIC's ability to assess the effect of Sprunt's
activities on Central. Central shall also take all reasonable steps to be aware of
and to notify the FDIC of any changes in relevant facts, circumstances, or law
which would adversely affect the FDIC's ability to obtain information about
Sprunt's activities.

6. If the proposed investment has not occurred within twelve months from the date
of this ORDER, or unless, in the interim, a request for an extension of time has
been approved by the FDIC, the consent granted herein shall expire at the end of
the twelve-month period.

Dated at Washington D.C., this 9th day of February, 2000.

BY ORDER OF THE BOARD OF DIRECTORS

Robert E. Feldman
Executive Secretary


FEDERAL DEPOSIT INSURANCE CORPORATION

IN RE: Central Carolina Bank and Trust Company, Durham, North Carolina

Application for Consent to Directly Acquire and Hold All of the Shares of a Foreign Financial Entity to be Organized Under the Laws of the British Virgin Islands

STATEMENT

Pursuant to provisions of section 18(l) and section 24 of the Federal Deposit Insurance Act and parts 303, 347, and 362 of the Federal Deposit Insurance Corporation's ("FDIC") rules and regulations, Central Carolina Bank and Trust Company, Durham, North Carolina ("Central"), has applied for the FDIC's consent to hold 100 percent of the issued and outstanding shares of Sprunt Insurance Company, Ltd ("Sprunt"), a de novo foreign financial entity. Sprunt was organized under the laws of the Territory of the British Virgin Islands, and was incorporated on September 17, 1999, under the International Business Companies Act. The Commissioner of Insurance, Financial Services Division of the Government of the British Virgin Islands approved the issuance of an insurance license to Sprunt on September 16, 1999.

Central will contribute $5 million in cash and securities to capitalize Sprunt and will receive all of the subsidiary's common stock. Central may invest additional capital in the future; however, such additional investment will not exceed $35 million. Sprunt will only provide reinsurance of private mortgage insurance and credit life, credit health, and credit accident insurance. Such reinsurance will be directly related to an extension of credit originated or purchased by Central and its affiliates and will be limited to ensuring the repayment of the outstanding balance due on the extension of credit. Sprunt will not provide insurance products or services directly to any third-party customers. Instead, Sprunt will enter into reinsurance agreements with unaffiliated insurance carriers that currently insure certain credit-related exposures of Central and its affiliates. The reinsurance agreements will take the form of an "excess loss" arrangement. Under this arrangement, the primary insurer will pay claims arising from a specified loan pool up to a predetermined amount, after which Sprunt will be obligated to reimburse the primary insurer's claims up to another predetermined amount. Thereafter, the primary insurer will be solely responsible for the remaining claims from that specified loan pool.

Despite being incorporated in the British Virgin Islands, the reinsurance agreements will require Sprunt to comply with the reinsurance regulatory requirements of the primary insurer's location of domicile, which will typically be the United States. In addition, Sprunt will be subject to standard United States accounting practices that require separate insurance reserves for the unearned portion of premiums assumed, the estimated future losses on loans that are delinquent but for which an insurance claim has not yet been perfected, and the estimated losses on loans which are delinquent but not yet reported as such to the primary insurer. Sprunt's operations will be included in Central's annual external audit to an extent that Central's external auditor will issue an opinion on the consolidated financial statements of Central's parent company.

In approving this application, the FDIC relied on information in Central's application, Sprunt's business plan, and certain commitments made by Central. For instance, Central has agreed to maintain duplicate records of Sprunt's activities in the United States. Also, reinsurance agreements will be solely between Sprunt and unaffiliated entities, and Central committed that neither Central, nor any of its affiliates will, guarantee the activities or obligations of Sprunt or provide Sprunt with any other credit enhancement.

Since Sprunt will be a wholly-owned subsidiary, Central committed that Central and its affiliates will not rely on private mortgage insurance reinsured by Sprunt to comply with the loan-to-value standards in the Interagency Guidelines for Real Estate Lending Policies detailed under Appendix A to part 365 of the FDIC's rules and regulations. Specifically, if a mortgage with a loan-to-value ratio in excess of the supervisory guidelines is part of a pool of loans with private mortgage insurance that is reinsured by Sprunt, Central and its affiliates will treat that mortgage as an exception to part 365. If the mortgage is sold, Central will report its recourse obligation as an exception to the interagency guidelines since Central retains a risk of loss through its wholly-owned subsidiary that reinsures private mortgage insurance on the sold mortgage.

In addition to the restrictions of part 365 regarding loan-to-value exceptions, assets sold with recourse are subject to risk-based capital standards under part 325 of the FDIC's rules and regulations. Regardless of the underlying loan-to-value ratio, Central will retain an indirect risk of loss on any sold mortgage with private mortgage insurance reinsured by Sprunt. Part 325 states that for risk-based capital purposes, the definition of sales of assets with recourse, including the sale of 1-to-4 family residential mortgages, is consistent with the definition contained in the instructions for the preparation of the Consolidated Reports of Condition and Income. Those instructions include the following as an example of sales of assets with recourse, "the sale of an asset guaranteed by an insurance contract in which the seller, either directly or indirectly, indemnifies or otherwise protects the insurer in any manner against loss." Central has committed to report the appropriate dollar volume of assets sold with recourse on the applicable schedules of its Consolidated Reports of Condition and Income.

The FDIC has fully considered all available facts and information relevant to the Central application. Based on Central's satisfactory condition and the level of investment in relation to Central's capital, the FDIC has concluded that the application should be approved with certain conditions. In order to fulfill the FDIC's supervisory responsibilities, the conditions address concerns including, but not limited to, the FDIC's ability to assess the impact of Sprunt's operations on Central. The confidentiality laws of the British Virgin Islands present particular concerns in this regard; therefore, the Order includes conditions to ensure FDIC's access to information about Sprunt's business operations.

THE BOARD OF DIRECTORS
FEDERAL DEPOSIT INSURANCE CORPORATION



Last Updated 03/24/2011 Legal@fdic.gov