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incidental to a financial activity. Thus, with the enactment of the Gramm-Leach-Bliley Act, banks, securities firms
and insurance companies find it easier to acquire or affiliate with each other and cross-sell financial products.  The
act permits a single financial services organization to offer a more complete array of financial products and services
than historically was permitted.
A financial holding company is essentially a bank holding company with significantly expanded powers.  Under
the Gramm-Leach-Bliley Act, among the activities that will be deemed “financial in nature” for financial holding
companies are, in addition to traditional lending activities, securities underwriting, dealing in or making a market in
securities, sponsoring mutual funds and investment companies, insurance underwriting and agency activities,
activities which the Federal Reserve Board determines to be closely related to banking, and certain merchant
banking activities. The Federal Reserve Board has proposed permitting a number of additional financial activities,
but we cannot predict whether any of these additional proposals will be adopted or the form any final rule will take.
We elected to become a financial holding company in September 2001.  As a financial holding company, we
have very broad discretion to affiliate with securities firms and insurance companies, make merchant banking
investments, and engage in other activities that the Federal Reserve Board has deemed financial in nature.  In order
to continue as a financial holding company, we must continue to be well-capitalized, well-managed and maintain
compliance with the Community Reinvestment Act.  Depending on the types of financial activities that we may
engage in in the future, under Gramm-Leach-Bliley’s fractional regulation principles, we may become subject to
supervision by additional government agencies.  The election to be treated as a financial holding company increases
our ability to offer financial products and services that historically we were either unable to provide or were only
able to provide on a limited basis.  As a result, we will face increased competition in the markets for any new
financial products and services that we may offer.  Likewise, an increased amount of consolidation among banks and
securities firms or banks and insurance firms could result in a growing number of large financial institutions that
could compete aggressively with us.
Mergers and Acquisitions
We generally must obtain approval from the banking regulators before we can acquire other financial
institutions.  We must not engage in certain acquisitions if we are undercapitalized.  Furthermore, the BHCA
provides that the Federal Reserve Board cannot approve any acquisition, merger or consolidation that may
substantially lessen competition in the banking industry, create a monopoly in any section of the country, or be a
restraint of trade.  However, the Federal Reserve Board may approve such a transaction if the convenience and
needs of the community clearly outweigh any anti-competitive effects. Specifically, the Federal Reserve Board
would consider, among other factors, the expected benefits to the public (greater convenience, increased
competition, greater efficiency, etc.) against the risks of possible adverse effects (undue concentration of resources,
decreased or unfair competition, conflicts of interest, unsound banking practices, etc.).
Banks
Federal and state laws and regulations that govern banks have the effect of, among other things, regulating the
scope of business, investments, cash reserves, the purpose and nature of loans, the maximum interest rate chargeable
on loans, the amount of dividends declared, and required capitalization ratios.
National Banking Associations .  Banks that are organized as national banking associations under the National
Bank Act are subject to regulation and examination by the Office of the Comptroller of the Currency, or OCC. The