March 15, 2001 **Conditional Approval #457**

# April 2001

Lawrence D. Kaplan, Esq.

Sidley & Austin

1722 Eye Street, NW

Washington, D.C. 20006

Re: Application from Rushmore Trust and Savings, FSB, Bethesda,
Maryland, to convert to a national bank charter, with the title "FBR
National Bank"

Application Control Number: 2000-NE-01-0011

Dear Mr. Kaplan:

The Office of the Comptroller of the Currency (OCC) has reviewed the
application to convert Rushmore Trust and Savings, FSB, to a national
bank. After a thorough review of all information available, including
the representations and commitments made in the application and the
bank's representatives, we find that your request meets the requirements
for conditional approval to convert to a national banking association
pursuant to 12 USC 35 and 12 C.F.R. § 5.24.

Title: FBR National Bank

Location: Bethesda, Maryland

You have represented that, immediately upon the conversion of Rushmore
Trust and Savings, FSB, into FBR National Bank, the Friedman, Billings,
Ramsey Group, Inc. ("FBR") will acquire FBR National Bank. FBR filed an
application to become a bank holding company with the Board of Governors
of the Federal Reserve System ("Federal Reserve"), which was approved by
the Federal Reserve on March 13, 2001. The operating plan of FBR
National Bank submitted with the application reflects that the bank will
be an indirect subsidiary of FBR.

This approval of the conversion application is subject to the condition
that the conversion may not take place prior to the expiration of any
required waiting period. This approval is subject to the additional
condition that the bank shall provide at least sixty (60) days prior
notice to, and receive the prior approval of the OCC's Washington, D.C.
Field Office before any significant deviation or change from the
proposed operating plan during the bank's first three years of operation
as a national bank. These conditions are deemed to be conditions
"imposed in writing by the agency in connection with the granting of any
application or other request" and are enforceable under 12 USC §1818.

Prior to or as of the date of the conversion:

1\. Directors of the national bank must own qualifying shares in
conformance with 12 U.S.C. § 72 and 12 C.F.R. § 7.2005.

2\. The national bank must have adequate fidelity bond coverage in
accordance with

> 12 C.F.R. § 7.2013, which lists four factors the directors should
> consider to determine adequacy.

3\. The board of directors must adopt and have in place policies,
practices, and procedures to ensure the safe and sound operation of the
bank. The board also must review those policies, practices, and
procedures continually and ensure bank compliance with them. We are
attaching the minimum policies and procedures applicable to national
banks.

4\. Rushmore Trust and Savings, FSB, has represented that it intends to
maintain its membership in the Federal Home Loan Bank (FHLB) system. If,
at any time, FBR National Bank ceases to be a member of the FHLB system,
it must use its best efforts, including contacting the appropriate FHLB
and/or the Federal Housing Finance Board, to dispose of any stock in the
FHLB. The OCC will consider this stock as a nonconforming asset for any
period that FBR National Bank is not a member of the FHLB system.

5\. FBR National Bank must maintain a liquidation account.

6\. The converting institution must notify the OCC if the facts
described in the filing materially change at any time prior to
consummation of the conversion. The OCC reserves the right to alter or
withdraw this approval should any interim development be deemed by the
OCC to warrant such action.

7\. The converting institution must obtain any other required regulatory
approvals.

The OCC also approves your proposal to conduct fiduciary powers pursuant
to 12 USC 92a. This approval constitutes a permit to conduct fiduciary
powers requested in your application (12 C.F.R. 5.26(d)(4)).
Accordingly, you may begin exercising fiduciary powers simultaneously
with your conversion to a national bank. Please notify this office in
writing within 10 days after commencement of trust activities. The trust
activities should begin within 18 months of this approval, unless we
grant an extension. In the event the bank decides to surrender its
fiduciary powers, it should notify the OCC in accordance with 12 CFR
9.17(a).

The board of directors should provide for the establishment and
administration of the trust department (or fiduciary operation) either
through the adoption of amendments to the bylaws or by appropriate
resolutions. You will note that 12 CFR 9.4 places responsibility on the
board of directors for the proper exercise of the bank's fiduciary
powers. However, the board may decide whether it shall supervise the
administration of all such powers directly or assign any function
related to such powers to any director, officer, employee, or committee.

The board should also provide:

-   A proper delineation of duties for trust officer(s) and
    committee(s).

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-   The pledging of securities to secure trust funds on deposit in the
    bank as required by 12 CFR 9.10(b).

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-   The designation of the officers or employees responsible for custody
    of the trust investments in conformity with 12 CFR 9.13(a).

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-   The deposit of securities with state authorities where required by
    local law, according to 12 CFR 9.14.

The establishment and administration of the trust department may appear
in the bylaws or in the board resolutions, or partly in the bylaws and
partly in the resolutions. After adoption, a copy of those provisions
should be furnished to the trust officer(s) for guidance.

Under separate cover, the OCC Communications Division will mail to you
the series of Comptroller's Handbooks for Fiduciary Activities. The
trust officers and staff should become thoroughly familiar with
"Fiduciary Activities of National Banks" at 12 CFR 9 (copy enclosed).

The OCC poses no objection to Trust Officer Marlene Carson or Senior
Lending Officer Carolyn Tabb. Additionally, the OCC poses no objection
to the addition of Webb Hayes, Robert Hartheimer, or George Grosz as
directors of FBR National Bank. You are also reminded that the OCC must
review and have no objection to any executive officers or directors
changes that Rushmore Trust and Savings, FSB, makes prior to converting
to a national bank.

Upon completion of the above procedures, please submit to the
Northeastern District Office a letter certifying that you have completed
all steps required to convert to a national banking association. Your
notification should include the following documents as attachments if
they have not already been submitted: Secretary's Certificate certifying
shareholder approval of the proposed conversion; Articles of
Association; Bylaws; Organization Certificate properly signed and
executed; Oath(s) of Directors; and List of Directors.

When the institution has satisfactorily completed all of the above
steps, the OCC will issue a letter officially authorizing the
institution to commence business as a national banking association. At
that time, you will receive the charter certificate. If the conversion
is not consummated within six months from the approval date, the
approval shall automatically terminate unless the OCC grants an
extension of the time period.

The OCC will also send to you under separate cover an appropriate set of
OCC handbooks, manuals, issuances, and selected other publications.

All correspondence regarding this application should reference the
application control number. If you have any questions concerning this
letter, please contact Senior Corporate Analyst Sandya R. Reddy in our
Northeastern District Office at (212) 790-4055 or me at (202) 874-5060.

Sincerely,

**-signed-**

J. Greg Parvin

National Bank Examiner/Senior Licensing Analyst