FEDERAL DEPOSIT INSURANCE CORPORATION

IN RE: Pocono Community Bank (Proposed) Stroudsburg, Pennsylvania

Application for Federal Deposit Insurance (Bank Insurance Fund)

ORDER

The Board of Directors ("Board") of the Federal Deposit Insurance Corporation ("FDIC") 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 Pocono Community Bank, a proposed new bank to be located at 559 Main Street, Stroudsburg, Monroe County, Pennsylvania ("Bank"), and has concluded that the application should be approved.

Accordingly, it is hereby ORDERED, for the reasons set forth in the attached Statement, that the application submitted and modified by the FDIC for Federal deposit insurance should be, and the same hereby is, approved subject to the following conditions:

1. That beginning paid-in capital funds of not less than $6,000,000 be provided, with $3,000,000 allocated to common stock and $2,850,000 allocated to surplus, and that a ratio of "Tier I" capital to "total assets" of not less than nine percent, in addition to a fully funded loan loss reserve, shall be maintained during the first three years of operations;

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 stock, will render this commitment null and void unless such proposed change is approved by the FDIC prior to opening of the Bank;

3. That, prior to opening the Bank, full disclosure be made to all directors and stockholders of the facts concerning the interest of any insider (one who is, or stands to be a director, an officer, or an incorporator of the Bank or shareholder who directly or indirectly controls ten or more percent of any class of the Bank's outstanding voting stock, or the associates or interests of any such person) in any transaction being effected or then contemplated, including the identity of the parties to the transaction and the terms and costs involved;

4. That any stock benefit plan 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 institution to require plan participants to exercise or forfeit their stock rights;

5. That any warrants issued to individuals other than operating management vest in approximate equal percentages each year over at least a three-year period from the date of issuance of the warrants;

6. That any warrants issued shall not be transferrable during the first year of operation, and thereafter, shall not be transferrable until any vesting requirements have been met;

7. That a supplement to the Private Placement Memorandum which reflects changes necessary to conform to applicable conditions of this Order be distributed to all subscribers and a copy provided to the FDIC's New York Regional Office;

8. 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;

9. That Federal deposit insurance shall not become effective unless and until the applicant has been established as a state bank with membership in the Federal Reserve System, that it has authority to conduct a banking business, and that its establishment and operation as a bank have been fully approved by the Pennsylvania Department of Banking and the Federal Reserve Bank of Philadelphia;

10. 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

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

Dated at Washington, D.C., this 10th day of June, 1997.

FEDERAL DEPOSIT INSURANCE CORPORATION

IN RE: Pocono Community Bank (Proposed) Stroudsburg, Pennsylvania

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 Pocono Community Bank, a proposed new bank to be located at 559 Main Street, Stroudsburg, Monroe County, Pennsylvania ("Bank").

The Bank will offer full service, community oriented banking in a primary service area which extends seven miles from the center of Stroudsburg, encompassing the Boroughs of Stroudsburg, East Stroudsburg, and Delaware Gap; Stroud Township; and Smithfield Township. The remainder of Monroe County is considered the secondary trade area. Economic activity and growth projections for the area support the addition of a new bank in the service area. 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 Bank's Community Reinvestment Act Statement and other available information 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. The proposed bank's 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 warrants and options with terms in contravention to the Statement of Policy "Applications for Deposit Insurance". Specifically, the terms of the warrants would have allowed the immediate vesting of wan-ants by directors with a strike price significantly less than the fair market value of the stock at the time of issuance, and the acquisition of warrants by active management without regard to performance. Management has addressed these issues by raising the strike price of the warrants to the fair market value of the stock at the time of issuance and tying the vesting of all stock warrants and options for active management to achieving specified performance goals. With the exception of developing a satisfactory vesting schedule for warrants issued to individuals other than operating management, management has finalized all modifications necessary to the terms of the warrants and incorporated the revisions in a supplement to the Private Placement Memorandum. No decision has yet been made by management regarding the proposed vesting schedule for warrants, but the requirement for an appropriate vesting schedule is imposed as a condition for approval.

Though most of the stock warrants will not be tied to specific performance by active management as appears to be required by the Federal Deposit Insurance Corporation's ("FDIC") current Statement of Policy, such warrants may be approved if justified by the time and expertise or financial commitment of the outside incorporators. In this particular case, the stock warrants are not objectionable because they 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 of the FDIC has concluded that approval of the application is warranted subject to conditions listed in the Order.

THE BOARD OF DIRECTORS
FEDERAL DEPOSIT INSURANCE CORPORATION