First Sound Bank

July 6, 2010

Dear Shareholders,

We are pleased to report a number of positive developments that have recently occurred at First Sound Bank:

At the Annual Shareholders Meeting held on June 24, 2010, the shareholders approved the re-election of the six (6) existing directors and an amendment to the Articles of Incorporation increasing the number of shares of Common Stock authorized from 11,586,250 to 91,586,250.
On June 16, 2010 the bank commenced a private placement stock offering with the objective of raising a minimum of $3.3 to $3.5 million from accredited investors (minimum net worth of $1 million). By June 30, 2010, the bank had received subscriptions for over $3.0 million, which was deposited to the capital of the bank on that date, increasing the bank's Tier 1 capital to just over 3 percent. As of the date of this letter, the bank has raised approximately $3.2 million in shares priced at $0.10 per share. The offering has been extended through July 2010 but may be terminated at an earlier date.
On June 1, 2010, the lawsuit filed by the bank against LARASCO, Inc. (formerly Puget Sound Leasing Company, Inc.) and Richard and Louis Secord (its owners) alleging, among other things, a breach of contract, was scheduled for trial. A few days before the trial was to begin, LARASCO filed for bankruptcy in the U.S. Bankruptcy Court for the Eastern District of Washington and the Secords filed for bankruptcy in the U.S. Bankruptcy Court for the Western District of Washington. On June 9, 2010, the bank filed a motion to transfer venue of the LARASCO bankruptcy to the Western District. On July 1, 2010, Judge Patricia C. Williams of the Eastern District granted the bank's motion. This will greatly shorten the time to bring the bank's lawsuit against LARASCO and the Secords to trial. It should be noted that the Court had granted the bank summary judgment (a ruling in favor of the bank as a matter of law) on a number of the matters in dispute, as well as a pre-judgment writ of attachment on certain assets - primarily real estate - to which the bank, if it prevails, believes it has a strong claim for priority over other creditors.
In the second quarter of 2010, the bank incurred - on an unaudited basis - a loss of $2.7 million. Most of this was due to an increase in the reserve for loan losses to cover possible future losses in its leasing and real estate portfolios. Fortunately, the losses suffered in the leasing portfolio are diminishing. Leases originated from the first quarter of 2009 - when underwriting standards were tightened and new Leasing Division management was put into place - continue to demonstrate minimal losses and reflect the quality of the portfolio since that time. Although there can be no assurance of this, we believe this trend will continue and the Leasing Division will become profitable in 2011. On the bank side, criticized loans - primarily in the real estate portfolio - are, one by one, being resolved.

We believe trends for the bank are favorable, with regard to both the bank's operations and resolving the pending litigation. We continue to have regulatory concerns and will need to increase capital, but we do feel that after a difficult time our prospects are improving.

We are encouraged by the loyal support of our shareholders and customers and feel privileged to be associated with and serve them.

If you have questions about anything in this letter, including the stock offering, please feel free to call either of us at the bank.

Sincerely,

Don L. Hirtzel	Steven M. Shaughnessy
206-436-2000	206-436-2001
Chairman and CEO	President and COO

Certain statements in this letter, including statements regarding the anticipated development and expansion of First Sound Bank's business, and the intent, belief or current expectations of the company, its directors or its officers, are "forward-looking" statements (as such term is defined in the Private Securities Litigation Reform Act of 1995). Because such statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements.

A Message From First Sound Bank - April, 2010

A Message From First Sound Bank - February, 2010

A Message From First Sound Bank - November, 2009

A Message From First Sound Bank - April 30, 2009

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