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Comptroller of the Currency

Administrator of National Banks

Western District Office

1225 17^th^ Street, Suite 300

Denver, Colorado 80202

October 25, 2004 **Conditional Approval #661**

**November 2004**

Colin M. Forkner

Spokesperson

Pacific Coast National Bancorp, Inc.

1291 Puerta del Sol., Suite 200

San Clemente, California 92673-6310

Subject: Pacific Coast National Bank (proposed)

> San Clemente, California
>
> Charter - CAIS No. 2004-WE-01-010
>
> Branch - CAIS No. 2004-WE-05-070
>
> Citizenship Waiver -- CAIS No. 2004-WE-12-206

Dear Mr. Forkner:

The Office of the Comptroller of the Currency (OCC) has reviewed your
application to establish a new national bank with the title of Pacific
Coast National Bank (proposed Bank). On October 25, 2004, the OCC
granted preliminary conditional approval of your charter application
after a determination that your proposal met certain regulatory and
policy requirements. Your request(s) for a branch at 499 North El Camino
Real, Suite C-100, Encinitas, California and to waive the United States'
citizenship requirements under 12 USC 72 for Donald R. Mealing to serve
on the Bank's board of directors are also conditionally approved.

This preliminary conditional approval is granted based on a thorough
evaluation of all information available to the OCC, including the
representations and commitments made in the application and by the
Bank's representatives. We also made our decision to grant preliminary
conditional approval with the understanding that the proposed Bank will
apply for Federal Reserve membership and will obtain deposit insurance
from the Federal Deposit Insurance Corporation (FDIC).

The OCC has granted preliminary conditional approval only. Final
approval and authorization for the Bank to open will not be granted
until all preopening requirements are met. Until final approval is
granted, the OCC has the right to alter, suspend, or revoke this
preliminary conditional approval should the OCC deem any interim
development to warrant such action.

This preliminary conditional approval is subject to the following
condition(s):

Colin M. Forkner

October 25, 2004

Page 2

The Bank: (i) shall give the OCC's Southern California-South (Orange
County) supervisory office at least sixty (60) days prior written notice
of the Bank's intent to significantly deviate or change from its
business plan or operations[^1] and (ii) shall obtain the OCC's written
determination of no objection before the Bank engages in any significant
deviation or change from its business plan or operations. The OCC may
impose additional conditions it deems appropriate in a written
determination of no objection to a bank's notice. For the first three
years of operation, the Bank also must provide a copy of such written
notice to the FDIC's San Francisco Regional Office.

Also, should the bank propose to offer or develop any new
electronically-based activities other than what is set forth in the
charter application, it should provide the OCC's Southern
California-South Supervisory Office with the above noted notice.

These conditions of approval are conditions "imposed in writing by the
agency in connection with the granting of any application or other
request" within the meaning of 12 USC 1818. As such, the conditions are
enforceable under 12 USC 1818.

The Bank's initial paid-in capital, net of all organizational and
preopening expenses, shall be no less than \$14.4 million. The manner in
which capital is raised must not deviate from that described in the
business plan without prior written OCC notification. If the capital for
the Bank is not raised within 12 months or if the Bank is not opened for
business within 18 months from the preliminary conditional approval
date, this approval expires. The OCC is opposed to granting extensions,
except under the most extenuating circumstances and when the OCC
determines that the delay is beyond the applicant's control. The
organizers are expected to proceed diligently, consistent with their
application, for the Bank to open for business as soon as possible.

Final approval will not be granted until and unless the Federal Reserve
acts favorably on your application to acquire the Bank. You must furnish
the OCC with a copy of all related filings to the Federal Reserve,
including registration material. Send this information to Licensing
Analyst Louis Gittleman in our Denver District Office.

The OCC poses no objection to the following person(s) serving as
executive officer(s), directors, and/or organizers as proposed in the
application:

[Name]{.underline} [Title]{.underline}

Colin Forkner Chief Executive Officer/Vice Chairman

Michael Hahn President/Chief Operating Officer

Richard Grinyer Chief Credit Officer

Terry Stalk Chief Financial Officer

Mike Cummings Organizer/Director

David Davies Organizer/Director

Fred DeBoom Organizer/Director

David Johnson Organizer/Director

Denny Lindeman Organizer/Director/Chairman

Don Mealing Organizer/Director

Dennis Morgan Organizer/Director

Colin M. Forkner

October 25, 2004

Page 3

Jim Shute Organizer/Director

Jack Vuona Organizer/Director

Niki Barbour Organizer

Dominic Burtech Organizer

Mike Crain Organizer

Walt Grinyer Organizer

Ben Hemeyer Organizer

Richard Kay Organizer

John Kennedy Organizer

Rocky King Organizer

Bill Lang Organizer

John Najjar Organizer

Steve Pezman Organizer

Hans Schroeder Organizer

Sean Speck Organizer

Leonard Yamamoto Organizer

Benjamin Yhap Organizer

Jennifer Navaro-Yhap Organizer

Prior to the Bank's opening, the Bank must obtain the OCC's prior
written determination of no objection for any additional organizers or
executive officers, or directors appointed or elected before the person
assumes the position. For a two-year period after the Bank commences
business, the Bank must file an Interagency Biographical and Financial
Report with the OCC and receive a letter of no objection from the OCC
prior to any new executive officer or director assuming such position.

The OCC also granted your request to waive the citizenship requirements
of 12 USC 72 for Donald R. Mealing to serve as a member of the board of
directors of the Bank. This waiver is based upon a review of all
available information, including the filing, subsequent correspondence
and telephone conversations, and the Bank's representation that this
waiver will not affect the board's responsibility to direct the Bank's
operations in a safe and sound manner. The OCC reserves the right to
withdraw or modify this waiver and, at its discretion, to request
additional information at any time in the future.

The "Charters" booklet in the *Comptroller's Licensing Manual* provides
guidance for organizing your bank. The booklet is located at the OCC\'s
web site:
<http://www.occ.treas.gov/corpbook/group4/public/pdf/charters.pdf>. The
booklet contains all of the steps you must take to receive your charter.

As detailed in the booklet, you may establish the corporate existence of
and begin organizing the Bank as soon as you adopt and forward Articles
of Association and the Organization Certificate to Ellen Tanner
Shepherd, Licensing Manager in this office for our review and
acceptance. As a "body corporate" or legal entity, you may begin taking
those steps necessary for obtaining final approval. The Bank may not
begin the business of banking until it fulfills all requirements for a
bank in organization and the OCC grants final approval.

Enclosed are standard requirements and minimum policies and procedures
for new national banks. The Bank must meet the standard requirements
before it is allowed to

Colin M. Forkner

October 25, 2004

Page 4

commence business and the Board of Directors must ensure that the
applicable policies and procedures are established and adopted before
the Bank begins operation.

In addition to the standard requirements for all new national banks, the
following special requirements must be satisfied prior to the Bank's
request for a preopening examination and before the OCC will grant final
charter approval:

1)  The Bank must submit for OCC review and approval, details of the
    split dollar life insurance policies to be offered to the Bank's
    executive officers. The Bank must demonstrate compliance with the
    provisions of OCC Bulletin 2000-23 (enclosed).

2\) The Bank must submit to the Southern California-South supervisory
office for review, and prior written determination of no supervisory
objection, a complete description of the Bank's final information
systems and operations architecture as well as the information systems
risk assessment and management plan. This should include a schematic
drawing and discussion of the following items:

Vendor due diligence and contracts; electronic banking security
mechanisms and policies; information systems personnel; internal
controls; audit plans; and operating policies and procedures, including,
but not limited to, vendor management, weblinking, customer
authentication and verification, and business resumption contingency
plans.

3\) The Bank must have performed an independent security review and test
of its electronic banking platform. The Bank must have this review
performed regardless of whether the platform is operated in-house or by
one or more third-party service providers. If the Bank outsources the
technology platform, it can rely on testing performed for the service
provider to the extent that it satisfies the scope and requirements
listed herein. The review must be conducted by an objective, qualified
independent source (Reviewer). The scope should cover:

-   All access points, including the Internet, Intranet, or remote
    access.

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-   The adequacy of physical and logical protection against unauthorized
    access including individual penetration attempts, computer viruses,
    denial of service, and other forms of electronic access.

> By written report, the Reviewer must confirm that the security
> measures, including the firewall, have been satisfactorily implemented
> and tested. For additional guidance, refer to \"The Internet and the
> National Bank Charter\" booklet of the *Comptroller\'s Licensing
> Manual*, pages 37-38, Information System Security. The booklet is
> located at the Electronic Banking section of the OCC\'s Web site:
> <http://www.occ.treas.gov/corpbook/group4/public/pdf/internetnbc.pdf>.

4\) The Bank must have a security program in place that complies with
the "Interagency Guidelines Establishing Standards for Safeguarding
Customer Information" specified at 12 CFR 30, Appendix B.

Colin M. Forkner

October 25, 2004

Page 5

Under separate cover, the OCC will send to you an appropriate set of OCC
handbooks, manuals, issuances, and selected other publications. This
information does not include the Comptroller's Licensing Manual, which
is available only in electronic form at our web site:
<http://www.occ.treas.gov/corpapps/corpapplic.htm>.

This preliminary conditional 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 (U.S.), any agency or entity of
the U.S., or any officer or employee of the U.S., 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 U.S.

Direct any questions concerning this preliminary conditional approval to
Licensing Analyst Louis Gittleman at 720-475-7650.

Sincerely,

/s/ Ellen Tanner Shepherd

Ellen Tanner Shepherd

Licensing Manager

Enclosures: Standard Requirements

Minimum Policies and Procedures

[^1]: If such deviation is the subject of an application filed with the
    OCC, no separate notice to the supervisory office is required.