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Federal Deposit
Insurance Corporation

Each depositor insured to at least $250,000 per insured bank

Decisions on Bank Applications

Bank of Sacramento (Proposed)


IN RE: Bank of Sacramento (Proposed) Sacramento, California

Application for Federal Deposit Insurance (Bank Insurance Fund)

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 Bank of Sacramento, a proposed new State nonmember bank to be located at 1750 Howe Avenue, Suite 100, Sacramento, California, 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 by Bank of Sacramento 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 $11,000,000 be provided, 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 Corporation prior to the bank's opening;

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

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

5. That adequate fidelity bond coverage be obtained prior to opening of the bank;

6. That federal deposit insurance shall not become effective unless and until the applicant has been established as a State nonmember bank, has authority to conduct a banking business, and its establishment and operation as a bank have been fully approved by the State authority,

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

8. That, if federal deposit insurance has not become effective within twelve months from the date of this Order, or unless, in the meantime, the Corporation 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 1st day of July, 1998.


Robert E. Feldman
Executive Secretary


IN RE: Bank of Sacramento (Proposed) Sacramento, Sacramento County, California

Application for Federal Deposit Insurance (Bank Insurance Fund)


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 Bank of Sacramento, a proposed new state nonmember bank to be located at 1750 Howe Avenue, Suite 100, Sacramento, California.

The bank will offer full service, community-oriented banking in an area which will primarily serve the city of Sacramento and the surrounding communities within Sacramento County. 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, community-based 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 applicant proposes to issue stock benefits to organizers to compensate for financial support provided in the initial stages of establishing the bank and to attract and retain qualified key personnel. There is no provision in the Statement of Policy to accommodate the granting of stock benefits to reward organizers for their financial support in the initial stages of establishing a bank. The issuance of stock benefits to organizers who will not be involved in the active management of the institution is also a contravention of existing policy.

While the stock benefits proposed to be issued will not be tied to specific performance by active management as provided in the Corporation's current Statement of Policy regarding applications for deposit insurance, such stock benefits would appear to be acceptable under the Corporation'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, 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 benefits are not considered objectionable in that the stock benefits represent reasonable compensation for the risk arising from the significant financial commitment of the outside incorporators.

Accordingly, based upon a careful evaluation of all available facts and information, the Board of Directors has concluded that approval of the application is warranted.


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