Complaint Review: First National Bank Of Marin - Las Vegas Nevada

First National Bank of Marin was placed under a Consent order in December 2001, by the Office of Comptroller of Currency, Department of Treasury (Federal) for deceptive practices. It appears Marin Bank has not changed its ways, since then, quite a bit of info follows, including a glowing report on their Officers inolvement in investing in Las Vegas community, of course it is not philanthropic, it is REQUIRED by the Feds to be chartered under this Limited Purpose Bank regulations, they have to do what is called assessment area community re-investment, there are now 17 directors on the Board of Directors: From the OCC website: Wholesale and Limited Purpose Banks under the Community Reinvestment Act Updated October 9, 2002 Under the Community Reinvestment Act, a bank may apply to its primary federal regulator to be designated a wholesale or a limited purpose bank. Such banks are evaluated for performance under standards found at 12 CFR 25.25. The regulation offers the following definitions: Limited purpose bank means a bank that offers only a narrow product line (such as credit card or motor vehicle loans) to a regional or broader market and for which a designation as a limited purpose bank is in effect. Limited purpose banks are identified as LP in the TYPE column in the table below. Wholesale bank means a bank that is not in the business of extending home mortgage, small business, small farm, or consumer loans to retail customers, and for which a designation as a wholesale bank is in effect. Wholesale banks are identified as WH in the TYPE column in the table below. The following national banks have been designated as wholesale or limited purpose banks by the OCC: http://www.occ.treas.gov/query/oop/qfullhit.htw?CiWebHitsFile=/ftp/craeval/apr03/20291.pdf&CiRestriction=%20First%20National%20Bank%20of%20Marin%20&CiQueryFile=/query.idq&CiBeginHilite=%3CB%20CLASS=HIT%3E&CiEndHilite=%3C/B%3E&CiUserParam3=queryhit.htm&CiHiliteType=Full LIMITED PURPOSE Comptroller of the Currency Administrator of National Banks PUBLIC DISCLOSURE May 20, 2002 COMMUNITY REINVESTMENT ACT PERFORMANCE EVALUATION << First National Bank>> of << Marin>> Charter Number 20291 585 Pilot Road Las Vegas, NV 89119 Comptroller of the Currency Western District Office 50 Fremont Street, Suite 3900 San Francisco, CA 94105 NOTE: This document is an evaluation of this institutions record of meeting the credit needs of its entire community, including low-and moderate-income neighborhoods consistent with safe and sound operation of the institution. This evaluation is not, nor should it be construed as, an assessment of the financial condition of this institution. The rating assigned to this institution does not represent an analysis, conclusion, or opinion of the federal financial supervisory agency concerning the safety and soundness of this financial institution. Institutions CRA rating: This institution is rated Satisfactory. The conclusions for the three rating criteria are: The bank demonstrates a high level of community development (CD) services and qualified investment activity. The bank demonstrates occasional use of innovative CD investments and services. The bank demonstrates excellent responsiveness to credit and CD needs in its assessment area. The banks violation of the Federal Trade Commission Act, which prohibits unfair or deceptive acts or practices, negatively impacted this rating, but did not result in a less than satisfactory rating. Scope of the Examination In evaluating the banks performance under the CRA, we reviewed community development activities from February 13, 1998, through June 3, 2002. We reviewed the level and nature of qualified investments and community development services. At the prior examination dated February 12, 1998, we rated the bank Satisfactory. We considered CD activities the bank submitted that benefit areas outside of its current assessment area in the evaluation of its performance. These were considered because they benefited the banks prior assessment area. In addition, the bank has adequately addressed the needs of its current assessment area. . Description of Institution << First National Bank>> of << Marin>> (FNBM) is headquartered in Las Vegas, Nevada. The bank has no branches. The bank began operations in San Rafael, California in July 1984 as a full service bank. FNBM maintained a wide range of products until 1995 when it began focusing primarily on one type of product, a partially secured credit card. FNBM received a limited purpose designation from the OCC in June 1996. Limited purpose banks offer only a narrow product line. The bank moved from San Rafael, California to Las Vegas, Nevada in November 1998. FNBM offers partially and fully secured credit cards to sub-prime borrowers with the ultimate goal of helping troubled borrowers to repair credit and ultimately become eligible for an unsecured credit card. Customer contacts for this product transpire over the telephone, through the mail, and through the Internet. The bank has 806 employees. The majority of the staff consists of customer representatives. There are 17 officers. As of March 30, 2002, FNBM reported total assets of $230 million and year-to-date net income of $1.8 million. FNBM is a wholly owned subsidiary of Marin National Bancorp (MNB), which is headquartered in Las Vegas, Nevada. As of March 31, 2002, MNB reported total assets of $36 million and a year-to-date net loss of $11 thousand. The bank keeps all of its receivables. It is important to take into consideration in evaluating the banks CRA performance, the substantial impact to the banks net earnings during the evaluation period. The reduction in net earnings is primarily due to the significant amount of monetary restitutions to consumers required by the OCC. The table below shows financial information for the four years since the last CRA examination and through the end of the most recent quarter. Table 1: Financial Information (000s) Year-end 1998 Year-end 1999 Year-end 2000 Year-end 2001 Most Recent Quarter-end 3/31/2002 Average for Evaluation Period Tier 1 Capital 17,189* 28,486* 32,360* 29,675* 30,811* 27,704 Total Income 54,442* 102,376* 170,879* 194,363* 204,896** 145,391 Net Operating Income 9,102* 18,277* 11,065* 2,741* 7,100** 9,657 Total Assets 155, 031* 209, 129* 192, 580* 239, 649* 230, 203* 205, 318 Source: Consolidated Report of Condition and Income and bank reported data. * Actual data reported. ** Annualized data reported. Description of Assessment Area FNBM operates in an urban area. The bank has designated a majority of Clark County as its assessment area. The assessment area consists of 110 census tracts and includes the cities of Las Vegas, North Las Vegas, Henderson, and the unincorporated areas of Clark County, which comprise the Las Vegas Valley. The assessment area meets the legal requirements of the CRA. All the census tracts that the bank excluded from its assessment area are on the perimeter of Clark County; none are low-or moderate-income (LMI) census tracts. The table below shows the demographics of the banks assessment area. Table 2: Assessment Area Description Number Low Moderate Middle Upper Tracts 110 6% 19% 46% 29% *Families 181, 341 18% 18% 23% 41% ** Businesses 42,883 4% 12% 40% 44% Source: Demographic Data -1990 U. S. Census, Dun & Bradstreet Data. *Represents families by income level. ** Represents businesses by income level of census tract. 3 Major employers include hotels, gaming, and service-related industries. Government, retail trades, mining, manufacturing, and agriculture are also among the most significant employers. However, the Las Vegas assessment area and the entire state of Nevada are still dominated completely by the gaming/tourist industry. In September 2001, gaming revenue fell for the first time in years. This was the result of the September 11, 2001, terrorist attack on the United States. The unemployment rate has climbed steadily upward and as of March 31, 2002, was at 6.29%. The area has grown significantly over the last decade and has a population of about 2 million. Housing prices also appreciated significantly with the median existing home price at $137 thousand. The 2001 HUD updated median family income is $52,100. Las Vegas has several community-based organizations with a community development purpose, particularly for small business development or affordable housing. Generally, these organizations have limited expertise in community development activities. The area has a critical shortage of affordable housing units. The rapid influx of people has aggravated the problem. Housing prices and rents have increased substantially faster than income levels. Although there has been significant job growth, most of these jobs are in the service or retail sectors and offer lower pay, often without benefits. The city has a large volume of substandard housing. Estimates are that there are 17 thousand substandard rental units. A large population of homeless people, many with chemical dependency, also puts pressure on city housing resources. These factors contribute to the overall housing need. Virtually all community contacts commented on the lack of houses or rental units for LMI people. They said that the areas rapid growth far exceeds the number of available housing units. Because most of the new jobs that attract people to the area are minimum wage jobs, there is a widening gap in the ability to afford single-family residences driven up by the demand and general shortage of housing units. There is a great need for affordable multi-family rental units to accommodate the increase in population. Several community contacts commented on the need for start-up financing for small businesses. Some contacts said that small business owners also need technical assistance from the financial institutions to understand basic banking and how to prepare a business plan. We reviewed 12 community contacts made by the OCC and other regulatory agencies during the last two years. These contacts included representatives from local government, economic development organizations, organizations that focus on affordable housing issues, and organizations that provide needed social services to LMI people. We also performed two additional community contacts, one with a community development organization and the other with an affordable housing organization. There are a number of competing financial institutions in the assessment area. Some of these are significantly larger and have more dedicated resources for community development loans and investments. The larger institutions also have more human resources available to provide community development services. While other institutions are smaller, they also compete for available investments in the assessment area. As a result, there is a high degree of competition and certain limitations as to availability of CD investment opportunities. Since FNBMs business focus is credit cards, the bank lacks employees who have the expertise in community development lending. Therefore, the bank focuses its community development efforts on qualified investments and CD services. Conclusions About Performance 4 Summary FNBM has done an excellent job of serving its assessment areas community development needs through a variety of investments and services. As noted in the table below, the bank invested $269 thousand in projects and activities that benefit the banks assessment area. This represents only investments that were still on the banks books as of the date of this evaluation. In addition, the bank invested an additional $250 thousand in three investments that matured during the review period. Employees of FNBM have provided numerous hours of qualified CD services. The focus of the banks qualified investments, grants, and donations was primarily on providing financial education and housing related services for LMI individuals. The focus of the banks CD services was on providing financial expertise to the community as well as to various community development organizations. These efforts were targeted at specific needs identified through FNBMs needs assessment process. FNBM provided a high number of CD services and qualified investments, grants, and donations in response to the banks research regarding the needs of LMI individuals in its assessment area. Through its investments, grants, and membership on boards of community development organizations, the bank was able to help implement some programs in the community that were not available prior to their implementation. The banks efforts are significant considering the opportunities available for limited purpose banks in this assessment area and the banks resources. The bank demonstrated innovativeness by placing deposits in commercial banks that have CD lending expertise. The purpose of the funds was to provide community development loans and to promote and finance community development activities that benefit LMI individuals. The bank showed excellent responsiveness to the community development needs in its assessment area. Management worked with some community based organizations to implement community development programs that address a critical issue faced by LMI individuals in the assessment area. This included participation in an innovative program, which aims to identify and assist individuals who have been harmed by predatory lending. Qualified Investments During the review period, FNBM provided $269 thousand in qualified investments, grants, and donations to community development organizations. In addition, the bank also provided $250 thousand in investments, which are not reflected in the tables below since these investments were no longer outstanding as of the date of this examination. All of the investments benefited the assessment area. 5 Table 3b: Qualified Investment Activity (000s) Benefits AA Originated Investments $100 Originated Grants $169 Prior-Period Investments that Remain Outstanding $ 0 Total Qualified Investments $269 Unfunded Commitments* $ 0 * Unfunded Commitments means legally binding investment commitments that are tracked and recorded by the banks financial reporting system. Table 4b: Qualified Investment Percentages Benefit AA (%) Total Investments/Average Tier 1 Capital 1% Total Investments/Average Total Income .2% FNBMs most notable qualified investments, grants, and donations in the assessment area consist of the following: $100 thousand certificate of deposit, which was placed in a commercial bank to be used by a housing center for its advocacy program that assists LMI borrowers who have been harmed by predatory lending. $24 thousand to two organizations that provide programs for LMI youth. $38 thousand to seven organizations that promote affordable housing. $10 thousand to two community development corporations. $8 thousand to two organizations that promote economic development by financing small businesses. Consideration of Activities that Benefit Areas Outside the Banks Assessment Area FNBM has adequately addressed the needs of its assessment area; therefore we considered activities outside the assessment area. During the review period, FNBM had $500 thousand in qualified investments on its books that benefited the banks prior assessment area in San Rafael, California. These are not included in the tables above since they were not outstanding as of the date of this examination. Community Development Services 6 FNBM provide a significant number of ongoing CD services, which are very responsive to the needs of its assessment area. Employees provide credit education for LMI students and serve on committees of various organizations that serve the LMI community. One of the organizations focuses on assisting LMI individuals who have been harmed by predatory lending. A majority of the organizations focus on providing affordable housing and community revitalization. The remaining community development organizations provide services for LMI individuals, including LMI youth. The bank provides CD services in one innovative community development program. Some of the services are complex. In addition, all the services are very responsive to some of the most significant needs in the banks assessment area. The bank has succeeded in maintaining a high profile in the assessment area through its memberships on numerous boards and the advisory committees of numerous community development organizations. All of the services benefit the banks assessment area. The following table highlights the banks CD services: Table 7: Community Development Service Activities CD Service Benefits AA Outside AA A number of employees provide Credit Card Financial Literacy Education at 8 local high schools, which have a predominantlyLMI student population. X The CRA Officer is a member of the board of directors of an organization that provides programs for LMI children and their families. He serves on various committees, including the fundraising and budget and finance committees. X An officer of the bank serves as a committee member of an organization which seeks to revitalize a LMI area of central downtown Las Vegas. The officer provides assistance on financial matters. X Employees of the bank provide financial services for an organization that engages in comprehensive community development projects that promote neighborhood revitalization and economic development. X An officer of the bank serves as a member of a community development organization whose mission is to rebuild whole communities by supporting community development corporations (CDCs). The officer performs the duties of committee oversight and strategic planning in an effort to locate, access, and negotiate funding for four CDCs. This service is considered to be complex because of the expertise and effort needed to negotiate funding. X 7 An officer of the bank serves as a member of a fair housing center. The officer participates by reviewing and assessing individual cases of loan origination and subordination where predatory lending may be present. The officer also reviews financial documents and chronology of events in order to decide on corrective actions and intervention avenues for LMI borrowers who have been harmed by predatory lending. This service is considered to be complex because of the expertise and effort needed to decide the most advantageous course of action for each of the LMI borrowers. It is also considered to be an innovative type of service. X An employee of the bank provides technical assistance on financial matters to a community development organization. The overall mission of the organization is to improve the quality of life for residents of a low-income neighborhood and to foster and promote community-wide interests and involvement in the problems associated with vandalism, drug-related criminal activity, housing deterioration, and unemployment. X An employee of the bank provides technical assistance on financial matters to an organization whose mission is to provide computers and related communication technology to LMI individuals who otherwise might have little opportunity to use or learn to use these technologies. X The CRA officer is a member of the board of directors of an organization whose mission is to assist LMI individuals and families to become self sufficient through direct services, training, and referral. He provides financial expertise as a member of the budget and finance committee and as a member of several fundraising committees. X The CRA Officer is a member of a community development corporation in East Las Vegas. He serves on various committees, including the fundraising and budget and finance committees. X X means yes; Blank means No. Compliance with Anti-Discrimination Laws and Regulations We determined that FNBM had engaged in a number of unfair and deceptive practices during the period covered by this evaluation. As a result, the banks Board of Directors signed a Stipulation and Consent to the Issuance of a Consent Order and a Consent Order, dated December 3, 2001. The Consent Order required a significant amount of monetary restitution to consumers, and it required management to change certain practices prospectively. The unfair and deceptive practices leading to the Consent Order and the OCCs determination that the bank had violated the Federal Trade Commission Act, negatively impacted the banks CRA rating. Since signing the Consent Order, the 8 bank has made changes to its solicitations. Consumer complaints have decreased significantly. An analysis of two years public comments and consumer complaint information for Limited Purpose institutions was performed according to the OCCs risk-based fair lending approach. Based on its analysis of the information, the OCC decided that a comprehensive fair lending examination would not need to be conducted with the CRA evaluation this year. The latest comprehensive fair lending examination was performed in March 1999. During the March 3, 2002, compliance examination, we reviewed the banks fair lending policies, procedures, training, monitoring, and compliance audits. We also reviewed for technical compliance with the Equal Credit Opportunity Act/Regulation B. We made some recommendations for enhancements to the banks program. We did not cite any violations of law or regulation. 9 Definitions and Common Abbreviations The following terms and abbreviations are used throughout this performance evaluation. The definitions are intended to provide the reader with a general understanding of the terms, not a strict legal definition. Affiliate Any company that controls, is controlled by, or is under common control with another company. A company is under common control with another company if the same company directly or indirectly controls both companies. A bank subsidiary is controlled by the bank and is, therefore, an affiliate. Assessment Area (AA) A geographic area that consists generally of one or more MSAs (using the MSA boundaries that were in effect as of January 1 of the calendar year in which the delineation is made) or one or more contiguous political subdivisions, such as counties, cities, or towns, in which the bank has its main office, branches, and deposit-taking ATMs. Benefit to Assessment Area A qualified Community Development activity benefits the assessment area if (i) the activity benefits areas within the assessment area, or (ii) the activity benefits a broader statewide or regional area that includes the banks assessment area. If a bank has adequately addressed the needs of its assessment area, then the OCC also considers activities submitted by the bank that benefit areas outside of its assessment area. Block Numbering Area (BNA) Statistical subdivisions of counties in which census tracts have not been established. The United States Census Bureau has established BNAs in conjunction with state agencies. Census Tract (CT) Small, locally defined statistical areas within metropolitan statistical areas. These areas are determined by the United States Census Bureau in an attempt to group homogenous populations. A CT has defined boundaries per 10-year census and an average population of 4,000. Community Development (CD) Affordable housing for low-or moderate-income individuals; community services targeted to low-or moderate-income individuals; activities that promote economic development by financing businesses or farms that meet the size eligibility standards of the Small Business Administrations Development Company or Small Business Investment Company programs (13 CFR 121.301)) or have gross annual revenues of $1 million or less; or activities that revitalize or stabilize low-or moderate-income geographies. Community Reinvestment Act (CRA) The statute that requires the OCC to evaluate a banks record of meeting the credit needs of its local community, consistent with the safe and sound operation of the bank, and to take this record into account when evaluating certain corporate applications filed by the bank. Geography A census tract or a block numbering area delineated by the United States Bureau of the Census in the most recent decennial census. 10 11 Limited Purpose Institution An institution that offers only a narrow product line (such as credit cards or automobile loans) to a regional or broader market and for which a designation as limited purpose bank is in effect. Median Family Income (MFI) The median income determined by the United States Census Bureau every 10 years and used to determine the income level category of geographies. Also, it is the median income determined by the Department of Housing and Urban Development annually that is used to determine the income level category of families. For any given geography, the median is the point at which half of the families have income above it and half below it. (See the four ategories of median income below.) c Low-Income An income level that is less than 50% of the MFI. Moderate-Income An income level that is at least 50% and less than 80% of the MFI. Middle-Income An income level that is at least 80% and less than 120% of the MFI. Upper-Income An income level that is 120% or more of the MFI. Metropolitan Statistical Area (MSA) Area defined by the director of the United States Office of Management and Budget. MSAs consist of one or more counties, including large population centers and nearby communities that have a high degree of interaction. Net Operating Income As listed in the Consolidated Report of Condition and Income: Income before income taxes and extraordinary items and other adjustments. Tier 1 Capital The total of common shareholders equity, perpetual preferred shareholders equity with noncumulative dividends, retained earnings and minority interests in the equity accounts of consolidated subsidiaries. Total Assets Total bank assets as listed in the Consolidated Report of Condition and Income. Total Income From the Consolidated Report of Condition and Income Total Interest income plus Total Noninterest income. http://www.occ.treas.gov/cra/limited.htm LP First National Bank of Marin NV Las Vegas 20291 6/28/1996 FIRST NATIONAL BANK>> OF << MARIN>> LAS VEGAS May-2002 585 PILOT ROAD LAS VEGAS NV 89119 http://www.occ.treas.gov/foia/foiadocs.htm CONSENT ORDER No. Bank, City Date California 96-54 << First National Bank>> of << Marin>> , San Rafael 10/17/96 Cease and Desist Orders, By Consent No. Name/Bank/City Date Nevada 2001- 97 << First National Bank>> of << Marin>> , Las Vegas 12/03/01 The Office of the Comptroller of the Currency (OCC) settles case against the First National Bank of Marin, Las Vegas, involving misleading and deceptive marketing of secured credit cards. In a consent order, http://www.occ.treas.gov/ftp/eas/ea2001-97.pdf the bank agreed to cease practices that the OCC alleged are unlawful or unsafe and unsound and to pay restitution to customers harmed by those practices. Fact Sheet O Comptroller of the Currency Administrator of National Banks December 4, 2001 Fact Sheet OCC Settles Case Against << First National Bank>> of << Marin>> Involving Misleading and Deceptive Marketing of Secured Credit Cards The Office of the Comptroller of the Currency has settled a case against << First National Bank>> of << Marin>> , Las Vegas, in which the bank agreed to cease practices that the OCC alleged are unlawful or unsafe and unsound, and to pay restitution to customers harmed by those practices. The bank was required to establish a reserve to handle restitution payments and to make an initial deposit of $4 million. The bank will add additional amounts, if required, to fully fund the reserve within 60 days. The OCC concluded that the banks conduct in marketing its secured credit card constituted unfair and deceptive practices in violation of the Federal Trade Commission Act, and was unsafe or unsound within the meaning of the Federal Deposit Insurance Act. Unfair and Deceptive Practices << First National Bank>> of << Marin>> markets to consumers with poor or non-existent credit histories. Many credit card lenders, as a matter of prudent underwriting, will require such consumers to maintain a savings account large enough to secure the line of credit. Under the banks program, the funds for the savings deposit are instead charged against the credit line, reducing the amount of available credit until the charge is paid off. In the OCCs view, since January, 1998, the bank has used false and misleading statements, in violation of the Federal Trade Commission Act, to induce these consumers to apply for its credit card and to pay substantial fees. The banks marketing led consumers to believe that they did not first have to submit funds for a savings deposit in order to receive a credit card with a usable amount of available credit. In reality, due to the deposit requirement and fees charged against the card, the vast majority of applicants received a credit card with little or no available credit. Among the practices cited by the OCC: Under one program sponsored by the bank, credit card applicants were required to pay up to $79 in cash to apply for a guaranteed card with credit lines between $250 and $600. The credit line was secured by a savings deposit of $200 charged against the card when it was first issued. In addition, other fees of up to $56 were charged to the card. --2 As a result, individuals approved for a $250 credit line had little or no available credit when the card was first issued. Instead, those consumers would then have to make additional payments to the bank to obtain usable credit. Roughly 80 percent of all applicants received the $250 credit line. Another program required the consumer to pay $79 for a guaranteed card with a fixed credit line of $400. The credit line was secured by a savings deposit of $350 charged against the card when it was first issued. The initial charge for the savings deposit, along with application and other fees of $37 that were charged against the card, meant that all applicants would receive a card with little or no available credit when first issued. In written solicitations, the bank represented that, You do not have to send in money for a savings deposit. The bank also told prospective customers: If you have credit problems or no credit history, and you want your own VISA card without having to send in hundreds of dollars for a savings deposit . . . this is it! Despite making these claims, the bank never disclosed in its solicitations that if the consumer did not send in money for the savings deposit, the consumer would have little or no available credit, and would have to make additional payments to the bank before being able to use the card. The bank promised that the card would have benefits like instant cash, and worldwide acceptance. The banks also said it would assure customers security and peace of mind, and said it would help them be prepared for emergencies. All of these benefits require a usable amount of available credit, which the vast majority of applicants did not receive. In one written solicitation, a message on the outside of the envelope stated, you do NOT need to send a savings deposit to get your new VISA credit card . . . not one penny. In another, the envelope message promised: Guaranteed approval, no matter what your credit situation, plus . . . you do not have to send in money for a savings deposit! When the bank disclosed in the solicitations that the savings deposit would be charged against the credit card, it did not disclose that the customer might receive little or no usable credit as a result. The OCC received complaints from consumers who had not understood that the card they received would have little or no available credit. The OCC believes that consumers may easily have been confused by the banks solicitations. On average, a consumer was required to pay $100 or more in application fees to obtain the banks credit card. The bank did not disclose, until after the customer paid the non-refundable portion of these application fees, (usually $49-$ 79) that he or she might --and probably would --receive a card with little or no available credit. --3 Consent Order Provisions The consent order requires the bank to refund application and other fees to consumers who received a credit card with less than $50 in available credit, and cancelled the card within 60 days after the card was issued to them by the bank. In addition, the consent order requires that the bank refund application fees to consumers who learned that they were to receive a card with $50 or less in available credit, and before receiving a card cancelled their application or failed to complete the application process. The consent order also requires that the bank change its marketing practices and disclosures. Among the provisions: The bank may not make any misleading or deceptive representation regarding the cost or operation of a credit card, or what available credit the consumer will receive at account opening. If the credit may be secured in whole or in part by a savings deposit that is charged against the credit card, the bank may not use a phrase such as Send no money for a savings deposit, unless the bank clearly and conspicuously discloses that the consumer's available credit will be reduced by the charge for the savings deposit." If the bank could approve an applicant for a card with less than $50 in available credit at account opening, the bank may not represent that any applicant who applies may be able to employ the card for uses that require available credit, unless the bank clearly and conspicuously discloses that the consumer could be approved for a card with less than $50 in available credit at account opening, will not be able to employ the card for those uses if the consumer is approved for such a card. If a solicitation discloses a range of credit lines for which a consumer may be approved, and if the consumer may be approved for a credit line in that range that would result in less than $50 in available credit at account opening, the bank must clearly and conspicuously disclose in the solicitation that if the consumer is approved for that credit line the consumer will have little or no available credit at account opening. In addition, if the consumer is approved for a card with $50 or less in immediately available credit, the bank must subsequently disclose to the consumer, before the card is activated for purchases by the consumer, the specific dollar amount of credit that will be available for the consumer's immediate use on the credit line that the consumer has received. The order also requires that the bank implement a written program to identify and evaluate, on an ongoing basis, communications from consumers who say that they did not understand --4 the banks solicitations. As part of this program the bank must evaluate, on an ongoing basis, the risk that the banks solicitations are misleading or deceptive or in violation of other law, and determine whether the solicitations should be modified or revised. # # # The OCC charters, regulates and examines approximately 2, 200 national banks and 52 federal branches of foreign banks in the U. S., accounting for more than 54 percent of the nations banking assets. Its mission is to ensure a safe and sound and competitive national banking system that supports the citizens, communities and economy of the United States. http://www.occ.treas.gov/foia/factsheet1fnbmarin201-97.pdf http://www.occ.treas.gov/query/oop/qsumrhit.htw?CiWebHitsFile=/ftp/craeval/20291.pdf&CiRestriction=%20First%20National%20Bank%20of%20Marin%20&CiQueryFile=/query.idq&CiBeginHilite=%3CB%20CLASS=HIT%3E&CiEndHilite=%3C/B%3E&CiUserParam3=queryhit.htm Currency Administrator of National Banks Washington, DC 20219 Public Disclosure February 12, 1998 Community Reinvestment Act Performance Evaluation First National Bank of Marin Charter Number: 20291 1201 Fifth Avenue San Rafael, CA 94901 Office of the Comptroller of the Currency Western District Office 50 Fremont Street, ... OCC Review Report from 1998: Description of Institution << First National Bank>> of << Marin>> opened in July 1984 as a full service bank. FNBM maintained a wide range of products until 1995 when the bank began focusing primarily on one product, a partially secured credit card. With the success of this card, the Board of Directors decided to focus solely on the credit card product. Because customer contacts for this product transpire over the phone or through mail, FNBM closed its main office to customer traffic on July 1, 1996. The branch now serves as the banks administrative office and is staffed with only about 16 people. The staff includes a few bank officers and administrative personnel. The bank contracts with outside firms for marketing and collection activities. Effective June 28, 1996, FNBM received designation as a limited purpose institution, for purposes of the Community Reinvestment Act. The bank uses savings deposit accounts and certificates of deposit to fund the credit cards. The banks assets total $128 million with equity of $12 million. In 1997, the bank reported net income of $6.6 million, including accounting adjustments. However, in 1996, the bank reported a net loss of $5.6million. Earlier in the assessment period, the banks resources were limited due to operating losses and capital constraints. Also, the bank operated under a Consent Order. This required the Board of Directors and its officers to focus their efforts on improving the financial condition of the bank. We assessed the banks CRA performance in light of these factors. Assessment Area Description FNBMs assessment area consists of all 51 census tracts in Marin County, California. Marin County is located within the San Francisco Metropolitan Statistical Area (MSA), which includes Marin, San Francisco, and San Mateo Counties. Marin County covers 606 square miles and is directly north of San Francisco. While the majority of tracts are middle-and upper-income, the banks assessment area contains four moderate-income tracts. These moderate-income tracts include Marin City, the Canal District in San Rafael, Novato, and Dillon Beach. The following table shows the number and percent of census tracts and families by income level within the banks assessment area: << First National Bank>> of << Marin>> Assessment Area Low-Income Moderate-Income Middle-Income Upper-Income Census Tracts Families Census Tracts Families Census Tracts Families Census Tracts Families 0 0% 8, 130 14% 4 8% 9, 101 15% 20 39% 12,204 21% 27 53% 29,514 50% Source: Demographic Data -1990 U. S. Census 4 Marin county is one of the most affluent counties in the San Francisco Bay Area. The 1990 U. S. Census Bureau data reported median family income for Marin County at $59,157 versus $49,282 for the entire MSA. Incomes throughout the county have increased. Updated information from the Department of Housing and Urban Development (HUD) shows San Francisco MSAs median family income at $61,300 for 1996. San Rafael Chamber of Commerce reported the average cost of a single-family residence in Marin County at $365,000 in 1995. The areas economy is dominated by small and mid-sized businesses, with a high concentration of software companies. Other major employers include government services, insurance companies, financial institutions, hospitals and utility companies. The local banking market is extremely competitive with regional banks, multinational bank branches, and several community banks. Housing prices and the overall cost of living have made it extremely difficult for low-and moderate-income families to live in Marin although they work in the area. According to local groups, the greatest need is for affordable housing. Multiple families share apartments to afford the high cost. Other needs include subsidized day care, small business financing, and education. Community contacts and area research showed that Marin County has a wide range of organizations that help serve these needs. Community development lending, investment, and service opportunities are available through these groups. 5 CONCLUSIONS WITH RESPECT TO PERFORMANCE We rated the bank as having a Satisfactory record of performance under the Community Reinvestment Act. Based upon the guidance provided by the OCC following the last CRA examination, management and the board provided sufficient community development investments and services, and exhibited an adequate responsiveness to credit and community development needs. During the rating period, the bank operated under a Consent Order to improve its financial condition. We considered the banks limited staff as well as its financial condition during the rating period to reach our conclusions. We evaluated the banks qualified investments and community development services since the last evaluation dated December 31, 1996. While the dollar volume is satisfactory, the banks investments and services do not exhibit innovative or complex characteristics. The bank has not made any community development loans. << First National Bank>> of << Marin>> -Qualified Investments Community Bank of the Bay (CBB) -In February 1998 and December 1997, FNBM invested at below market rates in two certificates of deposit for $300,000 and $100,000, respectively, at this community development bank. CBBs lending activities cover lower income areas in San Francisco and Oakland, as well as in adjacent Bay Area cities such as Richmond, West Berkeley, Marin City, or East Palo Alto. CBB focuses on community development projects that conventional banks will not fund. In December 1997, FNBM arranged a forum with CBB, Marin Family Action, Southern Bible Institute, and Hamilton Credit Union to discuss Marin County credit needs and how CBB can best meet these needs. Mission National Bank -FNBM invested a $100,000 certificate of deposit at a below market rate at this minority-owned, small business bank in December 1997. Mission National Bank presently has three loans to small businesses in Marin County. They plan to make additional small business loans to this area through referrals from FNBM. Grants -The bank provided $4,150 in grants to six different community development agencies in 1997. The largest of these grants for $2,500 helped Marin Family Action (MFA). MFA advocates for the low and moderate income families in Marin County. MFA was instrumental in obtaining approval to convert Hamilton Naval Base housing into low-income housing. Also, this organization provides credit repair, home ownership, computers and computer classes to their constituents. Other grants for between $150 to $500 helped local groups provide food, housing, mentoring and job training to low and moderate income people. 6 << First National Bank>> of << Marin>> -Community Development Services A bank officer provided financial counseling, business planning, and credit counseling to three minority-owned, low-income, small business owners. One of the businesses involves the musical recording of a compact disk. The bank officer helped document the steps needed to pursue this effort, especially the budgeting and financial accounting needed. This information will be used to educate other interested small business owners in this process. A bank officer is a board member of, and provides financial expertise to, Southern Marin Bible Institute (SMBI). SMBI is a non-profit educational institute founded in 1980 in Marin City . The school caters to socially and economically disadvantaged people. SMBI is developing a program to provide housing and counseling for low-income people, completing drug rehabilitation programs. The bank officer provided a class on Credit Management and Loans to SMBI students at the bank. She also prepared a budget and helped raise funds for SMBI. A bank director provided his expertise in obtaining financing for a group home located in Petaluma, California. This home provides low cost housing for people who were previously homeless but have obtained jobs. Although the home is located in Petaluma, about seven miles north of Novato, it serves the needs of both communities. The home is owned by the Committee on the Shelterless (COTS). Compliance with Anti-Discrimination Laws and Regulations We reviewed the banks compliance with fair lending laws and regulations during our December 31, 1996 examination. We identified no violations of the substantive provisions of the anti-discrimination laws and regulations. Next Report: ... evaluation of the institutions record of meeting the credit needs of its community. This document is an evaluation of the CRA performance of First National Bank of Marin prepared by The Office of the Comptroller of the Currency, the institutions supervisory agency, as of February 12, 1998. The agency evaluates ... ... set forth in Appendix A to 12 CFR Part 25. Institutions CRA Rating: This institution is rated Satisfactory under the Community Development Test. First National Bank of Marin (FNBM) made an adequate level of qualified investments and provided sufficient community development services in relation to its resources and ... ... responsiveness to the needs of the community was adequate in light of its managerial and financial resources. 3 Description of Institution First National Bank of Marin opened in July 1984 as a full service bank. FNBM maintained a wide range of products until 1995 when the bank began focusing primarily on one ... ... and Dillon Beach. The following table shows the number and percent of census tracts and families by income level within the banks assessment area: First National Bank of Marin Assessment Area Low-Income Moderate-Income Middle-Income Upper-Income Census Tracts Families Census Tracts Families Census Tracts Families Census ... ... the banks investments and services do not exhibit innovative or complex characteristics. The bank has not made any community development loans. First National Bank of Marin -Qualified Investments Community Bank of the Bay (CBB) -In February 1998 and December 1997, FNBM invested at below market rates in two certificates ... ... Other grants for between $150 to $500 helped local groups provide food, housing, mentoring and job training to low and moderate income people. 6 First National Bank of Marin -Community Development Services A bank officer provided financial counseling, business planning, and credit counseling to three minority-owned, ...

First National Bank of Marin was placed under a Consent order in December 2001, by the Office of Comptroller of Currency, Department of Treasury (Federal) for deceptive practices. It appears Marin Bank has not changed its ways, since then, quite a bit of info follows, including a glowing report on their Officers inolvement in investing in Las Vegas community, of course it is not philanthropic, it is REQUIRED by the Feds to be chartered under this Limited Purpose Bank regulations, they have to do what is called assessment area community re-investment, there are now 17 directors on the Board of Directors: From the OCC website: Wholesale and Limited Purpose Banks under the Community Reinvestment Act Updated October 9, 2002 Under the Community Reinvestment Act, a bank may apply to its primary federal regulator to be designated a wholesale or a limited purpose bank. Such banks are evaluated for performance under standards found at 12 CFR 25.25. The regulation offers the following definitions: Limited purpose bank means a bank that offers only a narrow product line (such as credit card or motor vehicle loans) to a regional or broader market and for which a designation as a limited purpose bank is in effect. Limited purpose banks are identified as LP in the TYPE column in the table below. Wholesale bank means a bank that is not in the business of extending home mortgage, small business, small farm, or consumer loans to retail customers, and for which a designation as a wholesale bank is in effect. Wholesale banks are identified as WH in the TYPE column in the table below. The following national banks have been designated as wholesale or limited purpose banks by the OCC: http://www.occ.treas.gov/query/oop/qfullhit.htw?CiWebHitsFile=/ftp/craeval/apr03/20291.pdf&CiRestriction=%20First%20National%20Bank%20of%20Marin%20&CiQueryFile=/query.idq&CiBeginHilite=%3CB%20CLASS=HIT%3E&CiEndHilite=%3C/B%3E&CiUserParam3=queryhit.htm&CiHiliteType=Full LIMITED PURPOSE Comptroller of the Currency Administrator of National Banks PUBLIC DISCLOSURE May 20, 2002 COMMUNITY REINVESTMENT ACT PERFORMANCE EVALUATION << First National Bank>> of << Marin>> Charter Number 20291 585 Pilot Road Las Vegas, NV 89119 Comptroller of the Currency Western District Office 50 Fremont Street, Suite 3900 San Francisco, CA 94105 NOTE: This document is an evaluation of this institutions record of meeting the credit needs of its entire community, including low-and moderate-income neighborhoods consistent with safe and sound operation of the institution. This evaluation is not, nor should it be construed as, an assessment of the financial condition of this institution. The rating assigned to this institution does not represent an analysis, conclusion, or opinion of the federal financial supervisory agency concerning the safety and soundness of this financial institution. Institutions CRA rating: This institution is rated Satisfactory. The conclusions for the three rating criteria are: The bank demonstrates a high level of community development (CD) services and qualified investment activity. The bank demonstrates occasional use of innovative CD investments and services. The bank demonstrates excellent responsiveness to credit and CD needs in its assessment area. The banks violation of the Federal Trade Commission Act, which prohibits unfair or deceptive acts or practices, negatively impacted this rating, but did not result in a less than satisfactory rating. Scope of the Examination In evaluating the banks performance under the CRA, we reviewed community development activities from February 13, 1998, through June 3, 2002. We reviewed the level and nature of qualified investments and community development services. At the prior examination dated February 12, 1998, we rated the bank Satisfactory. We considered CD activities the bank submitted that benefit areas outside of its current assessment area in the evaluation of its performance. These were considered because they benefited the banks prior assessment area. In addition, the bank has adequately addressed the needs of its current assessment area. . Description of Institution << First National Bank>> of << Marin>> (FNBM) is headquartered in Las Vegas, Nevada. The bank has no branches. The bank began operations in San Rafael, California in July 1984 as a full service bank. FNBM maintained a wide range of products until 1995 when it began focusing primarily on one type of product, a partially secured credit card. FNBM received a limited purpose designation from the OCC in June 1996. Limited purpose banks offer only a narrow product line. The bank moved from San Rafael, California to Las Vegas, Nevada in November 1998. FNBM offers partially and fully secured credit cards to sub-prime borrowers with the ultimate goal of helping troubled borrowers to repair credit and ultimately become eligible for an unsecured credit card. Customer contacts for this product transpire over the telephone, through the mail, and through the Internet. The bank has 806 employees. The majority of the staff consists of customer representatives. There are 17 officers. As of March 30, 2002, FNBM reported total assets of $230 million and year-to-date net income of $1.8 million. FNBM is a wholly owned subsidiary of Marin National Bancorp (MNB), which is headquartered in Las Vegas, Nevada. As of March 31, 2002, MNB reported total assets of $36 million and a year-to-date net loss of $11 thousand. The bank keeps all of its receivables. It is important to take into consideration in evaluating the banks CRA performance, the substantial impact to the banks net earnings during the evaluation period. The reduction in net earnings is primarily due to the significant amount of monetary restitutions to consumers required by the OCC. The table below shows financial information for the four years since the last CRA examination and through the end of the most recent quarter. Table 1: Financial Information (000s) Year-end 1998 Year-end 1999 Year-end 2000 Year-end 2001 Most Recent Quarter-end 3/31/2002 Average for Evaluation Period Tier 1 Capital 17,189* 28,486* 32,360* 29,675* 30,811* 27,704 Total Income 54,442* 102,376* 170,879* 194,363* 204,896** 145,391 Net Operating Income 9,102* 18,277* 11,065* 2,741* 7,100** 9,657 Total Assets 155, 031* 209, 129* 192, 580* 239, 649* 230, 203* 205, 318 Source: Consolidated Report of Condition and Income and bank reported data. * Actual data reported. ** Annualized data reported. Description of Assessment Area FNBM operates in an urban area. The bank has designated a majority of Clark County as its assessment area. The assessment area consists of 110 census tracts and includes the cities of Las Vegas, North Las Vegas, Henderson, and the unincorporated areas of Clark County, which comprise the Las Vegas Valley. The assessment area meets the legal requirements of the CRA. All the census tracts that the bank excluded from its assessment area are on the perimeter of Clark County; none are low-or moderate-income (LMI) census tracts. The table below shows the demographics of the banks assessment area. Table 2: Assessment Area Description Number Low Moderate Middle Upper Tracts 110 6% 19% 46% 29% *Families 181, 341 18% 18% 23% 41% ** Businesses 42,883 4% 12% 40% 44% Source: Demographic Data -1990 U. S. Census, Dun & Bradstreet Data. *Represents families by income level. ** Represents businesses by income level of census tract. 3 Major employers include hotels, gaming, and service-related industries. Government, retail trades, mining, manufacturing, and agriculture are also among the most significant employers. However, the Las Vegas assessment area and the entire state of Nevada are still dominated completely by the gaming/tourist industry. In September 2001, gaming revenue fell for the first time in years. This was the result of the September 11, 2001, terrorist attack on the United States. The unemployment rate has climbed steadily upward and as of March 31, 2002, was at 6.29%. The area has grown significantly over the last decade and has a population of about 2 million. Housing prices also appreciated significantly with the median existing home price at $137 thousand. The 2001 HUD updated median family income is $52,100. Las Vegas has several community-based organizations with a community development purpose, particularly for small business development or affordable housing. Generally, these organizations have limited expertise in community development activities. The area has a critical shortage of affordable housing units. The rapid influx of people has aggravated the problem. Housing prices and rents have increased substantially faster than income levels. Although there has been significant job growth, most of these jobs are in the service or retail sectors and offer lower pay, often without benefits. The city has a large volume of substandard housing. Estimates are that there are 17 thousand substandard rental units. A large population of homeless people, many with chemical dependency, also puts pressure on city housing resources. These factors contribute to the overall housing need. Virtually all community contacts commented on the lack of houses or rental units for LMI people. They said that the areas rapid growth far exceeds the number of available housing units. Because most of the new jobs that attract people to the area are minimum wage jobs, there is a widening gap in the ability to afford single-family residences driven up by the demand and general shortage of housing units. There is a great need for affordable multi-family rental units to accommodate the increase in population. Several community contacts commented on the need for start-up financing for small businesses. Some contacts said that small business owners also need technical assistance from the financial institutions to understand basic banking and how to prepare a business plan. We reviewed 12 community contacts made by the OCC and other regulatory agencies during the last two years. These contacts included representatives from local government, economic development organizations, organizations that focus on affordable housing issues, and organizations that provide needed social services to LMI people. We also performed two additional community contacts, one with a community development organization and the other with an affordable housing organization. There are a number of competing financial institutions in the assessment area. Some of these are significantly larger and have more dedicated resources for community development loans and investments. The larger institutions also have more human resources available to provide community development services. While other institutions are smaller, they also compete for available investments in the assessment area. As a result, there is a high degree of competition and certain limitations as to availability of CD investment opportunities. Since FNBMs business focus is credit cards, the bank lacks employees who have the expertise in community development lending. Therefore, the bank focuses its community development efforts on qualified investments and CD services. Conclusions About Performance 4 Summary FNBM has done an excellent job of serving its assessment areas community development needs through a variety of investments and services. As noted in the table below, the bank invested $269 thousand in projects and activities that benefit the banks assessment area. This represents only investments that were still on the banks books as of the date of this evaluation. In addition, the bank invested an additional $250 thousand in three investments that matured during the review period. Employees of FNBM have provided numerous hours of qualified CD services. The focus of the banks qualified investments, grants, and donations was primarily on providing financial education and housing related services for LMI individuals. The focus of the banks CD services was on providing financial expertise to the community as well as to various community development organizations. These efforts were targeted at specific needs identified through FNBMs needs assessment process. FNBM provided a high number of CD services and qualified investments, grants, and donations in response to the banks research regarding the needs of LMI individuals in its assessment area. Through its investments, grants, and membership on boards of community development organizations, the bank was able to help implement some programs in the community that were not available prior to their implementation. The banks efforts are significant considering the opportunities available for limited purpose banks in this assessment area and the banks resources. The bank demonstrated innovativeness by placing deposits in commercial banks that have CD lending expertise. The purpose of the funds was to provide community development loans and to promote and finance community development activities that benefit LMI individuals. The bank showed excellent responsiveness to the community development needs in its assessment area. Management worked with some community based organizations to implement community development programs that address a critical issue faced by LMI individuals in the assessment area. This included participation in an innovative program, which aims to identify and assist individuals who have been harmed by predatory lending. Qualified Investments During the review period, FNBM provided $269 thousand in qualified investments, grants, and donations to community development organizations. In addition, the bank also provided $250 thousand in investments, which are not reflected in the tables below since these investments were no longer outstanding as of the date of this examination. All of the investments benefited the assessment area. 5 Table 3b: Qualified Investment Activity (000s) Benefits AA Originated Investments $100 Originated Grants $169 Prior-Period Investments that Remain Outstanding $ 0 Total Qualified Investments $269 Unfunded Commitments* $ 0 * Unfunded Commitments means legally binding investment commitments that are tracked and recorded by the banks financial reporting system. Table 4b: Qualified Investment Percentages Benefit AA (%) Total Investments/Average Tier 1 Capital 1% Total Investments/Average Total Income .2% FNBMs most notable qualified investments, grants, and donations in the assessment area consist of the following: $100 thousand certificate of deposit, which was placed in a commercial bank to be used by a housing center for its advocacy program that assists LMI borrowers who have been harmed by predatory lending. $24 thousand to two organizations that provide programs for LMI youth. $38 thousand to seven organizations that promote affordable housing. $10 thousand to two community development corporations. $8 thousand to two organizations that promote economic development by financing small businesses. Consideration of Activities that Benefit Areas Outside the Banks Assessment Area FNBM has adequately addressed the needs of its assessment area; therefore we considered activities outside the assessment area. During the review period, FNBM had $500 thousand in qualified investments on its books that benefited the banks prior assessment area in San Rafael, California. These are not included in the tables above since they were not outstanding as of the date of this examination. Community Development Services 6 FNBM provide a significant number of ongoing CD services, which are very responsive to the needs of its assessment area. Employees provide credit education for LMI students and serve on committees of various organizations that serve the LMI community. One of the organizations focuses on assisting LMI individuals who have been harmed by predatory lending. A majority of the organizations focus on providing affordable housing and community revitalization. The remaining community development organizations provide services for LMI individuals, including LMI youth. The bank provides CD services in one innovative community development program. Some of the services are complex. In addition, all the services are very responsive to some of the most significant needs in the banks assessment area. The bank has succeeded in maintaining a high profile in the assessment area through its memberships on numerous boards and the advisory committees of numerous community development organizations. All of the services benefit the banks assessment area. The following table highlights the banks CD services: Table 7: Community Development Service Activities CD Service Benefits AA Outside AA A number of employees provide Credit Card Financial Literacy Education at 8 local high schools, which have a predominantlyLMI student population. X The CRA Officer is a member of the board of directors of an organization that provides programs for LMI children and their families. He serves on various committees, including the fundraising and budget and finance committees. X An officer of the bank serves as a committee member of an organization which seeks to revitalize a LMI area of central downtown Las Vegas. The officer provides assistance on financial matters. X Employees of the bank provide financial services for an organization that engages in comprehensive community development projects that promote neighborhood revitalization and economic development. X An officer of the bank serves as a member of a community development organization whose mission is to rebuild whole communities by supporting community development corporations (CDCs). The officer performs the duties of committee oversight and strategic planning in an effort to locate, access, and negotiate funding for four CDCs. This service is considered to be complex because of the expertise and effort needed to negotiate funding. X 7 An officer of the bank serves as a member of a fair housing center. The officer participates by reviewing and assessing individual cases of loan origination and subordination where predatory lending may be present. The officer also reviews financial documents and chronology of events in order to decide on corrective actions and intervention avenues for LMI borrowers who have been harmed by predatory lending. This service is considered to be complex because of the expertise and effort needed to decide the most advantageous course of action for each of the LMI borrowers. It is also considered to be an innovative type of service. X An employee of the bank provides technical assistance on financial matters to a community development organization. The overall mission of the organization is to improve the quality of life for residents of a low-income neighborhood and to foster and promote community-wide interests and involvement in the problems associated with vandalism, drug-related criminal activity, housing deterioration, and unemployment. X An employee of the bank provides technical assistance on financial matters to an organization whose mission is to provide computers and related communication technology to LMI individuals who otherwise might have little opportunity to use or learn to use these technologies. X The CRA officer is a member of the board of directors of an organization whose mission is to assist LMI individuals and families to become self sufficient through direct services, training, and referral. He provides financial expertise as a member of the budget and finance committee and as a member of several fundraising committees. X The CRA Officer is a member of a community development corporation in East Las Vegas. He serves on various committees, including the fundraising and budget and finance committees. X X means yes; Blank means No. Compliance with Anti-Discrimination Laws and Regulations We determined that FNBM had engaged in a number of unfair and deceptive practices during the period covered by this evaluation. As a result, the banks Board of Directors signed a Stipulation and Consent to the Issuance of a Consent Order and a Consent Order, dated December 3, 2001. The Consent Order required a significant amount of monetary restitution to consumers, and it required management to change certain practices prospectively. The unfair and deceptive practices leading to the Consent Order and the OCCs determination that the bank had violated the Federal Trade Commission Act, negatively impacted the banks CRA rating. Since signing the Consent Order, the 8 bank has made changes to its solicitations. Consumer complaints have decreased significantly. An analysis of two years public comments and consumer complaint information for Limited Purpose institutions was performed according to the OCCs risk-based fair lending approach. Based on its analysis of the information, the OCC decided that a comprehensive fair lending examination would not need to be conducted with the CRA evaluation this year. The latest comprehensive fair lending examination was performed in March 1999. During the March 3, 2002, compliance examination, we reviewed the banks fair lending policies, procedures, training, monitoring, and compliance audits. We also reviewed for technical compliance with the Equal Credit Opportunity Act/Regulation B. We made some recommendations for enhancements to the banks program. We did not cite any violations of law or regulation. 9 Definitions and Common Abbreviations The following terms and abbreviations are used throughout this performance evaluation. The definitions are intended to provide the reader with a general understanding of the terms, not a strict legal definition. Affiliate Any company that controls, is controlled by, or is under common control with another company. A company is under common control with another company if the same company directly or indirectly controls both companies. A bank subsidiary is controlled by the bank and is, therefore, an affiliate. Assessment Area (AA) A geographic area that consists generally of one or more MSAs (using the MSA boundaries that were in effect as of January 1 of the calendar year in which the delineation is made) or one or more contiguous political subdivisions, such as counties, cities, or towns, in which the bank has its main office, branches, and deposit-taking ATMs. Benefit to Assessment Area A qualified Community Development activity benefits the assessment area if (i) the activity benefits areas within the assessment area, or (ii) the activity benefits a broader statewide or regional area that includes the banks assessment area. If a bank has adequately addressed the needs of its assessment area, then the OCC also considers activities submitted by the bank that benefit areas outside of its assessment area. Block Numbering Area (BNA) Statistical subdivisions of counties in which census tracts have not been established. The United States Census Bureau has established BNAs in conjunction with state agencies. Census Tract (CT) Small, locally defined statistical areas within metropolitan statistical areas. These areas are determined by the United States Census Bureau in an attempt to group homogenous populations. A CT has defined boundaries per 10-year census and an average population of 4,000. Community Development (CD) Affordable housing for low-or moderate-income individuals; community services targeted to low-or moderate-income individuals; activities that promote economic development by financing businesses or farms that meet the size eligibility standards of the Small Business Administrations Development Company or Small Business Investment Company programs (13 CFR 121.301)) or have gross annual revenues of $1 million or less; or activities that revitalize or stabilize low-or moderate-income geographies. Community Reinvestment Act (CRA) The statute that requires the OCC to evaluate a banks record of meeting the credit needs of its local community, consistent with the safe and sound operation of the bank, and to take this record into account when evaluating certain corporate applications filed by the bank. Geography A census tract or a block numbering area delineated by the United States Bureau of the Census in the most recent decennial census. 10 11 Limited Purpose Institution An institution that offers only a narrow product line (such as credit cards or automobile loans) to a regional or broader market and for which a designation as limited purpose bank is in effect. Median Family Income (MFI) The median income determined by the United States Census Bureau every 10 years and used to determine the income level category of geographies. Also, it is the median income determined by the Department of Housing and Urban Development annually that is used to determine the income level category of families. For any given geography, the median is the point at which half of the families have income above it and half below it. (See the four ategories of median income below.) c Low-Income An income level that is less than 50% of the MFI. Moderate-Income An income level that is at least 50% and less than 80% of the MFI. Middle-Income An income level that is at least 80% and less than 120% of the MFI. Upper-Income An income level that is 120% or more of the MFI. Metropolitan Statistical Area (MSA) Area defined by the director of the United States Office of Management and Budget. MSAs consist of one or more counties, including large population centers and nearby communities that have a high degree of interaction. Net Operating Income As listed in the Consolidated Report of Condition and Income: Income before income taxes and extraordinary items and other adjustments. Tier 1 Capital The total of common shareholders equity, perpetual preferred shareholders equity with noncumulative dividends, retained earnings and minority interests in the equity accounts of consolidated subsidiaries. Total Assets Total bank assets as listed in the Consolidated Report of Condition and Income. Total Income From the Consolidated Report of Condition and Income Total Interest income plus Total Noninterest income. http://www.occ.treas.gov/cra/limited.htm LP First National Bank of Marin NV Las Vegas 20291 6/28/1996 FIRST NATIONAL BANK>> OF << MARIN>> LAS VEGAS May-2002 585 PILOT ROAD LAS VEGAS NV 89119 http://www.occ.treas.gov/foia/foiadocs.htm CONSENT ORDER No. Bank, City Date California 96-54 << First National Bank>> of << Marin>> , San Rafael 10/17/96 Cease and Desist Orders, By Consent No. Name/Bank/City Date Nevada 2001- 97 << First National Bank>> of << Marin>> , Las Vegas 12/03/01 The Office of the Comptroller of the Currency (OCC) settles case against the First National Bank of Marin, Las Vegas, involving misleading and deceptive marketing of secured credit cards. In a consent order, http://www.occ.treas.gov/ftp/eas/ea2001-97.pdf the bank agreed to cease practices that the OCC alleged are unlawful or unsafe and unsound and to pay restitution to customers harmed by those practices. Fact Sheet O Comptroller of the Currency Administrator of National Banks December 4, 2001 Fact Sheet OCC Settles Case Against << First National Bank>> of << Marin>> Involving Misleading and Deceptive Marketing of Secured Credit Cards The Office of the Comptroller of the Currency has settled a case against << First National Bank>> of << Marin>> , Las Vegas, in which the bank agreed to cease practices that the OCC alleged are unlawful or unsafe and unsound, and to pay restitution to customers harmed by those practices. The bank was required to establish a reserve to handle restitution payments and to make an initial deposit of $4 million. The bank will add additional amounts, if required, to fully fund the reserve within 60 days. The OCC concluded that the banks conduct in marketing its secured credit card constituted unfair and deceptive practices in violation of the Federal Trade Commission Act, and was unsafe or unsound within the meaning of the Federal Deposit Insurance Act. Unfair and Deceptive Practices << First National Bank>> of << Marin>> markets to consumers with poor or non-existent credit histories. Many credit card lenders, as a matter of prudent underwriting, will require such consumers to maintain a savings account large enough to secure the line of credit. Under the banks program, the funds for the savings deposit are instead charged against the credit line, reducing the amount of available credit until the charge is paid off. In the OCCs view, since January, 1998, the bank has used false and misleading statements, in violation of the Federal Trade Commission Act, to induce these consumers to apply for its credit card and to pay substantial fees. The banks marketing led consumers to believe that they did not first have to submit funds for a savings deposit in order to receive a credit card with a usable amount of available credit. In reality, due to the deposit requirement and fees charged against the card, the vast majority of applicants received a credit card with little or no available credit. Among the practices cited by the OCC: Under one program sponsored by the bank, credit card applicants were required to pay up to $79 in cash to apply for a guaranteed card with credit lines between $250 and $600. The credit line was secured by a savings deposit of $200 charged against the card when it was first issued. In addition, other fees of up to $56 were charged to the card. --2 As a result, individuals approved for a $250 credit line had little or no available credit when the card was first issued. Instead, those consumers would then have to make additional payments to the bank to obtain usable credit. Roughly 80 percent of all applicants received the $250 credit line. Another program required the consumer to pay $79 for a guaranteed card with a fixed credit line of $400. The credit line was secured by a savings deposit of $350 charged against the card when it was first issued. The initial charge for the savings deposit, along with application and other fees of $37 that were charged against the card, meant that all applicants would receive a card with little or no available credit when first issued. In written solicitations, the bank represented that, You do not have to send in money for a savings deposit. The bank also told prospective customers: If you have credit problems or no credit history, and you want your own VISA card without having to send in hundreds of dollars for a savings deposit . . . this is it! Despite making these claims, the bank never disclosed in its solicitations that if the consumer did not send in money for the savings deposit, the consumer would have little or no available credit, and would have to make additional payments to the bank before being able to use the card. The bank promised that the card would have benefits like instant cash, and worldwide acceptance. The banks also said it would assure customers security and peace of mind, and said it would help them be prepared for emergencies. All of these benefits require a usable amount of available credit, which the vast majority of applicants did not receive. In one written solicitation, a message on the outside of the envelope stated, you do NOT need to send a savings deposit to get your new VISA credit card . . . not one penny. In another, the envelope message promised: Guaranteed approval, no matter what your credit situation, plus . . . you do not have to send in money for a savings deposit! When the bank disclosed in the solicitations that the savings deposit would be charged against the credit card, it did not disclose that the customer might receive little or no usable credit as a result. The OCC received complaints from consumers who had not understood that the card they received would have little or no available credit. The OCC believes that consumers may easily have been confused by the banks solicitations. On average, a consumer was required to pay $100 or more in application fees to obtain the banks credit card. The bank did not disclose, until after the customer paid the non-refundable portion of these application fees, (usually $49-$ 79) that he or she might --and probably would --receive a card with little or no available credit. --3 Consent Order Provisions The consent order requires the bank to refund application and other fees to consumers who received a credit card with less than $50 in available credit, and cancelled the card within 60 days after the card was issued to them by the bank. In addition, the consent order requires that the bank refund application fees to consumers who learned that they were to receive a card with $50 or less in available credit, and before receiving a card cancelled their application or failed to complete the application process. The consent order also requires that the bank change its marketing practices and disclosures. Among the provisions: The bank may not make any misleading or deceptive representation regarding the cost or operation of a credit card, or what available credit the consumer will receive at account opening. If the credit may be secured in whole or in part by a savings deposit that is charged against the credit card, the bank may not use a phrase such as Send no money for a savings deposit, unless the bank clearly and conspicuously discloses that the consumer's available credit will be reduced by the charge for the savings deposit." If the bank could approve an applicant for a card with less than $50 in available credit at account opening, the bank may not represent that any applicant who applies may be able to employ the card for uses that require available credit, unless the bank clearly and conspicuously discloses that the consumer could be approved for a card with less than $50 in available credit at account opening, will not be able to employ the card for those uses if the consumer is approved for such a card. If a solicitation discloses a range of credit lines for which a consumer may be approved, and if the consumer may be approved for a credit line in that range that would result in less than $50 in available credit at account opening, the bank must clearly and conspicuously disclose in the solicitation that if the consumer is approved for that credit line the consumer will have little or no available credit at account opening. In addition, if the consumer is approved for a card with $50 or less in immediately available credit, the bank must subsequently disclose to the consumer, before the card is activated for purchases by the consumer, the specific dollar amount of credit that will be available for the consumer's immediate use on the credit line that the consumer has received. The order also requires that the bank implement a written program to identify and evaluate, on an ongoing basis, communications from consumers who say that they did not understand --4 the banks solicitations. As part of this program the bank must evaluate, on an ongoing basis, the risk that the banks solicitations are misleading or deceptive or in violation of other law, and determine whether the solicitations should be modified or revised. # # # The OCC charters, regulates and examines approximately 2, 200 national banks and 52 federal branches of foreign banks in the U. S., accounting for more than 54 percent of the nations banking assets. Its mission is to ensure a safe and sound and competitive national banking system that supports the citizens, communities and economy of the United States. http://www.occ.treas.gov/foia/factsheet1fnbmarin201-97.pdf http://www.occ.treas.gov/query/oop/qsumrhit.htw?CiWebHitsFile=/ftp/craeval/20291.pdf&CiRestriction=%20First%20National%20Bank%20of%20Marin%20&CiQueryFile=/query.idq&CiBeginHilite=%3CB%20CLASS=HIT%3E&CiEndHilite=%3C/B%3E&CiUserParam3=queryhit.htm Currency Administrator of National Banks Washington, DC 20219 Public Disclosure February 12, 1998 Community Reinvestment Act Performance Evaluation First National Bank of Marin Charter Number: 20291 1201 Fifth Avenue San Rafael, CA 94901 Office of the Comptroller of the Currency Western District Office 50 Fremont Street, ... OCC Review Report from 1998: Description of Institution << First National Bank>> of << Marin>> opened in July 1984 as a full service bank. FNBM maintained a wide range of products until 1995 when the bank began focusing primarily on one product, a partially secured credit card. With the success of this card, the Board of Directors decided to focus solely on the credit card product. Because customer contacts for this product transpire over the phone or through mail, FNBM closed its main office to customer traffic on July 1, 1996. The branch now serves as the banks administrative office and is staffed with only about 16 people. The staff includes a few bank officers and administrative personnel. The bank contracts with outside firms for marketing and collection activities. Effective June 28, 1996, FNBM received designation as a limited purpose institution, for purposes of the Community Reinvestment Act. The bank uses savings deposit accounts and certificates of deposit to fund the credit cards. The banks assets total $128 million with equity of $12 million. In 1997, the bank reported net income of $6.6 million, including accounting adjustments. However, in 1996, the bank reported a net loss of $5.6million. Earlier in the assessment period, the banks resources were limited due to operating losses and capital constraints. Also, the bank operated under a Consent Order. This required the Board of Directors and its officers to focus their efforts on improving the financial condition of the bank. We assessed the banks CRA performance in light of these factors. Assessment Area Description FNBMs assessment area consists of all 51 census tracts in Marin County, California. Marin County is located within the San Francisco Metropolitan Statistical Area (MSA), which includes Marin, San Francisco, and San Mateo Counties. Marin County covers 606 square miles and is directly north of San Francisco. While the majority of tracts are middle-and upper-income, the banks assessment area contains four moderate-income tracts. These moderate-income tracts include Marin City, the Canal District in San Rafael, Novato, and Dillon Beach. The following table shows the number and percent of census tracts and families by income level within the banks assessment area: << First National Bank>> of << Marin>> Assessment Area Low-Income Moderate-Income Middle-Income Upper-Income Census Tracts Families Census Tracts Families Census Tracts Families Census Tracts Families 0 0% 8, 130 14% 4 8% 9, 101 15% 20 39% 12,204 21% 27 53% 29,514 50% Source: Demographic Data -1990 U. S. Census 4 Marin county is one of the most affluent counties in the San Francisco Bay Area. The 1990 U. S. Census Bureau data reported median family income for Marin County at $59,157 versus $49,282 for the entire MSA. Incomes throughout the county have increased. Updated information from the Department of Housing and Urban Development (HUD) shows San Francisco MSAs median family income at $61,300 for 1996. San Rafael Chamber of Commerce reported the average cost of a single-family residence in Marin County at $365,000 in 1995. The areas economy is dominated by small and mid-sized businesses, with a high concentration of software companies. Other major employers include government services, insurance companies, financial institutions, hospitals and utility companies. The local banking market is extremely competitive with regional banks, multinational bank branches, and several community banks. Housing prices and the overall cost of living have made it extremely difficult for low-and moderate-income families to live in Marin although they work in the area. According to local groups, the greatest need is for affordable housing. Multiple families share apartments to afford the high cost. Other needs include subsidized day care, small business financing, and education. Community contacts and area research showed that Marin County has a wide range of organizations that help serve these needs. Community development lending, investment, and service opportunities are available through these groups. 5 CONCLUSIONS WITH RESPECT TO PERFORMANCE We rated the bank as having a Satisfactory record of performance under the Community Reinvestment Act. Based upon the guidance provided by the OCC following the last CRA examination, management and the board provided sufficient community development investments and services, and exhibited an adequate responsiveness to credit and community development needs. During the rating period, the bank operated under a Consent Order to improve its financial condition. We considered the banks limited staff as well as its financial condition during the rating period to reach our conclusions. We evaluated the banks qualified investments and community development services since the last evaluation dated December 31, 1996. While the dollar volume is satisfactory, the banks investments and services do not exhibit innovative or complex characteristics. The bank has not made any community development loans. << First National Bank>> of << Marin>> -Qualified Investments Community Bank of the Bay (CBB) -In February 1998 and December 1997, FNBM invested at below market rates in two certificates of deposit for $300,000 and $100,000, respectively, at this community development bank. CBBs lending activities cover lower income areas in San Francisco and Oakland, as well as in adjacent Bay Area cities such as Richmond, West Berkeley, Marin City, or East Palo Alto. CBB focuses on community development projects that conventional banks will not fund. In December 1997, FNBM arranged a forum with CBB, Marin Family Action, Southern Bible Institute, and Hamilton Credit Union to discuss Marin County credit needs and how CBB can best meet these needs. Mission National Bank -FNBM invested a $100,000 certificate of deposit at a below market rate at this minority-owned, small business bank in December 1997. Mission National Bank presently has three loans to small businesses in Marin County. They plan to make additional small business loans to this area through referrals from FNBM. Grants -The bank provided $4,150 in grants to six different community development agencies in 1997. The largest of these grants for $2,500 helped Marin Family Action (MFA). MFA advocates for the low and moderate income families in Marin County. MFA was instrumental in obtaining approval to convert Hamilton Naval Base housing into low-income housing. Also, this organization provides credit repair, home ownership, computers and computer classes to their constituents. Other grants for between $150 to $500 helped local groups provide food, housing, mentoring and job training to low and moderate income people. 6 << First National Bank>> of << Marin>> -Community Development Services A bank officer provided financial counseling, business planning, and credit counseling to three minority-owned, low-income, small business owners. One of the businesses involves the musical recording of a compact disk. The bank officer helped document the steps needed to pursue this effort, especially the budgeting and financial accounting needed. This information will be used to educate other interested small business owners in this process. A bank officer is a board member of, and provides financial expertise to, Southern Marin Bible Institute (SMBI). SMBI is a non-profit educational institute founded in 1980 in Marin City . The school caters to socially and economically disadvantaged people. SMBI is developing a program to provide housing and counseling for low-income people, completing drug rehabilitation programs. The bank officer provided a class on Credit Management and Loans to SMBI students at the bank. She also prepared a budget and helped raise funds for SMBI. A bank director provided his expertise in obtaining financing for a group home located in Petaluma, California. This home provides low cost housing for people who were previously homeless but have obtained jobs. Although the home is located in Petaluma, about seven miles north of Novato, it serves the needs of both communities. The home is owned by the Committee on the Shelterless (COTS). Compliance with Anti-Discrimination Laws and Regulations We reviewed the banks compliance with fair lending laws and regulations during our December 31, 1996 examination. We identified no violations of the substantive provisions of the anti-discrimination laws and regulations. Next Report: ... evaluation of the institutions record of meeting the credit needs of its community. This document is an evaluation of the CRA performance of First National Bank of Marin prepared by The Office of the Comptroller of the Currency, the institutions supervisory agency, as of February 12, 1998. The agency evaluates ... ... set forth in Appendix A to 12 CFR Part 25. Institutions CRA Rating: This institution is rated Satisfactory under the Community Development Test. First National Bank of Marin (FNBM) made an adequate level of qualified investments and provided sufficient community development services in relation to its resources and ... ... responsiveness to the needs of the community was adequate in light of its managerial and financial resources. 3 Description of Institution First National Bank of Marin opened in July 1984 as a full service bank. FNBM maintained a wide range of products until 1995 when the bank began focusing primarily on one ... ... and Dillon Beach. The following table shows the number and percent of census tracts and families by income level within the banks assessment area: First National Bank of Marin Assessment Area Low-Income Moderate-Income Middle-Income Upper-Income Census Tracts Families Census Tracts Families Census Tracts Families Census ... ... the banks investments and services do not exhibit innovative or complex characteristics. The bank has not made any community development loans. First National Bank of Marin -Qualified Investments Community Bank of the Bay (CBB) -In February 1998 and December 1997, FNBM invested at below market rates in two certificates ... ... Other grants for between $150 to $500 helped local groups provide food, housing, mentoring and job training to low and moderate income people. 6 First National Bank of Marin -Community Development Services A bank officer provided financial counseling, business planning, and credit counseling to three minority-owned, ...

First National Bank of Marin was placed under a Consent order in December 2001, by the Office of Comptroller of Currency, Department of Treasury (Federal) for deceptive practices. It appears Marin Bank has not changed its ways, since then, quite a bit of info follows, including a glowing report on their Officers inolvement in investing in Las Vegas community, of course it is not philanthropic, it is REQUIRED by the Feds to be chartered under this Limited Purpose Bank regulations, they have to do what is called assessment area community re-investment, there are now 17 directors on the Board of Directors: From the OCC website: Wholesale and Limited Purpose Banks under the Community Reinvestment Act Updated October 9, 2002 Under the Community Reinvestment Act, a bank may apply to its primary federal regulator to be designated a wholesale or a limited purpose bank. Such banks are evaluated for performance under standards found at 12 CFR 25.25. The regulation offers the following definitions: Limited purpose bank means a bank that offers only a narrow product line (such as credit card or motor vehicle loans) to a regional or broader market and for which a designation as a limited purpose bank is in effect. Limited purpose banks are identified as LP in the TYPE column in the table below. Wholesale bank means a bank that is not in the business of extending home mortgage, small business, small farm, or consumer loans to retail customers, and for which a designation as a wholesale bank is in effect. Wholesale banks are identified as WH in the TYPE column in the table below. The following national banks have been designated as wholesale or limited purpose banks by the OCC: http://www.occ.treas.gov/query/oop/qfullhit.htw?CiWebHitsFile=/ftp/craeval/apr03/20291.pdf&CiRestriction=%20First%20National%20Bank%20of%20Marin%20&CiQueryFile=/query.idq&CiBeginHilite=%3CB%20CLASS=HIT%3E&CiEndHilite=%3C/B%3E&CiUserParam3=queryhit.htm&CiHiliteType=Full LIMITED PURPOSE Comptroller of the Currency Administrator of National Banks PUBLIC DISCLOSURE May 20, 2002 COMMUNITY REINVESTMENT ACT PERFORMANCE EVALUATION << First National Bank>> of << Marin>> Charter Number 20291 585 Pilot Road Las Vegas, NV 89119 Comptroller of the Currency Western District Office 50 Fremont Street, Suite 3900 San Francisco, CA 94105 NOTE: This document is an evaluation of this institutions record of meeting the credit needs of its entire community, including low-and moderate-income neighborhoods consistent with safe and sound operation of the institution. This evaluation is not, nor should it be construed as, an assessment of the financial condition of this institution. The rating assigned to this institution does not represent an analysis, conclusion, or opinion of the federal financial supervisory agency concerning the safety and soundness of this financial institution. Institutions CRA rating: This institution is rated Satisfactory. The conclusions for the three rating criteria are: The bank demonstrates a high level of community development (CD) services and qualified investment activity. The bank demonstrates occasional use of innovative CD investments and services. The bank demonstrates excellent responsiveness to credit and CD needs in its assessment area. The banks violation of the Federal Trade Commission Act, which prohibits unfair or deceptive acts or practices, negatively impacted this rating, but did not result in a less than satisfactory rating. Scope of the Examination In evaluating the banks performance under the CRA, we reviewed community development activities from February 13, 1998, through June 3, 2002. We reviewed the level and nature of qualified investments and community development services. At the prior examination dated February 12, 1998, we rated the bank Satisfactory. We considered CD activities the bank submitted that benefit areas outside of its current assessment area in the evaluation of its performance. These were considered because they benefited the banks prior assessment area. In addition, the bank has adequately addressed the needs of its current assessment area. . Description of Institution << First National Bank>> of << Marin>> (FNBM) is headquartered in Las Vegas, Nevada. The bank has no branches. The bank began operations in San Rafael, California in July 1984 as a full service bank. FNBM maintained a wide range of products until 1995 when it began focusing primarily on one type of product, a partially secured credit card. FNBM received a limited purpose designation from the OCC in June 1996. Limited purpose banks offer only a narrow product line. The bank moved from San Rafael, California to Las Vegas, Nevada in November 1998. FNBM offers partially and fully secured credit cards to sub-prime borrowers with the ultimate goal of helping troubled borrowers to repair credit and ultimately become eligible for an unsecured credit card. Customer contacts for this product transpire over the telephone, through the mail, and through the Internet. The bank has 806 employees. The majority of the staff consists of customer representatives. There are 17 officers. As of March 30, 2002, FNBM reported total assets of $230 million and year-to-date net income of $1.8 million. FNBM is a wholly owned subsidiary of Marin National Bancorp (MNB), which is headquartered in Las Vegas, Nevada. As of March 31, 2002, MNB reported total assets of $36 million and a year-to-date net loss of $11 thousand. The bank keeps all of its receivables. It is important to take into consideration in evaluating the banks CRA performance, the substantial impact to the banks net earnings during the evaluation period. The reduction in net earnings is primarily due to the significant amount of monetary restitutions to consumers required by the OCC. The table below shows financial information for the four years since the last CRA examination and through the end of the most recent quarter. Table 1: Financial Information (000s) Year-end 1998 Year-end 1999 Year-end 2000 Year-end 2001 Most Recent Quarter-end 3/31/2002 Average for Evaluation Period Tier 1 Capital 17,189* 28,486* 32,360* 29,675* 30,811* 27,704 Total Income 54,442* 102,376* 170,879* 194,363* 204,896** 145,391 Net Operating Income 9,102* 18,277* 11,065* 2,741* 7,100** 9,657 Total Assets 155, 031* 209, 129* 192, 580* 239, 649* 230, 203* 205, 318 Source: Consolidated Report of Condition and Income and bank reported data. * Actual data reported. ** Annualized data reported. Description of Assessment Area FNBM operates in an urban area. The bank has designated a majority of Clark County as its assessment area. The assessment area consists of 110 census tracts and includes the cities of Las Vegas, North Las Vegas, Henderson, and the unincorporated areas of Clark County, which comprise the Las Vegas Valley. The assessment area meets the legal requirements of the CRA. All the census tracts that the bank excluded from its assessment area are on the perimeter of Clark County; none are low-or moderate-income (LMI) census tracts. The table below shows the demographics of the banks assessment area. Table 2: Assessment Area Description Number Low Moderate Middle Upper Tracts 110 6% 19% 46% 29% *Families 181, 341 18% 18% 23% 41% ** Businesses 42,883 4% 12% 40% 44% Source: Demographic Data -1990 U. S. Census, Dun & Bradstreet Data. *Represents families by income level. ** Represents businesses by income level of census tract. 3 Major employers include hotels, gaming, and service-related industries. Government, retail trades, mining, manufacturing, and agriculture are also among the most significant employers. However, the Las Vegas assessment area and the entire state of Nevada are still dominated completely by the gaming/tourist industry. In September 2001, gaming revenue fell for the first time in years. This was the result of the September 11, 2001, terrorist attack on the United States. The unemployment rate has climbed steadily upward and as of March 31, 2002, was at 6.29%. The area has grown significantly over the last decade and has a population of about 2 million. Housing prices also appreciated significantly with the median existing home price at $137 thousand. The 2001 HUD updated median family income is $52,100. Las Vegas has several community-based organizations with a community development purpose, particularly for small business development or affordable housing. Generally, these organizations have limited expertise in community development activities. The area has a critical shortage of affordable housing units. The rapid influx of people has aggravated the problem. Housing prices and rents have increased substantially faster than income levels. Although there has been significant job growth, most of these jobs are in the service or retail sectors and offer lower pay, often without benefits. The city has a large volume of substandard housing. Estimates are that there are 17 thousand substandard rental units. A large population of homeless people, many with chemical dependency, also puts pressure on city housing resources. These factors contribute to the overall housing need. Virtually all community contacts commented on the lack of houses or rental units for LMI people. They said that the areas rapid growth far exceeds the number of available housing units. Because most of the new jobs that attract people to the area are minimum wage jobs, there is a widening gap in the ability to afford single-family residences driven up by the demand and general shortage of housing units. There is a great need for affordable multi-family rental units to accommodate the increase in population. Several community contacts commented on the need for start-up financing for small businesses. Some contacts said that small business owners also need technical assistance from the financial institutions to understand basic banking and how to prepare a business plan. We reviewed 12 community contacts made by the OCC and other regulatory agencies during the last two years. These contacts included representatives from local government, economic development organizations, organizations that focus on affordable housing issues, and organizations that provide needed social services to LMI people. We also performed two additional community contacts, one with a community development organization and the other with an affordable housing organization. There are a number of competing financial institutions in the assessment area. Some of these are significantly larger and have more dedicated resources for community development loans and investments. The larger institutions also have more human resources available to provide community development services. While other institutions are smaller, they also compete for available investments in the assessment area. As a result, there is a high degree of competition and certain limitations as to availability of CD investment opportunities. Since FNBMs business focus is credit cards, the bank lacks employees who have the expertise in community development lending. Therefore, the bank focuses its community development efforts on qualified investments and CD services. Conclusions About Performance 4 Summary FNBM has done an excellent job of serving its assessment areas community development needs through a variety of investments and services. As noted in the table below, the bank invested $269 thousand in projects and activities that benefit the banks assessment area. This represents only investments that were still on the banks books as of the date of this evaluation. In addition, the bank invested an additional $250 thousand in three investments that matured during the review period. Employees of FNBM have provided numerous hours of qualified CD services. The focus of the banks qualified investments, grants, and donations was primarily on providing financial education and housing related services for LMI individuals. The focus of the banks CD services was on providing financial expertise to the community as well as to various community development organizations. These efforts were targeted at specific needs identified through FNBMs needs assessment process. FNBM provided a high number of CD services and qualified investments, grants, and donations in response to the banks research regarding the needs of LMI individuals in its assessment area. Through its investments, grants, and membership on boards of community development organizations, the bank was able to help implement some programs in the community that were not available prior to their implementation. The banks efforts are significant considering the opportunities available for limited purpose banks in this assessment area and the banks resources. The bank demonstrated innovativeness by placing deposits in commercial banks that have CD lending expertise. The purpose of the funds was to provide community development loans and to promote and finance community development activities that benefit LMI individuals. The bank showed excellent responsiveness to the community development needs in its assessment area. Management worked with some community based organizations to implement community development programs that address a critical issue faced by LMI individuals in the assessment area. This included participation in an innovative program, which aims to identify and assist individuals who have been harmed by predatory lending. Qualified Investments During the review period, FNBM provided $269 thousand in qualified investments, grants, and donations to community development organizations. In addition, the bank also provided $250 thousand in investments, which are not reflected in the tables below since these investments were no longer outstanding as of the date of this examination. All of the investments benefited the assessment area. 5 Table 3b: Qualified Investment Activity (000s) Benefits AA Originated Investments $100 Originated Grants $169 Prior-Period Investments that Remain Outstanding $ 0 Total Qualified Investments $269 Unfunded Commitments* $ 0 * Unfunded Commitments means legally binding investment commitments that are tracked and recorded by the banks financial reporting system. Table 4b: Qualified Investment Percentages Benefit AA (%) Total Investments/Average Tier 1 Capital 1% Total Investments/Average Total Income .2% FNBMs most notable qualified investments, grants, and donations in the assessment area consist of the following: $100 thousand certificate of deposit, which was placed in a commercial bank to be used by a housing center for its advocacy program that assists LMI borrowers who have been harmed by predatory lending. $24 thousand to two organizations that provide programs for LMI youth. $38 thousand to seven organizations that promote affordable housing. $10 thousand to two community development corporations. $8 thousand to two organizations that promote economic development by financing small businesses. Consideration of Activities that Benefit Areas Outside the Banks Assessment Area FNBM has adequately addressed the needs of its assessment area; therefore we considered activities outside the assessment area. During the review period, FNBM had $500 thousand in qualified investments on its books that benefited the banks prior assessment area in San Rafael, California. These are not included in the tables above since they were not outstanding as of the date of this examination. Community Development Services 6 FNBM provide a significant number of ongoing CD services, which are very responsive to the needs of its assessment area. Employees provide credit education for LMI students and serve on committees of various organizations that serve the LMI community. One of the organizations focuses on assisting LMI individuals who have been harmed by predatory lending. A majority of the organizations focus on providing affordable housing and community revitalization. The remaining community development organizations provide services for LMI individuals, including LMI youth. The bank provides CD services in one innovative community development program. Some of the services are complex. In addition, all the services are very responsive to some of the most significant needs in the banks assessment area. The bank has succeeded in maintaining a high profile in the assessment area through its memberships on numerous boards and the advisory committees of numerous community development organizations. All of the services benefit the banks assessment area. The following table highlights the banks CD services: Table 7: Community Development Service Activities CD Service Benefits AA Outside AA A number of employees provide Credit Card Financial Literacy Education at 8 local high schools, which have a predominantlyLMI student population. X The CRA Officer is a member of the board of directors of an organization that provides programs for LMI children and their families. He serves on various committees, including the fundraising and budget and finance committees. X An officer of the bank serves as a committee member of an organization which seeks to revitalize a LMI area of central downtown Las Vegas. The officer provides assistance on financial matters. X Employees of the bank provide financial services for an organization that engages in comprehensive community development projects that promote neighborhood revitalization and economic development. X An officer of the bank serves as a member of a community development organization whose mission is to rebuild whole communities by supporting community development corporations (CDCs). The officer performs the duties of committee oversight and strategic planning in an effort to locate, access, and negotiate funding for four CDCs. This service is considered to be complex because of the expertise and effort needed to negotiate funding. X 7 An officer of the bank serves as a member of a fair housing center. The officer participates by reviewing and assessing individual cases of loan origination and subordination where predatory lending may be present. The officer also reviews financial documents and chronology of events in order to decide on corrective actions and intervention avenues for LMI borrowers who have been harmed by predatory lending. This service is considered to be complex because of the expertise and effort needed to decide the most advantageous course of action for each of the LMI borrowers. It is also considered to be an innovative type of service. X An employee of the bank provides technical assistance on financial matters to a community development organization. The overall mission of the organization is to improve the quality of life for residents of a low-income neighborhood and to foster and promote community-wide interests and involvement in the problems associated with vandalism, drug-related criminal activity, housing deterioration, and unemployment. X An employee of the bank provides technical assistance on financial matters to an organization whose mission is to provide computers and related communication technology to LMI individuals who otherwise might have little opportunity to use or learn to use these technologies. X The CRA officer is a member of the board of directors of an organization whose mission is to assist LMI individuals and families to become self sufficient through direct services, training, and referral. He provides financial expertise as a member of the budget and finance committee and as a member of several fundraising committees. X The CRA Officer is a member of a community development corporation in East Las Vegas. He serves on various committees, including the fundraising and budget and finance committees. X X means yes; Blank means No. Compliance with Anti-Discrimination Laws and Regulations We determined that FNBM had engaged in a number of unfair and deceptive practices during the period covered by this evaluation. As a result, the banks Board of Directors signed a Stipulation and Consent to the Issuance of a Consent Order and a Consent Order, dated December 3, 2001. The Consent Order required a significant amount of monetary restitution to consumers, and it required management to change certain practices prospectively. The unfair and deceptive practices leading to the Consent Order and the OCCs determination that the bank had violated the Federal Trade Commission Act, negatively impacted the banks CRA rating. Since signing the Consent Order, the 8 bank has made changes to its solicitations. Consumer complaints have decreased significantly. An analysis of two years public comments and consumer complaint information for Limited Purpose institutions was performed according to the OCCs risk-based fair lending approach. Based on its analysis of the information, the OCC decided that a comprehensive fair lending examination would not need to be conducted with the CRA evaluation this year. The latest comprehensive fair lending examination was performed in March 1999. During the March 3, 2002, compliance examination, we reviewed the banks fair lending policies, procedures, training, monitoring, and compliance audits. We also reviewed for technical compliance with the Equal Credit Opportunity Act/Regulation B. We made some recommendations for enhancements to the banks program. We did not cite any violations of law or regulation. 9 Definitions and Common Abbreviations The following terms and abbreviations are used throughout this performance evaluation. The definitions are intended to provide the reader with a general understanding of the terms, not a strict legal definition. Affiliate Any company that controls, is controlled by, or is under common control with another company. A company is under common control with another company if the same company directly or indirectly controls both companies. A bank subsidiary is controlled by the bank and is, therefore, an affiliate. Assessment Area (AA) A geographic area that consists generally of one or more MSAs (using the MSA boundaries that were in effect as of January 1 of the calendar year in which the delineation is made) or one or more contiguous political subdivisions, such as counties, cities, or towns, in which the bank has its main office, branches, and deposit-taking ATMs. Benefit to Assessment Area A qualified Community Development activity benefits the assessment area if (i) the activity benefits areas within the assessment area, or (ii) the activity benefits a broader statewide or regional area that includes the banks assessment area. If a bank has adequately addressed the needs of its assessment area, then the OCC also considers activities submitted by the bank that benefit areas outside of its assessment area. Block Numbering Area (BNA) Statistical subdivisions of counties in which census tracts have not been established. The United States Census Bureau has established BNAs in conjunction with state agencies. Census Tract (CT) Small, locally defined statistical areas within metropolitan statistical areas. These areas are determined by the United States Census Bureau in an attempt to group homogenous populations. A CT has defined boundaries per 10-year census and an average population of 4,000. Community Development (CD) Affordable housing for low-or moderate-income individuals; community services targeted to low-or moderate-income individuals; activities that promote economic development by financing businesses or farms that meet the size eligibility standards of the Small Business Administrations Development Company or Small Business Investment Company programs (13 CFR 121.301)) or have gross annual revenues of $1 million or less; or activities that revitalize or stabilize low-or moderate-income geographies. Community Reinvestment Act (CRA) The statute that requires the OCC to evaluate a banks record of meeting the credit needs of its local community, consistent with the safe and sound operation of the bank, and to take this record into account when evaluating certain corporate applications filed by the bank. Geography A census tract or a block numbering area delineated by the United States Bureau of the Census in the most recent decennial census. 10 11 Limited Purpose Institution An institution that offers only a narrow product line (such as credit cards or automobile loans) to a regional or broader market and for which a designation as limited purpose bank is in effect. Median Family Income (MFI) The median income determined by the United States Census Bureau every 10 years and used to determine the income level category of geographies. Also, it is the median income determined by the Department of Housing and Urban Development annually that is used to determine the income level category of families. For any given geography, the median is the point at which half of the families have income above it and half below it. (See the four ategories of median income below.) c Low-Income An income level that is less than 50% of the MFI. Moderate-Income An income level that is at least 50% and less than 80% of the MFI. Middle-Income An income level that is at least 80% and less than 120% of the MFI. Upper-Income An income level that is 120% or more of the MFI. Metropolitan Statistical Area (MSA) Area defined by the director of the United States Office of Management and Budget. MSAs consist of one or more counties, including large population centers and nearby communities that have a high degree of interaction. Net Operating Income As listed in the Consolidated Report of Condition and Income: Income before income taxes and extraordinary items and other adjustments. Tier 1 Capital The total of common shareholders equity, perpetual preferred shareholders equity with noncumulative dividends, retained earnings and minority interests in the equity accounts of consolidated subsidiaries. Total Assets Total bank assets as listed in the Consolidated Report of Condition and Income. Total Income From the Consolidated Report of Condition and Income Total Interest income plus Total Noninterest income. http://www.occ.treas.gov/cra/limited.htm LP First National Bank of Marin NV Las Vegas 20291 6/28/1996 FIRST NATIONAL BANK>> OF << MARIN>> LAS VEGAS May-2002 585 PILOT ROAD LAS VEGAS NV 89119 http://www.occ.treas.gov/foia/foiadocs.htm CONSENT ORDER No. Bank, City Date California 96-54 << First National Bank>> of << Marin>> , San Rafael 10/17/96 Cease and Desist Orders, By Consent No. Name/Bank/City Date Nevada 2001- 97 << First National Bank>> of << Marin>> , Las Vegas 12/03/01 The Office of the Comptroller of the Currency (OCC) settles case against the First National Bank of Marin, Las Vegas, involving misleading and deceptive marketing of secured credit cards. In a consent order, http://www.occ.treas.gov/ftp/eas/ea2001-97.pdf the bank agreed to cease practices that the OCC alleged are unlawful or unsafe and unsound and to pay restitution to customers harmed by those practices. Fact Sheet O Comptroller of the Currency Administrator of National Banks December 4, 2001 Fact Sheet OCC Settles Case Against << First National Bank>> of << Marin>> Involving Misleading and Deceptive Marketing of Secured Credit Cards The Office of the Comptroller of the Currency has settled a case against << First National Bank>> of << Marin>> , Las Vegas, in which the bank agreed to cease practices that the OCC alleged are unlawful or unsafe and unsound, and to pay restitution to customers harmed by those practices. The bank was required to establish a reserve to handle restitution payments and to make an initial deposit of $4 million. The bank will add additional amounts, if required, to fully fund the reserve within 60 days. The OCC concluded that the banks conduct in marketing its secured credit card constituted unfair and deceptive practices in violation of the Federal Trade Commission Act, and was unsafe or unsound within the meaning of the Federal Deposit Insurance Act. Unfair and Deceptive Practices << First National Bank>> of << Marin>> markets to consumers with poor or non-existent credit histories. Many credit card lenders, as a matter of prudent underwriting, will require such consumers to maintain a savings account large enough to secure the line of credit. Under the banks program, the funds for the savings deposit are instead charged against the credit line, reducing the amount of available credit until the charge is paid off. In the OCCs view, since January, 1998, the bank has used false and misleading statements, in violation of the Federal Trade Commission Act, to induce these consumers to apply for its credit card and to pay substantial fees. The banks marketing led consumers to believe that they did not first have to submit funds for a savings deposit in order to receive a credit card with a usable amount of available credit. In reality, due to the deposit requirement and fees charged against the card, the vast majority of applicants received a credit card with little or no available credit. Among the practices cited by the OCC: Under one program sponsored by the bank, credit card applicants were required to pay up to $79 in cash to apply for a guaranteed card with credit lines between $250 and $600. The credit line was secured by a savings deposit of $200 charged against the card when it was first issued. In addition, other fees of up to $56 were charged to the card. --2 As a result, individuals approved for a $250 credit line had little or no available credit when the card was first issued. Instead, those consumers would then have to make additional payments to the bank to obtain usable credit. Roughly 80 percent of all applicants received the $250 credit line. Another program required the consumer to pay $79 for a guaranteed card with a fixed credit line of $400. The credit line was secured by a savings deposit of $350 charged against the card when it was first issued. The initial charge for the savings deposit, along with application and other fees of $37 that were charged against the card, meant that all applicants would receive a card with little or no available credit when first issued. In written solicitations, the bank represented that, You do not have to send in money for a savings deposit. The bank also told prospective customers: If you have credit problems or no credit history, and you want your own VISA card without having to send in hundreds of dollars for a savings deposit . . . this is it! Despite making these claims, the bank never disclosed in its solicitations that if the consumer did not send in money for the savings deposit, the consumer would have little or no available credit, and would have to make additional payments to the bank before being able to use the card. The bank promised that the card would have benefits like instant cash, and worldwide acceptance. The banks also said it would assure customers security and peace of mind, and said it would help them be prepared for emergencies. All of these benefits require a usable amount of available credit, which the vast majority of applicants did not receive. In one written solicitation, a message on the outside of the envelope stated, you do NOT need to send a savings deposit to get your new VISA credit card . . . not one penny. In another, the envelope message promised: Guaranteed approval, no matter what your credit situation, plus . . . you do not have to send in money for a savings deposit! When the bank disclosed in the solicitations that the savings deposit would be charged against the credit card, it did not disclose that the customer might receive little or no usable credit as a result. The OCC received complaints from consumers who had not understood that the card they received would have little or no available credit. The OCC believes that consumers may easily have been confused by the banks solicitations. On average, a consumer was required to pay $100 or more in application fees to obtain the banks credit card. The bank did not disclose, until after the customer paid the non-refundable portion of these application fees, (usually $49-$ 79) that he or she might --and probably would --receive a card with little or no available credit. --3 Consent Order Provisions The consent order requires the bank to refund application and other fees to consumers who received a credit card with less than $50 in available credit, and cancelled the card within 60 days after the card was issued to them by the bank. In addition, the consent order requires that the bank refund application fees to consumers who learned that they were to receive a card with $50 or less in available credit, and before receiving a card cancelled their application or failed to complete the application process. The consent order also requires that the bank change its marketing practices and disclosures. Among the provisions: The bank may not make any misleading or deceptive representation regarding the cost or operation of a credit card, or what available credit the consumer will receive at account opening. If the credit may be secured in whole or in part by a savings deposit that is charged against the credit card, the bank may not use a phrase such as Send no money for a savings deposit, unless the bank clearly and conspicuously discloses that the consumer's available credit will be reduced by the charge for the savings deposit." If the bank could approve an applicant for a card with less than $50 in available credit at account opening, the bank may not represent that any applicant who applies may be able to employ the card for uses that require available credit, unless the bank clearly and conspicuously discloses that the consumer could be approved for a card with less than $50 in available credit at account opening, will not be able to employ the card for those uses if the consumer is approved for such a card. If a solicitation discloses a range of credit lines for which a consumer may be approved, and if the consumer may be approved for a credit line in that range that would result in less than $50 in available credit at account opening, the bank must clearly and conspicuously disclose in the solicitation that if the consumer is approved for that credit line the consumer will have little or no available credit at account opening. In addition, if the consumer is approved for a card with $50 or less in immediately available credit, the bank must subsequently disclose to the consumer, before the card is activated for purchases by the consumer, the specific dollar amount of credit that will be available for the consumer's immediate use on the credit line that the consumer has received. The order also requires that the bank implement a written program to identify and evaluate, on an ongoing basis, communications from consumers who say that they did not understand --4 the banks solicitations. As part of this program the bank must evaluate, on an ongoing basis, the risk that the banks solicitations are misleading or deceptive or in violation of other law, and determine whether the solicitations should be modified or revised. # # # The OCC charters, regulates and examines approximately 2, 200 national banks and 52 federal branches of foreign banks in the U. S., accounting for more than 54 percent of the nations banking assets. Its mission is to ensure a safe and sound and competitive national banking system that supports the citizens, communities and economy of the United States. http://www.occ.treas.gov/foia/factsheet1fnbmarin201-97.pdf http://www.occ.treas.gov/query/oop/qsumrhit.htw?CiWebHitsFile=/ftp/craeval/20291.pdf&CiRestriction=%20First%20National%20Bank%20of%20Marin%20&CiQueryFile=/query.idq&CiBeginHilite=%3CB%20CLASS=HIT%3E&CiEndHilite=%3C/B%3E&CiUserParam3=queryhit.htm Currency Administrator of National Banks Washington, DC 20219 Public Disclosure February 12, 1998 Community Reinvestment Act Performance Evaluation First National Bank of Marin Charter Number: 20291 1201 Fifth Avenue San Rafael, CA 94901 Office of the Comptroller of the Currency Western District Office 50 Fremont Street, ... OCC Review Report from 1998: Description of Institution << First National Bank>> of << Marin>> opened in July 1984 as a full service bank. FNBM maintained a wide range of products until 1995 when the bank began focusing primarily on one product, a partially secured credit card. With the success of this card, the Board of Directors decided to focus solely on the credit card product. Because customer contacts for this product transpire over the phone or through mail, FNBM closed its main office to customer traffic on July 1, 1996. The branch now serves as the banks administrative office and is staffed with only about 16 people. The staff includes a few bank officers and administrative personnel. The bank contracts with outside firms for marketing and collection activities. Effective June 28, 1996, FNBM received designation as a limited purpose institution, for purposes of the Community Reinvestment Act. The bank uses savings deposit accounts and certificates of deposit to fund the credit cards. The banks assets total $128 million with equity of $12 million. In 1997, the bank reported net income of $6.6 million, including accounting adjustments. However, in 1996, the bank reported a net loss of $5.6million. Earlier in the assessment period, the banks resources were limited due to operating losses and capital constraints. Also, the bank operated under a Consent Order. This required the Board of Directors and its officers to focus their efforts on improving the financial condition of the bank. We assessed the banks CRA performance in light of these factors. Assessment Area Description FNBMs assessment area consists of all 51 census tracts in Marin County, California. Marin County is located within the San Francisco Metropolitan Statistical Area (MSA), which includes Marin, San Francisco, and San Mateo Counties. Marin County covers 606 square miles and is directly north of San Francisco. While the majority of tracts are middle-and upper-income, the banks assessment area contains four moderate-income tracts. These moderate-income tracts include Marin City, the Canal District in San Rafael, Novato, and Dillon Beach. The following table shows the number and percent of census tracts and families by income level within the banks assessment area: << First National Bank>> of << Marin>> Assessment Area Low-Income Moderate-Income Middle-Income Upper-Income Census Tracts Families Census Tracts Families Census Tracts Families Census Tracts Families 0 0% 8, 130 14% 4 8% 9, 101 15% 20 39% 12,204 21% 27 53% 29,514 50% Source: Demographic Data -1990 U. S. Census 4 Marin county is one of the most affluent counties in the San Francisco Bay Area. The 1990 U. S. Census Bureau data reported median family income for Marin County at $59,157 versus $49,282 for the entire MSA. Incomes throughout the county have increased. Updated information from the Department of Housing and Urban Development (HUD) shows San Francisco MSAs median family income at $61,300 for 1996. San Rafael Chamber of Commerce reported the average cost of a single-family residence in Marin County at $365,000 in 1995. The areas economy is dominated by small and mid-sized businesses, with a high concentration of software companies. Other major employers include government services, insurance companies, financial institutions, hospitals and utility companies. The local banking market is extremely competitive with regional banks, multinational bank branches, and several community banks. Housing prices and the overall cost of living have made it extremely difficult for low-and moderate-income families to live in Marin although they work in the area. According to local groups, the greatest need is for affordable housing. Multiple families share apartments to afford the high cost. Other needs include subsidized day care, small business financing, and education. Community contacts and area research showed that Marin County has a wide range of organizations that help serve these needs. Community development lending, investment, and service opportunities are available through these groups. 5 CONCLUSIONS WITH RESPECT TO PERFORMANCE We rated the bank as having a Satisfactory record of performance under the Community Reinvestment Act. Based upon the guidance provided by the OCC following the last CRA examination, management and the board provided sufficient community development investments and services, and exhibited an adequate responsiveness to credit and community development needs. During the rating period, the bank operated under a Consent Order to improve its financial condition. We considered the banks limited staff as well as its financial condition during the rating period to reach our conclusions. We evaluated the banks qualified investments and community development services since the last evaluation dated December 31, 1996. While the dollar volume is satisfactory, the banks investments and services do not exhibit innovative or complex characteristics. The bank has not made any community development loans. << First National Bank>> of << Marin>> -Qualified Investments Community Bank of the Bay (CBB) -In February 1998 and December 1997, FNBM invested at below market rates in two certificates of deposit for $300,000 and $100,000, respectively, at this community development bank. CBBs lending activities cover lower income areas in San Francisco and Oakland, as well as in adjacent Bay Area cities such as Richmond, West Berkeley, Marin City, or East Palo Alto. CBB focuses on community development projects that conventional banks will not fund. In December 1997, FNBM arranged a forum with CBB, Marin Family Action, Southern Bible Institute, and Hamilton Credit Union to discuss Marin County credit needs and how CBB can best meet these needs. Mission National Bank -FNBM invested a $100,000 certificate of deposit at a below market rate at this minority-owned, small business bank in December 1997. Mission National Bank presently has three loans to small businesses in Marin County. They plan to make additional small business loans to this area through referrals from FNBM. Grants -The bank provided $4,150 in grants to six different community development agencies in 1997. The largest of these grants for $2,500 helped Marin Family Action (MFA). MFA advocates for the low and moderate income families in Marin County. MFA was instrumental in obtaining approval to convert Hamilton Naval Base housing into low-income housing. Also, this organization provides credit repair, home ownership, computers and computer classes to their constituents. Other grants for between $150 to $500 helped local groups provide food, housing, mentoring and job training to low and moderate income people. 6 << First National Bank>> of << Marin>> -Community Development Services A bank officer provided financial counseling, business planning, and credit counseling to three minority-owned, low-income, small business owners. One of the businesses involves the musical recording of a compact disk. The bank officer helped document the steps needed to pursue this effort, especially the budgeting and financial accounting needed. This information will be used to educate other interested small business owners in this process. A bank officer is a board member of, and provides financial expertise to, Southern Marin Bible Institute (SMBI). SMBI is a non-profit educational institute founded in 1980 in Marin City . The school caters to socially and economically disadvantaged people. SMBI is developing a program to provide housing and counseling for low-income people, completing drug rehabilitation programs. The bank officer provided a class on Credit Management and Loans to SMBI students at the bank. She also prepared a budget and helped raise funds for SMBI. A bank director provided his expertise in obtaining financing for a group home located in Petaluma, California. This home provides low cost housing for people who were previously homeless but have obtained jobs. Although the home is located in Petaluma, about seven miles north of Novato, it serves the needs of both communities. The home is owned by the Committee on the Shelterless (COTS). Compliance with Anti-Discrimination Laws and Regulations We reviewed the banks compliance with fair lending laws and regulations during our December 31, 1996 examination. We identified no violations of the substantive provisions of the anti-discrimination laws and regulations. Next Report: ... evaluation of the institutions record of meeting the credit needs of its community. This document is an evaluation of the CRA performance of First National Bank of Marin prepared by The Office of the Comptroller of the Currency, the institutions supervisory agency, as of February 12, 1998. The agency evaluates ... ... set forth in Appendix A to 12 CFR Part 25. Institutions CRA Rating: This institution is rated Satisfactory under the Community Development Test. First National Bank of Marin (FNBM) made an adequate level of qualified investments and provided sufficient community development services in relation to its resources and ... ... responsiveness to the needs of the community was adequate in light of its managerial and financial resources. 3 Description of Institution First National Bank of Marin opened in July 1984 as a full service bank. FNBM maintained a wide range of products until 1995 when the bank began focusing primarily on one ... ... and Dillon Beach. The following table shows the number and percent of census tracts and families by income level within the banks assessment area: First National Bank of Marin Assessment Area Low-Income Moderate-Income Middle-Income Upper-Income Census Tracts Families Census Tracts Families Census Tracts Families Census ... ... the banks investments and services do not exhibit innovative or complex characteristics. The bank has not made any community development loans. First National Bank of Marin -Qualified Investments Community Bank of the Bay (CBB) -In February 1998 and December 1997, FNBM invested at below market rates in two certificates ... ... Other grants for between $150 to $500 helped local groups provide food, housing, mentoring and job training to low and moderate income people. 6 First National Bank of Marin -Community Development Services A bank officer provided financial counseling, business planning, and credit counseling to three minority-owned, ...

First National Bank of Marin was placed under a Consent order in December 2001, by the Office of Comptroller of Currency, Department of Treasury (Federal) for deceptive practices. It appears Marin Bank has not changed its ways, since then, quite a bit of info follows, including a glowing report on their Officers inolvement in investing in Las Vegas community, of course it is not philanthropic, it is REQUIRED by the Feds to be chartered under this Limited Purpose Bank regulations, they have to do what is called assessment area community re-investment, there are now 17 directors on the Board of Directors: From the OCC website: Wholesale and Limited Purpose Banks under the Community Reinvestment Act Updated October 9, 2002 Under the Community Reinvestment Act, a bank may apply to its primary federal regulator to be designated a wholesale or a limited purpose bank. Such banks are evaluated for performance under standards found at 12 CFR 25.25. The regulation offers the following definitions: Limited purpose bank means a bank that offers only a narrow product line (such as credit card or motor vehicle loans) to a regional or broader market and for which a designation as a limited purpose bank is in effect. Limited purpose banks are identified as LP in the TYPE column in the table below. Wholesale bank means a bank that is not in the business of extending home mortgage, small business, small farm, or consumer loans to retail customers, and for which a designation as a wholesale bank is in effect. Wholesale banks are identified as WH in the TYPE column in the table below. The following national banks have been designated as wholesale or limited purpose banks by the OCC: http://www.occ.treas.gov/query/oop/qfullhit.htw?CiWebHitsFile=/ftp/craeval/apr03/20291.pdf&CiRestriction=%20First%20National%20Bank%20of%20Marin%20&CiQueryFile=/query.idq&CiBeginHilite=%3CB%20CLASS=HIT%3E&CiEndHilite=%3C/B%3E&CiUserParam3=queryhit.htm&CiHiliteType=Full LIMITED PURPOSE Comptroller of the Currency Administrator of National Banks PUBLIC DISCLOSURE May 20, 2002 COMMUNITY REINVESTMENT ACT PERFORMANCE EVALUATION << First National Bank>> of << Marin>> Charter Number 20291 585 Pilot Road Las Vegas, NV 89119 Comptroller of the Currency Western District Office 50 Fremont Street, Suite 3900 San Francisco, CA 94105 NOTE: This document is an evaluation of this institutions record of meeting the credit needs of its entire community, including low-and moderate-income neighborhoods consistent with safe and sound operation of the institution. This evaluation is not, nor should it be construed as, an assessment of the financial condition of this institution. The rating assigned to this institution does not represent an analysis, conclusion, or opinion of the federal financial supervisory agency concerning the safety and soundness of this financial institution. Institutions CRA rating: This institution is rated Satisfactory. The conclusions for the three rating criteria are: The bank demonstrates a high level of community development (CD) services and qualified investment activity. The bank demonstrates occasional use of innovative CD investments and services. The bank demonstrates excellent responsiveness to credit and CD needs in its assessment area. The banks violation of the Federal Trade Commission Act, which prohibits unfair or deceptive acts or practices, negatively impacted this rating, but did not result in a less than satisfactory rating. Scope of the Examination In evaluating the banks performance under the CRA, we reviewed community development activities from February 13, 1998, through June 3, 2002. We reviewed the level and nature of qualified investments and community development services. At the prior examination dated February 12, 1998, we rated the bank Satisfactory. We considered CD activities the bank submitted that benefit areas outside of its current assessment area in the evaluation of its performance. These were considered because they benefited the banks prior assessment area. In addition, the bank has adequately addressed the needs of its current assessment area. . Description of Institution << First National Bank>> of << Marin>> (FNBM) is headquartered in Las Vegas, Nevada. The bank has no branches. The bank began operations in San Rafael, California in July 1984 as a full service bank. FNBM maintained a wide range of products until 1995 when it began focusing primarily on one type of product, a partially secured credit card. FNBM received a limited purpose designation from the OCC in June 1996. Limited purpose banks offer only a narrow product line. The bank moved from San Rafael, California to Las Vegas, Nevada in November 1998. FNBM offers partially and fully secured credit cards to sub-prime borrowers with the ultimate goal of helping troubled borrowers to repair credit and ultimately become eligible for an unsecured credit card. Customer contacts for this product transpire over the telephone, through the mail, and through the Internet. The bank has 806 employees. The majority of the staff consists of customer representatives. There are 17 officers. As of March 30, 2002, FNBM reported total assets of $230 million and year-to-date net income of $1.8 million. FNBM is a wholly owned subsidiary of Marin National Bancorp (MNB), which is headquartered in Las Vegas, Nevada. As of March 31, 2002, MNB reported total assets of $36 million and a year-to-date net loss of $11 thousand. The bank keeps all of its receivables. It is important to take into consideration in evaluating the banks CRA performance, the substantial impact to the banks net earnings during the evaluation period. The reduction in net earnings is primarily due to the significant amount of monetary restitutions to consumers required by the OCC. The table below shows financial information for the four years since the last CRA examination and through the end of the most recent quarter. Table 1: Financial Information (000s) Year-end 1998 Year-end 1999 Year-end 2000 Year-end 2001 Most Recent Quarter-end 3/31/2002 Average for Evaluation Period Tier 1 Capital 17,189* 28,486* 32,360* 29,675* 30,811* 27,704 Total Income 54,442* 102,376* 170,879* 194,363* 204,896** 145,391 Net Operating Income 9,102* 18,277* 11,065* 2,741* 7,100** 9,657 Total Assets 155, 031* 209, 129* 192, 580* 239, 649* 230, 203* 205, 318 Source: Consolidated Report of Condition and Income and bank reported data. * Actual data reported. ** Annualized data reported. Description of Assessment Area FNBM operates in an urban area. The bank has designated a majority of Clark County as its assessment area. The assessment area consists of 110 census tracts and includes the cities of Las Vegas, North Las Vegas, Henderson, and the unincorporated areas of Clark County, which comprise the Las Vegas Valley. The assessment area meets the legal requirements of the CRA. All the census tracts that the bank excluded from its assessment area are on the perimeter of Clark County; none are low-or moderate-income (LMI) census tracts. The table below shows the demographics of the banks assessment area. Table 2: Assessment Area Description Number Low Moderate Middle Upper Tracts 110 6% 19% 46% 29% *Families 181, 341 18% 18% 23% 41% ** Businesses 42,883 4% 12% 40% 44% Source: Demographic Data -1990 U. S. Census, Dun & Bradstreet Data. *Represents families by income level. ** Represents businesses by income level of census tract. 3 Major employers include hotels, gaming, and service-related industries. Government, retail trades, mining, manufacturing, and agriculture are also among the most significant employers. However, the Las Vegas assessment area and the entire state of Nevada are still dominated completely by the gaming/tourist industry. In September 2001, gaming revenue fell for the first time in years. This was the result of the September 11, 2001, terrorist attack on the United States. The unemployment rate has climbed steadily upward and as of March 31, 2002, was at 6.29%. The area has grown significantly over the last decade and has a population of about 2 million. Housing prices also appreciated significantly with the median existing home price at $137 thousand. The 2001 HUD updated median family income is $52,100. Las Vegas has several community-based organizations with a community development purpose, particularly for small business development or affordable housing. Generally, these organizations have limited expertise in community development activities. The area has a critical shortage of affordable housing units. The rapid influx of people has aggravated the problem. Housing prices and rents have increased substantially faster than income levels. Although there has been significant job growth, most of these jobs are in the service or retail sectors and offer lower pay, often without benefits. The city has a large volume of substandard housing. Estimates are that there are 17 thousand substandard rental units. A large population of homeless people, many with chemical dependency, also puts pressure on city housing resources. These factors contribute to the overall housing need. Virtually all community contacts commented on the lack of houses or rental units for LMI people. They said that the areas rapid growth far exceeds the number of available housing units. Because most of the new jobs that attract people to the area are minimum wage jobs, there is a widening gap in the ability to afford single-family residences driven up by the demand and general shortage of housing units. There is a great need for affordable multi-family rental units to accommodate the increase in population. Several community contacts commented on the need for start-up financing for small businesses. Some contacts said that small business owners also need technical assistance from the financial institutions to understand basic banking and how to prepare a business plan. We reviewed 12 community contacts made by the OCC and other regulatory agencies during the last two years. These contacts included representatives from local government, economic development organizations, organizations that focus on affordable housing issues, and organizations that provide needed social services to LMI people. We also performed two additional community contacts, one with a community development organization and the other with an affordable housing organization. There are a number of competing financial institutions in the assessment area. Some of these are significantly larger and have more dedicated resources for community development loans and investments. The larger institutions also have more human resources available to provide community development services. While other institutions are smaller, they also compete for available investments in the assessment area. As a result, there is a high degree of competition and certain limitations as to availability of CD investment opportunities. Since FNBMs business focus is credit cards, the bank lacks employees who have the expertise in community development lending. Therefore, the bank focuses its community development efforts on qualified investments and CD services. Conclusions About Performance 4 Summary FNBM has done an excellent job of serving its assessment areas community development needs through a variety of investments and services. As noted in the table below, the bank invested $269 thousand in projects and activities that benefit the banks assessment area. This represents only investments that were still on the banks books as of the date of this evaluation. In addition, the bank invested an additional $250 thousand in three investments that matured during the review period. Employees of FNBM have provided numerous hours of qualified CD services. The focus of the banks qualified investments, grants, and donations was primarily on providing financial education and housing related services for LMI individuals. The focus of the banks CD services was on providing financial expertise to the community as well as to various community development organizations. These efforts were targeted at specific needs identified through FNBMs needs assessment process. FNBM provided a high number of CD services and qualified investments, grants, and donations in response to the banks research regarding the needs of LMI individuals in its assessment area. Through its investments, grants, and membership on boards of community development organizations, the bank was able to help implement some programs in the community that were not available prior to their implementation. The banks efforts are significant considering the opportunities available for limited purpose banks in this assessment area and the banks resources. The bank demonstrated innovativeness by placing deposits in commercial banks that have CD lending expertise. The purpose of the funds was to provide community development loans and to promote and finance community development activities that benefit LMI individuals. The bank showed excellent responsiveness to the community development needs in its assessment area. Management worked with some community based organizations to implement community development programs that address a critical issue faced by LMI individuals in the assessment area. This included participation in an innovative program, which aims to identify and assist individuals who have been harmed by predatory lending. Qualified Investments During the review period, FNBM provided $269 thousand in qualified investments, grants, and donations to community development organizations. In addition, the bank also provided $250 thousand in investments, which are not reflected in the tables below since these investments were no longer outstanding as of the date of this examination. All of the investments benefited the assessment area. 5 Table 3b: Qualified Investment Activity (000s) Benefits AA Originated Investments $100 Originated Grants $169 Prior-Period Investments that Remain Outstanding $ 0 Total Qualified Investments $269 Unfunded Commitments* $ 0 * Unfunded Commitments means legally binding investment commitments that are tracked and recorded by the banks financial reporting system. Table 4b: Qualified Investment Percentages Benefit AA (%) Total Investments/Average Tier 1 Capital 1% Total Investments/Average Total Income .2% FNBMs most notable qualified investments, grants, and donations in the assessment area consist of the following: $100 thousand certificate of deposit, which was placed in a commercial bank to be used by a housing center for its advocacy program that assists LMI borrowers who have been harmed by predatory lending. $24 thousand to two organizations that provide programs for LMI youth. $38 thousand to seven organizations that promote affordable housing. $10 thousand to two community development corporations. $8 thousand to two organizations that promote economic development by financing small businesses. Consideration of Activities that Benefit Areas Outside the Banks Assessment Area FNBM has adequately addressed the needs of its assessment area; therefore we considered activities outside the assessment area. During the review period, FNBM had $500 thousand in qualified investments on its books that benefited the banks prior assessment area in San Rafael, California. These are not included in the tables above since they were not outstanding as of the date of this examination. Community Development Services 6 FNBM provide a significant number of ongoing CD services, which are very responsive to the needs of its assessment area. Employees provide credit education for LMI students and serve on committees of various organizations that serve the LMI community. One of the organizations focuses on assisting LMI individuals who have been harmed by predatory lending. A majority of the organizations focus on providing affordable housing and community revitalization. The remaining community development organizations provide services for LMI individuals, including LMI youth. The bank provides CD services in one innovative community development program. Some of the services are complex. In addition, all the services are very responsive to some of the most significant needs in the banks assessment area. The bank has succeeded in maintaining a high profile in the assessment area through its memberships on numerous boards and the advisory committees of numerous community development organizations. All of the services benefit the banks assessment area. The following table highlights the banks CD services: Table 7: Community Development Service Activities CD Service Benefits AA Outside AA A number of employees provide Credit Card Financial Literacy Education at 8 local high schools, which have a predominantlyLMI student population. X The CRA Officer is a member of the board of directors of an organization that provides programs for LMI children and their families. He serves on various committees, including the fundraising and budget and finance committees. X An officer of the bank serves as a committee member of an organization which seeks to revitalize a LMI area of central downtown Las Vegas. The officer provides assistance on financial matters. X Employees of the bank provide financial services for an organization that engages in comprehensive community development projects that promote neighborhood revitalization and economic development. X An officer of the bank serves as a member of a community development organization whose mission is to rebuild whole communities by supporting community development corporations (CDCs). The officer performs the duties of committee oversight and strategic planning in an effort to locate, access, and negotiate funding for four CDCs. This service is considered to be complex because of the expertise and effort needed to negotiate funding. X 7 An officer of the bank serves as a member of a fair housing center. The officer participates by reviewing and assessing individual cases of loan origination and subordination where predatory lending may be present. The officer also reviews financial documents and chronology of events in order to decide on corrective actions and intervention avenues for LMI borrowers who have been harmed by predatory lending. This service is considered to be complex because of the expertise and effort needed to decide the most advantageous course of action for each of the LMI borrowers. It is also considered to be an innovative type of service. X An employee of the bank provides technical assistance on financial matters to a community development organization. The overall mission of the organization is to improve the quality of life for residents of a low-income neighborhood and to foster and promote community-wide interests and involvement in the problems associated with vandalism, drug-related criminal activity, housing deterioration, and unemployment. X An employee of the bank provides technical assistance on financial matters to an organization whose mission is to provide computers and related communication technology to LMI individuals who otherwise might have little opportunity to use or learn to use these technologies. X The CRA officer is a member of the board of directors of an organization whose mission is to assist LMI individuals and families to become self sufficient through direct services, training, and referral. He provides financial expertise as a member of the budget and finance committee and as a member of several fundraising committees. X The CRA Officer is a member of a community development corporation in East Las Vegas. He serves on various committees, including the fundraising and budget and finance committees. X X means yes; Blank means No. Compliance with Anti-Discrimination Laws and Regulations We determined that FNBM had engaged in a number of unfair and deceptive practices during the period covered by this evaluation. As a result, the banks Board of Directors signed a Stipulation and Consent to the Issuance of a Consent Order and a Consent Order, dated December 3, 2001. The Consent Order required a significant amount of monetary restitution to consumers, and it required management to change certain practices prospectively. The unfair and deceptive practices leading to the Consent Order and the OCCs determination that the bank had violated the Federal Trade Commission Act, negatively impacted the banks CRA rating. Since signing the Consent Order, the 8 bank has made changes to its solicitations. Consumer complaints have decreased significantly. An analysis of two years public comments and consumer complaint information for Limited Purpose institutions was performed according to the OCCs risk-based fair lending approach. Based on its analysis of the information, the OCC decided that a comprehensive fair lending examination would not need to be conducted with the CRA evaluation this year. The latest comprehensive fair lending examination was performed in March 1999. During the March 3, 2002, compliance examination, we reviewed the banks fair lending policies, procedures, training, monitoring, and compliance audits. We also reviewed for technical compliance with the Equal Credit Opportunity Act/Regulation B. We made some recommendations for enhancements to the banks program. We did not cite any violations of law or regulation. 9 Definitions and Common Abbreviations The following terms and abbreviations are used throughout this performance evaluation. The definitions are intended to provide the reader with a general understanding of the terms, not a strict legal definition. Affiliate Any company that controls, is controlled by, or is under common control with another company. A company is under common control with another company if the same company directly or indirectly controls both companies. A bank subsidiary is controlled by the bank and is, therefore, an affiliate. Assessment Area (AA) A geographic area that consists generally of one or more MSAs (using the MSA boundaries that were in effect as of January 1 of the calendar year in which the delineation is made) or one or more contiguous political subdivisions, such as counties, cities, or towns, in which the bank has its main office, branches, and deposit-taking ATMs. Benefit to Assessment Area A qualified Community Development activity benefits the assessment area if (i) the activity benefits areas within the assessment area, or (ii) the activity benefits a broader statewide or regional area that includes the banks assessment area. If a bank has adequately addressed the needs of its assessment area, then the OCC also considers activities submitted by the bank that benefit areas outside of its assessment area. Block Numbering Area (BNA) Statistical subdivisions of counties in which census tracts have not been established. The United States Census Bureau has established BNAs in conjunction with state agencies. Census Tract (CT) Small, locally defined statistical areas within metropolitan statistical areas. These areas are determined by the United States Census Bureau in an attempt to group homogenous populations. A CT has defined boundaries per 10-year census and an average population of 4,000. Community Development (CD) Affordable housing for low-or moderate-income individuals; community services targeted to low-or moderate-income individuals; activities that promote economic development by financing businesses or farms that meet the size eligibility standards of the Small Business Administrations Development Company or Small Business Investment Company programs (13 CFR 121.301)) or have gross annual revenues of $1 million or less; or activities that revitalize or stabilize low-or moderate-income geographies. Community Reinvestment Act (CRA) The statute that requires the OCC to evaluate a banks record of meeting the credit needs of its local community, consistent with the safe and sound operation of the bank, and to take this record into account when evaluating certain corporate applications filed by the bank. Geography A census tract or a block numbering area delineated by the United States Bureau of the Census in the most recent decennial census. 10 11 Limited Purpose Institution An institution that offers only a narrow product line (such as credit cards or automobile loans) to a regional or broader market and for which a designation as limited purpose bank is in effect. Median Family Income (MFI) The median income determined by the United States Census Bureau every 10 years and used to determine the income level category of geographies. Also, it is the median income determined by the Department of Housing and Urban Development annually that is used to determine the income level category of families. For any given geography, the median is the point at which half of the families have income above it and half below it. (See the four ategories of median income below.) c Low-Income An income level that is less than 50% of the MFI. Moderate-Income An income level that is at least 50% and less than 80% of the MFI. Middle-Income An income level that is at least 80% and less than 120% of the MFI. Upper-Income An income level that is 120% or more of the MFI. Metropolitan Statistical Area (MSA) Area defined by the director of the United States Office of Management and Budget. MSAs consist of one or more counties, including large population centers and nearby communities that have a high degree of interaction. Net Operating Income As listed in the Consolidated Report of Condition and Income: Income before income taxes and extraordinary items and other adjustments. Tier 1 Capital The total of common shareholders equity, perpetual preferred shareholders equity with noncumulative dividends, retained earnings and minority interests in the equity accounts of consolidated subsidiaries. Total Assets Total bank assets as listed in the Consolidated Report of Condition and Income. Total Income From the Consolidated Report of Condition and Income Total Interest income plus Total Noninterest income. http://www.occ.treas.gov/cra/limited.htm LP First National Bank of Marin NV Las Vegas 20291 6/28/1996 FIRST NATIONAL BANK>> OF << MARIN>> LAS VEGAS May-2002 585 PILOT ROAD LAS VEGAS NV 89119 http://www.occ.treas.gov/foia/foiadocs.htm CONSENT ORDER No. Bank, City Date California 96-54 << First National Bank>> of << Marin>> , San Rafael 10/17/96 Cease and Desist Orders, By Consent No. Name/Bank/City Date Nevada 2001- 97 << First National Bank>> of << Marin>> , Las Vegas 12/03/01 The Office of the Comptroller of the Currency (OCC) settles case against the First National Bank of Marin, Las Vegas, involving misleading and deceptive marketing of secured credit cards. In a consent order, http://www.occ.treas.gov/ftp/eas/ea2001-97.pdf the bank agreed to cease practices that the OCC alleged are unlawful or unsafe and unsound and to pay restitution to customers harmed by those practices. Fact Sheet O Comptroller of the Currency Administrator of National Banks December 4, 2001 Fact Sheet OCC Settles Case Against << First National Bank>> of << Marin>> Involving Misleading and Deceptive Marketing of Secured Credit Cards The Office of the Comptroller of the Currency has settled a case against << First National Bank>> of << Marin>> , Las Vegas, in which the bank agreed to cease practices that the OCC alleged are unlawful or unsafe and unsound, and to pay restitution to customers harmed by those practices. The bank was required to establish a reserve to handle restitution payments and to make an initial deposit of $4 million. The bank will add additional amounts, if required, to fully fund the reserve within 60 days. The OCC concluded that the banks conduct in marketing its secured credit card constituted unfair and deceptive practices in violation of the Federal Trade Commission Act, and was unsafe or unsound within the meaning of the Federal Deposit Insurance Act. Unfair and Deceptive Practices << First National Bank>> of << Marin>> markets to consumers with poor or non-existent credit histories. Many credit card lenders, as a matter of prudent underwriting, will require such consumers to maintain a savings account large enough to secure the line of credit. Under the banks program, the funds for the savings deposit are instead charged against the credit line, reducing the amount of available credit until the charge is paid off. In the OCCs view, since January, 1998, the bank has used false and misleading statements, in violation of the Federal Trade Commission Act, to induce these consumers to apply for its credit card and to pay substantial fees. The banks marketing led consumers to believe that they did not first have to submit funds for a savings deposit in order to receive a credit card with a usable amount of available credit. In reality, due to the deposit requirement and fees charged against the card, the vast majority of applicants received a credit card with little or no available credit. Among the practices cited by the OCC: Under one program sponsored by the bank, credit card applicants were required to pay up to $79 in cash to apply for a guaranteed card with credit lines between $250 and $600. The credit line was secured by a savings deposit of $200 charged against the card when it was first issued. In addition, other fees of up to $56 were charged to the card. --2 As a result, individuals approved for a $250 credit line had little or no available credit when the card was first issued. Instead, those consumers would then have to make additional payments to the bank to obtain usable credit. Roughly 80 percent of all applicants received the $250 credit line. Another program required the consumer to pay $79 for a guaranteed card with a fixed credit line of $400. The credit line was secured by a savings deposit of $350 charged against the card when it was first issued. The initial charge for the savings deposit, along with application and other fees of $37 that were charged against the card, meant that all applicants would receive a card with little or no available credit when first issued. In written solicitations, the bank represented that, You do not have to send in money for a savings deposit. The bank also told prospective customers: If you have credit problems or no credit history, and you want your own VISA card without having to send in hundreds of dollars for a savings deposit . . . this is it! Despite making these claims, the bank never disclosed in its solicitations that if the consumer did not send in money for the savings deposit, the consumer would have little or no available credit, and would have to make additional payments to the bank before being able to use the card. The bank promised that the card would have benefits like instant cash, and worldwide acceptance. The banks also said it would assure customers security and peace of mind, and said it would help them be prepared for emergencies. All of these benefits require a usable amount of available credit, which the vast majority of applicants did not receive. In one written solicitation, a message on the outside of the envelope stated, you do NOT need to send a savings deposit to get your new VISA credit card . . . not one penny. In another, the envelope message promised: Guaranteed approval, no matter what your credit situation, plus . . . you do not have to send in money for a savings deposit! When the bank disclosed in the solicitations that the savings deposit would be charged against the credit card, it did not disclose that the customer might receive little or no usable credit as a result. The OCC received complaints from consumers who had not understood that the card they received would have little or no available credit. The OCC believes that consumers may easily have been confused by the banks solicitations. On average, a consumer was required to pay $100 or more in application fees to obtain the banks credit card. The bank did not disclose, until after the customer paid the non-refundable portion of these application fees, (usually $49-$ 79) that he or she might --and probably would --receive a card with little or no available credit. --3 Consent Order Provisions The consent order requires the bank to refund application and other fees to consumers who received a credit card with less than $50 in available credit, and cancelled the card within 60 days after the card was issued to them by the bank. In addition, the consent order requires that the bank refund application fees to consumers who learned that they were to receive a card with $50 or less in available credit, and before receiving a card cancelled their application or failed to complete the application process. The consent order also requires that the bank change its marketing practices and disclosures. Among the provisions: The bank may not make any misleading or deceptive representation regarding the cost or operation of a credit card, or what available credit the consumer will receive at account opening. If the credit may be secured in whole or in part by a savings deposit that is charged against the credit card, the bank may not use a phrase such as Send no money for a savings deposit, unless the bank clearly and conspicuously discloses that the consumer's available credit will be reduced by the charge for the savings deposit." If the bank could approve an applicant for a card with less than $50 in available credit at account opening, the bank may not represent that any applicant who applies may be able to employ the card for uses that require available credit, unless the bank clearly and conspicuously discloses that the consumer could be approved for a card with less than $50 in available credit at account opening, will not be able to employ the card for those uses if the consumer is approved for such a card. If a solicitation discloses a range of credit lines for which a consumer may be approved, and if the consumer may be approved for a credit line in that range that would result in less than $50 in available credit at account opening, the bank must clearly and conspicuously disclose in the solicitation that if the consumer is approved for that credit line the consumer will have little or no available credit at account opening. In addition, if the consumer is approved for a card with $50 or less in immediately available credit, the bank must subsequently disclose to the consumer, before the card is activated for purchases by the consumer, the specific dollar amount of credit that will be available for the consumer's immediate use on the credit line that the consumer has received. The order also requires that the bank implement a written program to identify and evaluate, on an ongoing basis, communications from consumers who say that they did not understand --4 the banks solicitations. As part of this program the bank must evaluate, on an ongoing basis, the risk that the banks solicitations are misleading or deceptive or in violation of other law, and determine whether the solicitations should be modified or revised. # # # The OCC charters, regulates and examines approximately 2, 200 national banks and 52 federal branches of foreign banks in the U. S., accounting for more than 54 percent of the nations banking assets. Its mission is to ensure a safe and sound and competitive national banking system that supports the citizens, communities and economy of the United States. http://www.occ.treas.gov/foia/factsheet1fnbmarin201-97.pdf http://www.occ.treas.gov/query/oop/qsumrhit.htw?CiWebHitsFile=/ftp/craeval/20291.pdf&CiRestriction=%20First%20National%20Bank%20of%20Marin%20&CiQueryFile=/query.idq&CiBeginHilite=%3CB%20CLASS=HIT%3E&CiEndHilite=%3C/B%3E&CiUserParam3=queryhit.htm Currency Administrator of National Banks Washington, DC 20219 Public Disclosure February 12, 1998 Community Reinvestment Act Performance Evaluation First National Bank of Marin Charter Number: 20291 1201 Fifth Avenue San Rafael, CA 94901 Office of the Comptroller of the Currency Western District Office 50 Fremont Street, ... OCC Review Report from 1998: Description of Institution << First National Bank>> of << Marin>> opened in July 1984 as a full service bank. FNBM maintained a wide range of products until 1995 when the bank began focusing primarily on one product, a partially secured credit card. With the success of this card, the Board of Directors decided to focus solely on the credit card product. Because customer contacts for this product transpire over the phone or through mail, FNBM closed its main office to customer traffic on July 1, 1996. The branch now serves as the banks administrative office and is staffed with only about 16 people. The staff includes a few bank officers and administrative personnel. The bank contracts with outside firms for marketing and collection activities. Effective June 28, 1996, FNBM received designation as a limited purpose institution, for purposes of the Community Reinvestment Act. The bank uses savings deposit accounts and certificates of deposit to fund the credit cards. The banks assets total $128 million with equity of $12 million. In 1997, the bank reported net income of $6.6 million, including accounting adjustments. However, in 1996, the bank reported a net loss of $5.6million. Earlier in the assessment period, the banks resources were limited due to operating losses and capital constraints. Also, the bank operated under a Consent Order. This required the Board of Directors and its officers to focus their efforts on improving the financial condition of the bank. We assessed the banks CRA performance in light of these factors. Assessment Area Description FNBMs assessment area consists of all 51 census tracts in Marin County, California. Marin County is located within the San Francisco Metropolitan Statistical Area (MSA), which includes Marin, San Francisco, and San Mateo Counties. Marin County covers 606 square miles and is directly north of San Francisco. While the majority of tracts are middle-and upper-income, the banks assessment area contains four moderate-income tracts. These moderate-income tracts include Marin City, the Canal District in San Rafael, Novato, and Dillon Beach. The following table shows the number and percent of census tracts and families by income level within the banks assessment area: << First National Bank>> of << Marin>> Assessment Area Low-Income Moderate-Income Middle-Income Upper-Income Census Tracts Families Census Tracts Families Census Tracts Families Census Tracts Families 0 0% 8, 130 14% 4 8% 9, 101 15% 20 39% 12,204 21% 27 53% 29,514 50% Source: Demographic Data -1990 U. S. Census 4 Marin county is one of the most affluent counties in the San Francisco Bay Area. The 1990 U. S. Census Bureau data reported median family income for Marin County at $59,157 versus $49,282 for the entire MSA. Incomes throughout the county have increased. Updated information from the Department of Housing and Urban Development (HUD) shows San Francisco MSAs median family income at $61,300 for 1996. San Rafael Chamber of Commerce reported the average cost of a single-family residence in Marin County at $365,000 in 1995. The areas economy is dominated by small and mid-sized businesses, with a high concentration of software companies. Other major employers include government services, insurance companies, financial institutions, hospitals and utility companies. The local banking market is extremely competitive with regional banks, multinational bank branches, and several community banks. Housing prices and the overall cost of living have made it extremely difficult for low-and moderate-income families to live in Marin although they work in the area. According to local groups, the greatest need is for affordable housing. Multiple families share apartments to afford the high cost. Other needs include subsidized day care, small business financing, and education. Community contacts and area research showed that Marin County has a wide range of organizations that help serve these needs. Community development lending, investment, and service opportunities are available through these groups. 5 CONCLUSIONS WITH RESPECT TO PERFORMANCE We rated the bank as having a Satisfactory record of performance under the Community Reinvestment Act. Based upon the guidance provided by the OCC following the last CRA examination, management and the board provided sufficient community development investments and services, and exhibited an adequate responsiveness to credit and community development needs. During the rating period, the bank operated under a Consent Order to improve its financial condition. We considered the banks limited staff as well as its financial condition during the rating period to reach our conclusions. We evaluated the banks qualified investments and community development services since the last evaluation dated December 31, 1996. While the dollar volume is satisfactory, the banks investments and services do not exhibit innovative or complex characteristics. The bank has not made any community development loans. << First National Bank>> of << Marin>> -Qualified Investments Community Bank of the Bay (CBB) -In February 1998 and December 1997, FNBM invested at below market rates in two certificates of deposit for $300,000 and $100,000, respectively, at this community development bank. CBBs lending activities cover lower income areas in San Francisco and Oakland, as well as in adjacent Bay Area cities such as Richmond, West Berkeley, Marin City, or East Palo Alto. CBB focuses on community development projects that conventional banks will not fund. In December 1997, FNBM arranged a forum with CBB, Marin Family Action, Southern Bible Institute, and Hamilton Credit Union to discuss Marin County credit needs and how CBB can best meet these needs. Mission National Bank -FNBM invested a $100,000 certificate of deposit at a below market rate at this minority-owned, small business bank in December 1997. Mission National Bank presently has three loans to small businesses in Marin County. They plan to make additional small business loans to this area through referrals from FNBM. Grants -The bank provided $4,150 in grants to six different community development agencies in 1997. The largest of these grants for $2,500 helped Marin Family Action (MFA). MFA advocates for the low and moderate income families in Marin County. MFA was instrumental in obtaining approval to convert Hamilton Naval Base housing into low-income housing. Also, this organization provides credit repair, home ownership, computers and computer classes to their constituents. Other grants for between $150 to $500 helped local groups provide food, housing, mentoring and job training to low and moderate income people. 6 << First National Bank>> of << Marin>> -Community Development Services A bank officer provided financial counseling, business planning, and credit counseling to three minority-owned, low-income, small business owners. One of the businesses involves the musical recording of a compact disk. The bank officer helped document the steps needed to pursue this effort, especially the budgeting and financial accounting needed. This information will be used to educate other interested small business owners in this process. A bank officer is a board member of, and provides financial expertise to, Southern Marin Bible Institute (SMBI). SMBI is a non-profit educational institute founded in 1980 in Marin City . The school caters to socially and economically disadvantaged people. SMBI is developing a program to provide housing and counseling for low-income people, completing drug rehabilitation programs. The bank officer provided a class on Credit Management and Loans to SMBI students at the bank. She also prepared a budget and helped raise funds for SMBI. A bank director provided his expertise in obtaining financing for a group home located in Petaluma, California. This home provides low cost housing for people who were previously homeless but have obtained jobs. Although the home is located in Petaluma, about seven miles north of Novato, it serves the needs of both communities. The home is owned by the Committee on the Shelterless (COTS). Compliance with Anti-Discrimination Laws and Regulations We reviewed the banks compliance with fair lending laws and regulations during our December 31, 1996 examination. We identified no violations of the substantive provisions of the anti-discrimination laws and regulations. Next Report: ... evaluation of the institutions record of meeting the credit needs of its community. This document is an evaluation of the CRA performance of First National Bank of Marin prepared by The Office of the Comptroller of the Currency, the institutions supervisory agency, as of February 12, 1998. The agency evaluates ... ... set forth in Appendix A to 12 CFR Part 25. Institutions CRA Rating: This institution is rated Satisfactory under the Community Development Test. First National Bank of Marin (FNBM) made an adequate level of qualified investments and provided sufficient community development services in relation to its resources and ... ... responsiveness to the needs of the community was adequate in light of its managerial and financial resources. 3 Description of Institution First National Bank of Marin opened in July 1984 as a full service bank. FNBM maintained a wide range of products until 1995 when the bank began focusing primarily on one ... ... and Dillon Beach. The following table shows the number and percent of census tracts and families by income level within the banks assessment area: First National Bank of Marin Assessment Area Low-Income Moderate-Income Middle-Income Upper-Income Census Tracts Families Census Tracts Families Census Tracts Families Census ... ... the banks investments and services do not exhibit innovative or complex characteristics. The bank has not made any community development loans. First National Bank of Marin -Qualified Investments Community Bank of the Bay (CBB) -In February 1998 and December 1997, FNBM invested at below market rates in two certificates ... ... Other grants for between $150 to $500 helped local groups provide food, housing, mentoring and job training to low and moderate income people. 6 First National Bank of Marin -Community Development Services A bank officer provided financial counseling, business planning, and credit counseling to three minority-owned, ...