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Federal Deposit
Insurance Corporation

Each depositor insured to at least $250,000 per insured bank

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High Point Bank and Trust Company


RE: High Point Bank and Trust Company High Point, North Carolina

Application Pursuant to Section 24 of the Federal Deposit Insurance Act for Consent to Engage Indirectly as Principal in an Activity Which May Not Be Permissible for a Subsidiary of a National Bank


Pursuant to the provisions of section 24 of the Federal Deposit Insurance ("FDI") Act as implemented by part 362 of the Federal Deposit Insurance Corporation ("FDIC") Rules and Regulations, High Point Bank and Trust Company, High Point, North Carolina ("the Bank") has filed an application with the FDIC. The applicant requests consent to indirectly engage as principal in the activity of holding shares of stock via a subsidiary.

Between the years of 1958 and 1975, the Bank acquired an equity investment in stock; specifically, 2,500 shares of common stock of Lexington Telephone Company ("stock"). The stock is unlisted and, according to a local broker, is thinly traded. The stock is currently being carried on the Bank's books in accordance with Financial Accounting Standards Board No. 115 and FDIC accounting standards. Part 362 provides that insured state banks may not hold equity investments at the bank level unless the investments are of the type and amount allowable for a national bank or are otherwise allowable by part 362. Since holding unlisted non-bank common stock does not appear to fall within one of those exceptions identified as permissible for a national bank or a subsidiary of a national bank and since the stock does not fall within one of the exceptions of part 362, the stock held by the Bank represents an impermissible equity investment for which divestiture is required by part 362 no later than December 19, 1996. In order to effect divestiture, the Bank has made application to the FDIC to transfer the stock to a to-be formed wholly-owned subsidiary. 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 applicable deposit insurance fund.

North Carolina State law permits state chartered banks to hold equity securities of other corporations up to 75% of the bank's unimpaired capital funds. Upon transfer of the investment in the stock to the subsidiary, the Bank's investment in the subsidiary, and indirectly in the stock, would represent 1.10 of the Bank's Tier 1 capital as of June 30, 1995. Given the de minimis nature"of the proposed investment in the to-be-formed subsidiary, the Bank would continue to be well capitalized in the event the stock becomes worthless and the entire investment in the subsidiary is written off. The investment in the stock will be limited to the stock held as of the date of the Bank's application to the FDIC.

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 1 leverage, Tier 1 Risk-based, and Total Risked Based capital ratios of 11.31%, and 15.60% and 16.86%, respectively, as of the June 30, 1995, Call Report data. The Bank is in overall sound condition and is satisfactorily managed. Based on the foregoing, the FDIC has determined that engaging in the activity of holding common stock in Lexington Telephone Company at the subsidiary level does not present a significant risk to the applicable deposit insurance fund.

Having found that State law authorizes the activity, that the Bank is in compliance with applicable capital standards, and that engaging in the activity of holding the stock in a subsidiary does not pose any significant risk to the deposit insurance fund, the FDIC concludes that approval of the Bank's request to indirectly hold the stock via the subsidiary is warranted, subject to the conditions described below.

The Bank shall continue to meet applicable capital standards. In addition, transactions between the Bank and the subsidiary will be subject to the same restrictions under Sections 23A and 23B of the Federal Reserve Act that would otherwise apply if the subsidiary were considered an affiliate of the Bank. Further, the Bank shall notify the FDIC of any significant change in facts or circumstances, and the FDIC shall have the right to alter, suspend, or withdraw its approval in the event the facts and circumstances presented in the application change significantly.


Mr. Robert H. McInnis
High Point Bank and Trust Company
P.O. Box 2276
High Point, North Carolina 27261

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