FEDERAL DEPOSIT INSURANCE CORPORATION

IN RE: New Century Bank Spokane, Spokane County, Washington

Application for Federal Deposit Insurance (Bank Insurance Fund)

ORDER

The Board of Directors has fully considered all available facts and information relevant to the factors of section 6 of the Federal Deposit Insurance Act and relating to the application for Federal deposit insurance, with membership in the Bank Insurance Fund, for New Century Bank, Spokane, Spokane County, Washington, a proposed new state nonmember bank to be located at East 12209 Mission Street, Spokane, Spokane County, Washington, and has concluded that the application should be approved.

Accordingly, it is hereby ORDERED, that the application submitted by New Century Bank, Spokane, Spokane County, Washington, for Federal deposit insurance be and the same hereby is approved subject to the following conditions.

1. That beginning paid-in capital funds of not less than $5,000,000 shall be provided, including common stock of $500,000, surplus of $3,500,000, and other segregations of $1,000,000, and that a ratio of Tier 1 capital to total assets of not less than eight percent, in addition to a fully funded loan loss reserve, shall be maintained during the first three years of operation;

2. That any changes in proposed management or proposed ownership (10 percent or more of stock), including new acquisitions of or subscriptions to 10 percent or more of the stock, will render this commitment null and void unless such proposal is approved by the Federal Deposit Insurance Corporation ("FDIC") prior to opening of the bank;

3. That any stock benefit plan shall contain a provision that, in the event the bank's capital falls below the minimum requirements as determined by the primary Federal or state regulator, the primary Federal or state regulator may direct the bank to require plan participants to exercise or forfeit their stock rights;

4. That any stock options granted shall not be transferable, and will expire, if not exercised, within 10 years of the date of the grant;

5. That an accrual accounting system shall be adopted for maintaining the bank's books;

6. That during the first three years of operations, cash dividends shall be paid only from net operating profits, and shall not be paid until an appropriate allowance for loan and lease losses has been established and overall capital is adequate;

7. That the bank shall obtain an audit of its financial statements by an independent public accountant annually for at least the first three years after deposit insurance is effective, shall furnish a copy of any reports by the independent auditor (including any management letters) to the San Francisco Regional Office within 15 days after their receipt by the bank, and shall notify the Regional Office within 15 days when a change in its independent auditor occurs;

8. That adequate fidelity bond coverage shall be obtained prior to opening the bank;

9. That Federal deposit insurance shall not become effective unless and until all regulatory approvals have been received for the establishment of the bank and its parent bank holding company;

10. That, until the bank commences business, if the FDIC revises its Policy Statement on "Applications For Deposit Insurance" so as to differ in content with any conditions imposed herein, the FDIC shall have the right to alter said conditions to conform to such revised Policy Statement;

11. That, until the date this conditional commitment for deposit insurance becomes effective, the FDIC shall have the right to alter, suspend, or withdraw the said commitment should any interim development be deemed to warrant such action; and

12. That, if deposit insurance has not become effective within twelve months from the date of this Order, or unless, in the meantime, the FDIC has approved a request for an extension of time, the consent granted shall expire at the end of said twelve-month period.

Dated at Washington, D. C., this 24th day of February, 1998.

BY ORDER OF THE BOARD OF DIRECTORS

Robert E. Feldman
Executive Secretary

FEDERAL DEPOSIT INSURANCE CORPORATION

IN RE. New Century Bank Spokane, Spokane County, Washington

Application for Federal Deposit Insurance (Bank Insurance Fund)

STATEMENT

Pursuant to the provisions of section 5 of the Federal Deposit Insurance Act (12 U.S.C. 1815), an application for Federal deposit insurance has been filed on behalf of the New Century Bank, Spokane, Spokane County, Washington, a proposed new state nonmember bank to be located at East 12209 Mission Street, Spokane, Spokane County, Washington.

The bank will offer full service community oriented banking in a primary service area which includes the city of Spokane, Washington and the remainder of Spokane County, Washington. Economic activity and growth projections for the area support the addition of a new bank. The proponents believe that the recent consolidation of the banking industry has created opportunities for independent, locally owned and managed banks. A review of the information submitted by the applicant relating to the convenience and needs statutory factor revealed no inconsistencies with the purposes of the Community Reinvestment Act.

Initial capitalization is adequate, and acceptable deposit growth and operating profits within a reasonable period of time are projected. Proposed management is acceptable and approval of the proposal would not create an undue risk to the Bank Insurance Fund.

The application as originally submitted included the proposed issuance of stock options to organizers to compensate for financial support provided in the initial stages of establishing the bank. There is no provision in the Statement of Policy to accommodate the granting of stock options to reward organizers for their financial support in the initial stages of establishing a bank. The issuance of stock options to organizers who will not be involved in the active management of the institution is also a contravention of existing policy.

While the stock options proposed to be issued will not be tied to specific performance by active management as provided in the FDIC's current Statement of Policy regarding applications for deposit insurance, such stock options would appear to be acceptable under the FDIC's proposed revisions to that Statement of Policy. The Board, in the proposed revisions to the Statement of Policy and in recent cases involving stock benefit plans or stock warrants, has concluded that such plans are not objectionable if such plans represent reasonable compensation for the time and expertise or financial commitment of the outside incorporators. In this particular case, the stock options are not considered objectionable in that the stock options represent reasonable compensation for the risk arising from the significant financial commitment of the outside incorporators.

Accordingly, based on a careful evaluation of all available relevant facts and information, the Board of Directors has concluded that approval of the application is warranted, subject to conditions listed in the Order.

THE BOARD OF DIRECTORS
FEDERAL DEPOSIT INSURANCE CORPORATION