Brentwood Bank Bethel Park, Pennsylvania

Application Pursuant to Section 24 of the Federal Deposit Insurance Act for Consent to Indirectly Engage as Principal Through a Wholly-Owned Subsidiary in Investment Activities That May Not Be Permissible for a Subsidiary of a National Bank

ORDER

The Board of Directors ("Board") of the Federal Deposit Insurance Corporation ("FDIC") has fully considered all available facts and information relevant to Section 24 of the Federal Deposit Insurance Act, 12 U.S.C. § 1831a, and Part 362 of the FDIC's Rules and Regulations, 12 C.F.R. Part 362, relating to the application by Brentwood Bank, Bethel Park, Pennsylvania ("Brentwood" or the "Bank"), for consent to indirectly invest in equity securities, either corporations listed on a national securities exchange or registered investment companies, through a newly formed, wholly-owned limited liability company to be known as Clifton Investments, LLC ("Clifton"). These are activities that may not be permissible for a subsidiary of a national bank.

Under Brentwood's proposal, its investment in Clifton will not exceed 25 percent of the Bank's Tier 1 capital. Clifton will restrict its investment in any one company to 5 percent of that company's total number of issued and outstanding shares. Management is aware that all investments must be investments specifically authorized as permissible for a savings bank by the Pennsylvania Banking Code of 1965. The Board has concluded that the application should be approved subject to certain conditions.

Accordingly, it is hereby ORDERED, for reasons set forth in the attached. Statement, that the application submitted by the Bank, is hereby approved, subject to the following conditions:

1. That the investment in the stock be held indirectly through a single, wholly-owned subsidiary organized for the purpose of holding such investments;

2. That the Bank shall be required to conduct equity investment activities in a wholly-owned subsidiary which:

a. meets applicable statutory or regulatory capital requirements and has sufficient operating capital for a business of its size and character within the industry,

b. maintains separate accounting and other business records,

c. observes separate business formalities under its operating agreement, such as separate members' meetings,

d. conducts business pursuant to separate policies and procedures designed to inform customers and prospective customers of the subsidiary that it is a separate organization from the Bank, including the placement of specific language on any debt instrument or contract with a third party disclosing that the Bank itself is not responsible for payment or performance,

e. has a business plan that is appropriate to the type and scope of business of the subsidiary, and

f. maintains management expertise capable of conducting activities in a safe and sound manner;

3. That the bank maintains a "Well Capitalized" status pursuant to Part 325 of the FDIC's Rules and Regulations, 12 C.F.R. Part 325, after deducting from its Tier 1 capital the appropriate capital charge for equity investments in nonfinancial companies, as reflected in the table shown in Section II.B of Appendix A to Part 325, for its investment in the wholly-owned subsidiary;

4. That the Bank's aggregate investment in the subsidiary shall be limited to 25 percent of Tier I capital;

5. That the Bank shall submit to the Regional Director an acceptable Certificate of Organization for the wholly-owned subsidiary, as filed and published in accordance with the Commonwealth of Pennsylvania Law, as well as a copy of the executed Operating Agreement, prior to purchasing any equity securities;

6. That neither the Bank nor the wholly-owned subsidiary may enter into any transaction with the Bank's executive officers, directors, principal shareholders, or related interests of such persons which relate to the wholly-owned subsidiary's activities unless the transactions are on terms and conditions that are substantially the same as those prevailing at the time for comparable transactions with persons not affiliated with the Bank;

7. That neither the Bank nor the wholly-owned subsidiary may require a customer to either buy any product or use. any service from the other as a condition of entering into a transaction; and

8. That in the event the facts and circumstances presented or otherwise known to the FDIC in connection with this request change significantly, the FDIC retains the ability to alter, suspend, or withdraw its approval.

Dated at Washington, D.C., this 21st day of May, 2004.

BY ORDER OF THE BOARD OF DIRECTORS

Valerie I. Best
Assistant Executive Secretary

Brentwood Bank Bethel Park, Pennsylvania

Application Pursuant to Section 24 of the Federal Deposit Insurance Act for Consent to Indirectly Engage as Principal Through a Wholly-Owned Subsidiary in Investment Activities That May Not Be Permissible for a Subsidiary of a National Bank

STATEMENT

Pursuant to the provisions of Section 24 of the Federal Deposit Insurance Act, Brentwood Bank, Bethel Park, Pennsylvania ("Brentwood" or the "Bank"), has filed an application with the Federal Deposit Insurance Corporation ("FDIC"). Brentwood requests the FDIC's consent to indirectly invest in equity securities, either corporations listed on a national securities exchange or registered shares, through a newly formed, wholly-owned limited liability company to be known as Clifton Investments, LLC ("Clifton"). It is expected that most, if not all, of the equity securities acquired under this authority will be dividend-paying securities, and a significant portion of these securities is likely to be preferred stock. These are activities that may not be permissible for a subsidiary of a national bank. Under Brentwood's proposal, the aggregate investment in Clifton will not exceed 25 percent of the Bank's Tier 1 capital. The proposal also restricts the investment in any one company to 5 percent of that company's total number of issued and outstanding shares. Management is aware that all investments must be investments specifically authorized as permissible for a savings bank by the Pennsylvania Banking Code of 1965. Management has stated that the investments will be purchased as long-term investments and does intend to pursue short-term trading activities.

Section 504 of the Pennsylvania Banking Code of 1965 permits a savings bank to invest in preferred stock, guaranteed stock, or common stock of a corporation or similar entity existing under the laws of the United States, any state, or the District of Columbia, subject to: the prudent man rule; a limit for the aggregate cost of all shares acquired of the lesser of 7.5 percent of the savings bank's assets or 75 percent of the savings bank's capital, surplus, and capital securities; a limit for the aggregate cost of all shares of one issuer of 0.2 percent of the book value of the savings bank's assets; and a limit for the aggregate number of shares of one issuer of 5 percent of the total number of the issuer's outstanding shares.

Investing in the common or preferred stock of corporations listed on national securities exchange and registered shares is not a permissible activity for a national bank or a subsidiary of a national bank. Neither insured state banks nor their subsidiaries may engage as principal in an activity prohibited for national banks unless consent has been obtained from the 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 deposit insurance funds.

Brentwood is proposing to invest in equity securities through a newly formed, wholly-owned limited liability company (LLC). Generally, courts recognize corporations and LLCs as legal entities separate from their shareholders and members. However, there are occasions when courts pierce the corporate veil and hold a shareholder/owner liable for the debts of a subsidiary entity. The FDIC developed "eligible subsidiary" criteria to strike a reasonable balance between the costs associated with separating a subsidiary from the parent bank and the benefit of gaining reasonable assurance that the bank's assets will not be subject to liability from a creditor of the subsidiary or from some other person seeking to hold the parent liable because of something the subsidiary has done or not done. The only criterion from the eligible subsidiary standards that cannot be applied to the LLC without modification is the requirement that the subsidiary have a board of directors, a majority of whom are outside directors. A LLC does not have a board of directors because it is designed to allow the member investor(s) or their designated managers to directly participate in the management of the organization.

In order to establish sufficient separateness between the Bank and Clifton, the FDIC is requiring that the LLC subsidiary meet certain standards of an eligible subsidiary as defined under Part 362 of the FDIC's Rules and Regulations, I2 C.F.R. Part 362. Additionally, the FDIC is requiring the Bank to submit to the Regional Director an acceptable Certificate of Organization for Clifton, as filed and published in accordance with the Commonwealth of Pennsylvania Law, as well as a copy of the executed Operating Agreement, prior to purchasing any equity securities. A proper operating agreement needs to specifically set forth the rights, powers, and responsibilities of its members, managers, employees, and agents. Since only certificates of organization are binding on third parties, it is important that the certificate of organization contain clear statements that Brentwood will not be liable for any obligations of Clifton and that there are no exceptions to that limited liability.

As of December 31, 2003, Brentwood had total assets of approximately $344 million. Its financial condition, future earnings prospects, and management are regarded as satisfactory. Brentwood had proposed a set of investment guidelines to prudently manage the investment through Brentwood's wholly-owned subsidiary. Brentwood meets the definition of "well capitalized" within the meaning of Part 325 of the FDIC's Rules and Regulations, 12 C.F.R. Part 325. Brentwood would continue to be "well capitalized" after deducting the appropriate capital charge for equity investments in nonfinancial companies from its Tier I capital.

Equity investing may be somewhat riskier than lending, but it requires the application of financial analysis, economic assessment, and business. judgment similar to that required for lending. Subject to prudent supervision and judgment, investing in equity securities may not be unduly risky. The maximum investment limit, the conservative nature of the investment parameters that will be followed, and the restrictions under state law reduce the risk associated with the investment activity in this instance. Brentwood has applied to invest only in shares listed on a national securities exchange or registered shares. Listed securities and registered shares are more liquid than nonlisted securities or unregistered shares, and these entities must meet capital requirements of their respective exchanges. These requirements provide some assurances as to the marketability of the investment.

Nevertheless, because the proposed investment may be of greater risk than other, more traditional bank activities, the FDIC is imposing a condition requiring Brentwood to maintain a "well capitalized" status pursuant to Section 325.103 of the FDIC's Rules and Regulations, 12 C.F.R. § 325.103, after deducting from its Tier 1 capital the appropriate capital charge for equity investments in nonfinancial companies, as reflected in the table shown in Section II.B. of Appendix A to Part 325, for its investment in the subsidiary. As such, Brentwood must have a Tier 1 leverage capital ratio of not less than 5.0 percent, a Tier 1 risk-based capital ratio of not less than 6.0 percent, and a total risk-based capital ratio of not less than 10.0 percent. Additionally, Brentwood's aggregate investment in Clifton will be limited to 25 percent of the Bank's Tier 1 capital. These conditions are being imposed to protect the deposit insurance funds from the market risk associated with the proposed equity investments.

Management has stated that the subsidiary will not invest in companies that have any affiliation with the Bank's executive officers, directors, or related interests of such persons. However, the FDIC is imposing a condition requiring that for any transaction of the Bank and the subsidiary entered with the Bank's executive officers, directors, principal shareholders, or related interests of such persons which relate to the subsidiary, the terms and conditions of such transaction must be substantially the same as those prevailing at the time for comparable transactions with persons not affiliated with the Bank. Additionally, the FDIC is imposing an "anti-tying" condition to prohibit a bank and its wholly-owned subsidiary from requiring a customer to either buy any product or use any service from the other as a condition of entering into a transaction. Finally, the FDIC has advised the Bank and its wholly-owned subsidiary of the need to comply with Section 18(j)(1) of the Federal Deposit Insurance Act, 12 U.S.C. § 1828(j)(l), and with the restrictions and limitations contained in regulations implementing Sections 23A and 23B of the Federal Reserve Act.

Based on a careful review of all available facts and information, including the investment limits under Brentwood's proposal, the Board of Directors of the FDIC has concluded that the proposed investment through a wholly-owned subsidiary in stock of corporations listed on a national securities exchange and registered shares does not pose a significant risk to the Bank Insurance Fund and therefore, approval of the application, subject to the conditions in the Order, is warranted.

THE BOARD OF DIRECTORS
FEDERAL DEPOSIT INSURANCE CORPORATION