**Conditional Approval #611**

November 18, 2003 **December 2003**

Mr. Anthony Costa

Empire State Bank, N.A. (Proposed)

2044 Route 32, Suite 6

Modena, New York 12548

Re: Empire State Bank, N.A. (Proposed)

CAIS Control Number 2003-NE-01-010

Dear Mr. Costa:

The Office of the Comptroller of the Currency (OCC) has reviewed your
application to establish a new national bank with the title of Empire
State Bank, National Association. On November 18, 2003, the OCC granted
preliminary conditional approval of your charter application after a
determination that your proposal met certain regulatory and policy
requirements.

This preliminary conditional approval is granted based on a thorough
evaluation of all information available to the OCC, including the
representations and commitments made in the application and by the
Bank's representatives. We also made our decision to grant preliminary
conditional approval with the understanding that the proposed Bank will
apply for Federal Reserve membership and will obtain deposit insurance
from the Federal Deposit Insurance Corporation (FDIC).

The OCC has granted preliminary conditional approval only. Final
approval and authorization for the Bank to open will not be granted
until all preopening requirements are met. Until final approval is
granted, the OCC has the right to alter, suspend, or revoke this
preliminary conditional approval should the OCC deem any interim
development to warrant such action.

This preliminary conditional approval is subject to the following
condition:

> 1\. The Bank: (i) shall give the New York Field Office at least sixty
> (60) days prior written notice of the Bank's intent to significantly
> deviate or change from its business plan or operations[^1] and (ii)
> shall obtain the OCC's written determination of no objection before
> the Bank engages in any significant deviation or change from its
> business plan or operations. For the first three years of operation,
> the Bank also must provide a copy of such written notice to the FDIC's
> New York Regional Office.

This condition of approval is a condition "imposed in writing by the
agency in connection with the granting of any application or other
request" within the meaning of 12 USC 1818. As such, the condition is
enforceable under 12 USC 1818.

The Bank's initial paid-in capital, net of all organizational and
preopening expenses, shall be no less than \$11 million. The manner in
which capital is raised must not deviate from that described in the
business plan without prior written OCC notification. If the capital for
the Bank is not raised within 12 months or if the Bank is not opened for
business within 18 months from the preliminary conditional approval
date, this approval expires. The OCC is opposed to granting extensions,
except under the most extenuating circumstances and when the OCC
determines that the delay is beyond the applicant's control. The
organizers are expected to proceed diligently, consistent with their
application, for the Bank to open for business as soon as possible.

The OCC poses no objection to the following persons serving as executive
officers, directors, and/or organizers as proposed in the application:

### Anthony P. Costa Organizer, Chairman, and Chief Executive Officer

**Leslie M. Apple Organizer, Director**

**William W. Davenport Organizer, Director**

**Peter B. Ferrante Organizer, Director**

#### Andrew G. Finkelstein Organizer, Director

#### Gale L. Foster Organizer, Director

#### David Freer Jr. Organizer, Vice Chairman

**Philip Guarnieri Organizer, President, Chief Operating Officer,
Director**

**Harold L. Kahn Organizer, Director**

**David N. Mesches Organizer, Director**

#### Albert Pagano Organizer, Director

#### Peter J. Savago Organizer, Director

**Roderick O. Dressel Organizer**

**Theresa Guarnieri Organizer**

**J.A. Klein Organizer**

**Michael Ostrow Organizer, Director**

**David K. Roehrs Organizer**

**Richard B. Rowley Organizer**

**George Sifre Organizer**

**Emil Mian SVP, Chief Credit Officer**

**Richard Rooney SVP, Chief Financial Officer/Chief Technology Officer**

**Branca Gatto SVP, Operations, Mortgage Division**

Prior to the Bank's opening, the Bank must obtain the OCC's prior
written determination of no objection for any additional organizers or
executive officers, or directors appointed or elected before the person
assumes the position. For a two-year period after the Bank commences
business, the Bank must file an Interagency Biographical and Financial
Report with the OCC and receive a letter of no objection from the OCC
prior to any new executive officer or director assuming such position.

Some of the background checks requested by the OCC with respect to the
above named individuals have not been received yet. Accordingly, the
continued service of these individuals will be dependent on satisfactory
completion of the background investigation process.

The "Corporate Organization" booklet in the *Comptroller's Licensing
Manual* provides guidance for organizing your bank. The booklet is
located at the OCC\'s web site: [www.occ.treas.gov/corpbook/
group1/public/pdf/corporg.pdf](http://www.occ.treas.gov/corpbook/ group1/public/pdf/corporg.pdf).
The booklet contains all of the steps you must take to receive your
charter. As detailed in the booklet, you may establish the corporate
existence of and begin organizing the Bank as soon as you adopt and
forward Articles of Association and the Organization Certificate to
Kerry Rice, Licensing Analyst in this office for our review and
acceptance. As a "body corporate" or legal entity, you may begin taking
those steps necessary for obtaining final approval. The Bank may not
begin the business of banking until it fulfills all requirements for a
bank in organization and the OCC grants final approval.

After reading the instructions for the organization of a new national
bank, it is suggested that the spokesperson or other designated
representative consult with Kerry Rice, Licensing Analyst at (212)
790-4055 to discuss the organization process. The OCC believes that such
a meeting can contribute to a more efficient and effective organization
process and help avoid common mistakes that have delayed or prevented
other banks from opening.

Enclosed are standard requirements and minimum policies and procedures
for new national banks. The Bank must meet the standard requirements
before it is allowed to commence business and the Board of Directors
must ensure that the applicable policies and procedures are established
and adopted before the Bank begins operation.

In addition to the standard requirements for all new national banks, the
following special requirements must be satisfied prior to the Bank's
request for a preopening examination and before the OCC will grant final
charter approval:

1.  The Bank shall obtain and implement an interest rate risk ("IRR")
    model that will assist in providing ongoing analysis of the impact
    of IRR before and after transactions are consummated.

2.  The Bank shall revise its IRR policy to include a description of the
    modeling program that will be utilized, IRR controls and limits, and
    contingency funding plans.

3.  The OCC will review Atlantic States Mortgage Company to ensure no
    irregularities have occurred and the purchase value is still
    appropriate, given any changes in activity during the "in
    organization" phase of the bank.

We understand that the Bank plans a transactional web site during the
first year of operation. Prior to commencing this activity, the Bank
must submit to the New York Field Office for review, and prior written
determination of no supervisory objection, a complete description of the
Bank's final information systems and operations architecture as well as
the information systems risk assessment and management plan. This should
include a schematic drawing and discussion of the following items:

-   Vendor due diligence and contracts; electronic banking security
    mechanisms and policies; information systems personnel; internal
    controls; audit plans; and operating policies and procedures,
    including, but not limited to, vendor management, weblinking,
    customer authentication and verification, and business resumption
    contingency plans.

    The Bank must have performed an independent security review and test
    of its electronic banking platform. The Bank must have this review
    performed regardless of whether the platform is operated in-house or
    by one or more third-party service providers. If the Bank outsources
    the technology platform, it can rely on testing performed for the
    service provider to the extent that it satisfies the scope and
    requirements listed herein. The review must be conducted by an
    objective, qualified independent source (Reviewer). The scope should
    cover:

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-   All access points, including the Internet, Intranet, or remote
    access.

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-   The adequacy of physical and logical protection against unauthorized
    access including individual penetration attempts, computer viruses,
    denial of service, and other forms of electronic access.

By written report, the Reviewer must confirm that the security measures,
including the firewall, have been satisfactorily implemented and tested.
For additional guidance, see \"The Internet and the National Bank
Charter\" booklet of the *Comptroller\'s Licensing Manual*, sections
"Risk Considerations \-- Information System Security" and "Appendix A:
Sample Business Guidelines \-- Records, Systems, and Controls." The
booklet is located at the Electronic Banking section of the OCC\'s web
site: www.occ.treas.gov/netbank/letters.htm.

The Bank must have a security program in place that complies with the
"Interagency Guidelines Establishing Standards for Safeguarding Customer
Information" specified at 12 CFR 30, Appendix B.

Under separate cover, the OCC will send to you an appropriate set of OCC
handbooks, manuals, issuances, and selected other publications. This
information does not include the Comptroller's Licensing Manual, which
is available only in electronic form at our web site:
<http://www.occ.treas.gov/corpapps/corpapplic.htm>.

This preliminary conditional approval and the activities and
communications by OCC employees in connection with the filing do not
constitute a contract, express or implied, or any other obligation
binding upon the OCC, the United States (U.S.), any agency or entity of
the U.S., or any officer or employee of the U.S., and do not affect the
ability of the OCC to exercise its supervisory, regulatory and
examination authorities under applicable law and regulations. The
foregoing may not be waived or modified by any employee or agent of the
OCC or the U.S.

Direct any questions concerning this preliminary conditional approval to
Kerry Rice, Licensing Analyst at (212) 790-4055.

Sincerely,

/s/ Anthony P. DosSantos

Anthony P. DosSantos

Licensing Manager

Enclosures: Standard Requirements

Minimum Policies and Procedures

[^1]: If such deviation is the subject of an application filed with the
    OCC, no separate notice to the supervisory office is required.