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> Comptroller of the Currency
>
> Administrator of National Banks
>
> Western District Office
>
> 1225 17^th^ Street, Suite 300
>
> Denver, Colorado 80202

#### CRA Decision #123

**September 2004**

> August 31, 2004
>
> Ms. Elaine Hetrick
>
> Senior Vice President
>
> Community National Bank
>
> 900 Canterbury Place
>
> Escondido, CA 92025
>
> Re: Application to merge Cuyamaca Bank, National Association, Santee,
> California into Community National Bank, Fallbrook, California CAIS
> Control Number: 2004-WE-02-0032
>
> Dear Ms. Hetrick:
>
> On August 31, 2004 the Comptroller of the Currency (OCC) approved your
> application to merge Cuyamaca Bank, National Association, Santee,
> California ("Cuyamaca Bank") into Community National Bank, Fallbrook,
> California ("Community NB").
>
> This approval is granted based on a thorough review of all information
> available, including commitments and representations made in the
> application, merger agreement, and those of your representatives.
>
> The OCC reviewed the proposed transaction under the criteria of the
> Bank Merger Act (12 U.S.C. § 1828(c)), the Community Reinvestment Act
> (12 U.S.C. § 2901, et seq.), and applicable OCC regulations and
> policies. Among other matters, we found that the proposed transaction
> would not have any anticompetitive effects. The OCC considered the
> financial and managerial resources of the banks, their future
> prospects, and the convenience and needs of the communities to be
> served. In addition, the Bank Merger Act requires the OCC to consider,
> "\... the effectiveness of any insured depository institution involved
> in the proposed merger transaction in \[combating\] money laundering
> activities, including in overseas branches." (12 U.S.C. §
> 1828(c)(11).) We
>
> Elaine Hetrick
>
> August 31, 2004
>
> Page 2
>
> considered these factors and believe the approval of this transaction
> is consistent with the statutory provisions.
>
> With respect to the Community Reinvestment Act ("CRA"), the OCC takes
> into account the applicants' record of helping to meet the credit
> needs of their entire communities, including low- and moderate-income
> neighborhoods, when evaluating certain applications, including
> transactions subject to the Bank Merger Act.[^1] The OCC's review
> revealed no evidence that the applicants' records of helping to meet
> the credit needs of their communities, including low- and
> moderate-income neighborhoods, are less than satisfactory.
>
> Community NB received a "Satisfactory" CRA rating from the OCC in its
> most recent Performance Evaluation ("PE") dated July 13, 1998.[^2]
> Community NB's CRA assessment area in the San Diego Metropolitan
> Statistical Area is primarily described as northern San Diego County.
> Cuyamaca Bank received a "Satisfactory" CRA rating from the OCC in its
> most recent PE dated June 7, 1999. Cuyamaca Bank's CRA assessment area
> is in eastern San Diego County.[^3]
>
> The OCC received one comment letter expressing concerns with certain
> Home Mortgage Disclosure Act ("HMDA") data[^4] and the location of
> Community NB's branches. With respect to the HMDA data, the commenter
> expressed concerns that Community NB makes very few mortgages while
> Cuyamaca Bank demonstrated a strong lending record to person with
> lower incomes. In response to this concern, Community NB represented
> that: 1) Cuyamaca Bank primarily provides mobile home loan products to
> low- and moderate-income persons; and 2) the resulting bank will
> continue to provide these types of loans. In addition, Community NB
> indicated that it recently partnered with a third party originator to
> provide conventional, Fannie Mae, Freddie Mac, and fixed and
> adjustable rate mortgage loans, including loans to borrowers with
> limited down-payment resources. As a result, Community NB represented
> that Cuyamaca Bank's customers will have access to many additional
> lending products.
>
> Elaine Hetrick
>
> August 31, 2004
>
> Page 3
>
> The commenter also expressed concern that Community NB's lending
> focuses on small business loans and are loans mainly in excess of
> \$250,000. Community NB acknowledged that small business lending is
> its primary focus and indicated that during 2002 and 2003 the largest
> number of small business loans it made were of less than \$100,000.
>
> With respect to branches, the commenter expressed a concern that since
> both Community NB and Cuyamaca branches are suburban, the resulting
> bank's ability to serve low- and moderate-income persons will be
> restricted. The commenter expressed a desire for Community NB to make
> a commitment to maintain the existing branches and to expand into more
> central city communities. Community NB reiterated its plans to
> maintain all existing branches of both banks but stated that, at this
> time, it has no expansion plans beyond the recently approved branch to
> be located in Murrieta, California. Several of the existing branches
> are located in moderate-income census tracts.
>
> For the reasons set forth above, the OCC found that the transaction
> met the relevant statutory criteria for approval. Inasmuch as the
> transaction also raised no supervisory or policy concerns, the
> application was approved.
>
> The district office must be advised in writing in advance of the
> desired effective date for the merger, so it may issue the necessary
> certification letter. The effective date must follow the applicable
> Department of Justice's injunction period and any other required
> regulatory approval.
>
> The OCC will issue a letter certifying consummation of the transaction
> when we receive a Secretary's Certificate from each institution,
> certifying that the shareholder

approvals have been obtained, if required.

> If the merger is not consummated within one year from the approval
> date, the approval shall automatically terminate, unless the OCC
> grants an extension of the time period.
>
> This approval and the activities and communications by OCC employees
> in connection with the filing do not constitute a contract, express or
> implied, or any other obligation binding upon the OCC, the United
> States, any agency or entity of the United States, or any officer or
> employee of the United States, and do not affect the ability of the
> OCC to exercise its supervisory, regulatory, and examination
> authorities under applicable law and regulations. The foregoing may
> not be waived or modified by any employee or agent of the OCC or the
> United States.
>
> Elaine Hetrick
>
> August 31, 2004
>
> Page 4
>
> All correspondence regarding this application should reference the
> control number. If you have any questions, contact Louis Gittleman at
> 720-475-7650 or e-mail Louis.Gittleman@occ.treas.gov.
>
> Sincerely,
>
> /s/ Ellen Tanner Shepherd
>
> Ellen Tanner Shepherd
>
> Licensing Manager
>
> Enclosures: Survey Letter

[^1]:
    > See 12 U.S.C. § 2903; 12 C.F.R. § 25.29(a).

[^2]:
    > Community NB was recently examined for compliance with CRA. Since
    > the recent PE for Community NB has not yet been finalized, the OCC
    > is unable to disclose any findings or the bank's CRA rating at
    > this time. However, the OCC is currently unaware of any
    > significant deficiencies that would indicate that its performance
    > was less than satisfactory.

[^3]:
    > Community NB represented that only one of Cuyamaca Bank's branches
    > lies within Community NB's San Diego CRA assessment area.

[^4]:
    > The commenter did not identify the date of its HMDA data.