PUBLIC DISCLOSURE. December 1, 2014 COMMUNITY REINVESTMENT ACT PERFORMANCE EVALUATION. Liberty Bank RSSD #478766

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1 PUBLIC DISCLOSURE December 1, 2014 COMMUNITY REINVESTMENT ACT PERFORMANCE EVALUATION Liberty Bank RSSD # Linden Avenue South San Francisco, California Federal Reserve Bank of San Francisco 101 Market Street San Francisco, California NOTE: This document is an evaluation of this institution s record of meeting the credit needs of its entire community, including low and moderate income neighborhoods, consistent with the 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.

2 TABLE OF CONTENTS INSTITUTION RATING... 1 Institution s Community Reinvestment Act (CRA) Rating... 1 INSTITUTION... 2 Description of Institution... 2 Description of Assessment Area... 3 Scope of Examination CONCLUSIONS WITH RESPECT TO PERFORMANCE CRITERIA Loan to Deposit Ratio Lending in Assessment Area Lending Distribution by Geography Lending Distribution by Business Revenue Response to Complaints Fair Lending or Other Illegal Practices Review GLOSSARY OF TERMS... 14

3 INSTITUTION RATING Institution s Community Reinvestment Act (CRA) Rating Liberty Bank is rated "SATISFACTORY PERFORMANCE LEVELS PERFORMANCE TESTS LENDING TEST OUTSTANDING SATISFACTORY X NEEDS TO IMPROVE SUBSTANTIAL NONCOMPLIANCE The major factors supporting the institution s rating include: A reasonable loan to deposit ratio; A majority of small business loans originated within the bank s assessment area; A reasonable geographic distribution of small business loans; and An excellent distribution of loans to businesses of different sizes. 1

4 INSTITUTION Description of Institution Liberty Bank (Liberty) has been operating as a full service, independent community bank since April 1982 and is headquartered in South San Francisco, California. Liberty, with $238 million in total assets as of September 30, 2014, is a wholly owned subsidiary of Liberty Bancorp. In addition to its headquarters office, Liberty operates two additional branches located in Boulder Creek, and Felton, California. The bank previously operated an additional branch office in Palo Alto, but closed the branch on August 30, Liberty is primarily focused on extending commercial loans to small businesses, professionals, and real estate investors; however, the company also offers a variety of consumer purpose loans. Commercial loan products include secured and unsecured lines of credit, commercial real estate, construction loans, equipment loans, and secured and unsecured term loans, and the portfolio is concentrated in mini perm commercial real estate loans and owner occupied construction loans. Liberty provides consumer loan products including overdraft lines of credit, home equity lines of credit, vehicle loans, small aircraft loans, and personal unsecured loans. Liberty offers deposit products and other services such as internet banking, telephone banking, and internet bill pay to businesses and consumers. Exhibit 1 below discloses the composition of Liberty s loan portfolio as of its September 30, 2014, Consolidated Report of Condition, and illustrates the focus on commercial and multifamily lending. EXHIBIT 1 LOANS AND LEASES AS OF SEPTEMBER 30, 2014 Loan Type $ ( 000s) % Commercial/Industrial & Non Farm Non Residential Real Estate 102, MultiFamily Residential Real Estate 24, Secured by 1 4 Family Residential Real Estate 7, Construction & Land Development 4, Consumer Loans & Credit Cards 1, State, Political Subdivisions and All Other Total (Gross) 140, During the review period, Liberty did not face any legal or financial impediments to prevent it from helping meet the credit needs of its assessment area consistent with its business strategy, size, financial capacity, and local economic conditions. The bank received an overall satisfactory rating at its previous CRA examination, conducted as of April 2010, by the Federal Reserve Bank of San Francisco, pursuant to the Interagency Small Institution CRA Examination Procedures. 2

5 Description of Assessment Area Liberty has one contiguous assessment area that is part of the San Jose San Francisco Oakland Combined Statistical Area. The assessment area is bordered by Marin County to the north, Alameda and Stanislaus counties to the east, Monterey and San Benito counties to the south, and the Pacific Ocean to the west, and includes the following geographic divisions: San Francisco and San Mateo counties in their entirety. This area is part of the San Francisco San Mateo Redwood City Metropolitan Division (MD). Santa Cruz County in its entirety. This portion of the assessment area was expanded since the 2010 CRA evaluation in order to encompass the entire county. This area is part of the Santa Cruz Watsonville Metropolitan Statistical Area (MSA). The City of Palo Alto, which is south of San Mateo County and northeast of Santa Cruz County. This area is part of the San Jose Sunnyvale Santa Clara MSA. Liberty has a relatively small presence in and portion of the overall market share in a highly competitive assessment area, ranking 30 th among competing institutions within the area. As of June 30, 2014, the assessment area was home to 58 FDIC insured institutions operating 530 offices with total deposits of $250.5 billion. Liberty s branch offices held total deposits of $196.8 million, accounting for less than 0.1 percent of the total market share. 1 Exhibit 2, on the next page, presents key demographic and business information used to help develop a performance context for the assessment area, based on the 2010 U.S. Census and 2012 Dun & Bradstreet data. 1 Federal Deposit Insurance Corporation, Deposit Market Share Report, June 30, 2014; available from: 3

6 Categories Tract Distribution EXHIBIT 2 ASSESSMENT AREA DEMOGRAPHICS Families by Tract Families < Poverty Level as % of Families by Tract Families by Family # % # % # % # % Low income , , , Moderate income , , , Middle income , , , Upper income , , , Unknown income Total AA , , , Categories Housing Units by Tract Housing Types by Tract Owner Occupied Rental Vacant # % % # % # % Low income 90,954 11, , , Moderate income 144,896 58, , , Middle income 281, , , , Upper income 266, , , , Unknown income Total AA 783, , , , Businesses by Tract & Revenue Size Total Businesses by Tract Less Than or Equal Greater than $1 Revenue Not Categories to $1 Million Million Reported # % # % # % # % Low income 21, , , , Moderate income 21, , , Middle income 42, , , , Upper income 52, , , , Unknown income Total AA 138, , , , Percentage of Total Businesses HUD Adjusted Median Family 2 San Francisco San Mateo Redwood City San Jose Sunnyvale Santa Clara Santa Cruz Watsonville $103,000 $105,000 $87,000 June 2012 Median Housing Value 3 San Francisco County San Mateo County Santa Cruz County Santa Clara County June 2012 Unemployment Rate 4 San Francisco County San Mateo County Santa Cruz County Santa Clara County $741,850 $825,000 $495,000 $695, % 7.0% 10.4% 8.8% 2 FFIEC Median Family Listing, available from: (accessed November 10, 2014). 3 California Association of Realtors, Sales and Median Prices for Existing Detached Homes; available from: (accessed November 10, 2014). 4 U.S. Bureau of Labor Statistics, Local Area Unemployment Statistics by County; available from: bin/dsrv?la (accessed November 17, 2014). 4

7 Exhibit 3 below presents key demographic and business information used to help develop a performance context for the assessment area, based on the 2010 U.S. Census and 2013 Dun & Bradstreet data. Categories Tract Distribution EXHIBIT 3 ASSESSMENT AREA DEMOGRAPHICS Families by Tract Families < Poverty Level as % of Families by Tract Families by Family # % # % # % # % Low income , , , Moderate income , , , Middle income , , , Upper income , , , Unknown income Total AA , , , Categories Housing Units by Tract Housing Types by Tract Owner Occupied Rental Vacant # % % # % # % Low income 90,954 11, , , Moderate income 144,896 58, , , Middle income 281, , , , Upper income 266, , , , Unknown income Total AA 783, , , , Businesses by Tract & Revenue Size Total Businesses by Less Than or Equal Greater than $1 Revenue Not Tract Categories to $1 Million Million Reported # % # % # % # % Low income 19, , , Moderate income 19, , , Middle income 37, , , , Upper income 46, , , , Unknown income Total AA 122, , , , Percentage of Total Businesses Median Family 5 San Francisco San Mateo Redwood City San Jose Sunnyvale Santa Clara Santa Cruz Watsonville $101,200 $101,300 $73,800 June 2013 Median Housing Value 6 San Francisco County San Mateo County Santa Cruz County Santa Clara County June 2013 Unemployment Rate 7 San Francisco County San Mateo County Santa Cruz County Santa Clara County $855,180 $1,001,000 $586,000 $809, % 5.7% 8.6% 7.2% 5 FFIEC Median Family Listing, available from: (accessed November 10, 2014). 6 California Association of Realtors, Sales and Median Prices for Existing Detached Homes; available from: (accessed November 10, 2014). 7 U.S. Bureau of Labor Statistics, Local Area Unemployment Statistics by County; available from: (accessed November 17, 2014). 5

8 Economic Conditions The assessment area s economy is highly diverse and home to many thriving industries. Overall, the economy saw significant improvement since the Great Recession, with major industries in each of the geographic divisions within the bank s assessment area (discussed below) seeing substantial growth during the review period. 8 While all geographic areas showed economic growth, each of the divisions within the assessment area had unique drivers that contribute to the overall economy. San Francisco County, which is the most populated geographic division in the assessment area, supports thriving finance, technology, tourism, and education sectors. The county is home to more than 30 international financial institutions and ranks 15 th among the top 20 global financial centers. 9 Large technology companies such as Salesforce, Twitter, and LinkedIn are also based in San Francisco, as are smaller technology startups, which have been investing and hiring at rapid speeds. The county is also home to numerous tourist attractions and San Francisco ranks as the 5 th most popular U.S. tourist destination for overseas travelers 10 and the 7 th most popular for domestic travelers. 11 Finally, education plays a prominent role in San Francisco s economy with the University of California, San Francisco, and the University of San Francisco being two of the largest employers in the county. 12 San Mateo County is a hub for technology and transportation. The southern portion of the county makes up part of Silicon Valley and, as such, the area is home to numerous technology companies such as Oracle, Electronic Arts, and Genentech. The county also supports seven of the ten largest venture capital firms in the Bay Area, which help to fuel innovation in the area. San Mateo County is home to the Port of Redwood City and the San Francisco International Airport (SFO). 13 The port saw cargo totals of 1.5 million metric tons in 2013, which represents a 13.0 percent increase over the previous year and a seven year high. 14 Although technically owned and operated by San Francisco County, SFO is located in San Mateo County and provides tens of thousands of jobs to the area. SFO provided services to 45 million passengers in 2013, up 1.2 percent from Santa Cruz County supports strong agriculture, health, education, and tourism sectors. 16 The county had a gross agricultural production of $566 million in 2012, the most recent data available, up 0.1 percent from 8 Department of Transportation, County Economic Forecasts, 2013; available from: (accessed November 13, 2014). 9 Forbes, San Francisco, CA; available from: francisco/ (accessed November 10, 2014). 10 Poland, Jennifer. Here Are The Cities That Americans Love To Visit In The US. Business Insider. September 11, 2013; available from: popular us travel destinations (accessed April 8, 2014). 11 U.S. Department of Commerce, Overseas Visitation Estimates for U.S. States, Cities, and Census Regions: 2012; available from: (accessed April 8, 2014). 12 Moody s Analytics, Précis Report, San Francisco, August County of San Mateo, Profile (pg. 8); available from: 19.pdf. 14 Cargo at seven year high at Port of Redwood City; available from: /cargo at seven year high at port of redwoodcity/ html (accessed November 10, 2014). 15 SFO Air Traffic Statistics 2013; available from: 16 Santa Cruz County Economic Vitality Strategy, May 2014 (pg. 13); available from: 6

9 the year before and ranking 20 th among the 58 counties in California. 17 The area also supports a growing health sector and a medical corridor in the county which extends from the Dominican Hospital Campus, to the Sutter Surgery Center, to sites in the Research Park Drive area. 18 Education also plays an important role in the local economy with institutions like the University of California Santa Cruz and Cabrillo College providing over 11,000 jobs to the area. 19 Finally, the county is home to numerous beaches, redwood forests, restaurants, and boutique shops that attract numerous visitors and generate over $500 million in direct travel expenditures annually. 20 The City of Palo Alto, which is the least populated and smallest geographic division in the assessment area, is a hub of technology, education, and health. The city, located in the heart of Silicon Valley, is home to over 7,000 businesses, including large technology companies like VMware, Hewlett Packard, and SAP. 21 Additionally, the city borders Stanford, California, home to Stanford University which is also the city s major employer, providing jobs for almost 11,000 individuals. The health sector also plays a prominent role in the city s economy with Lucille Packard Children s Hospital, the Veteran s Affairs Palo Alto Health Care System, and the Stanford University Medical Center responsible for 11.5 percent of the city s total employment. 22 Due to the significant industry growth within the assessment area, there was a substantial decline in unemployment rates during the review period as depicted in Exhibit 4, 23 on the next page. As of June 2014, unemployment rates compared favorably to the statewide average. San Mateo and San Francisco s unemployment rates of 4.2 and 4.6 percent represented the 2 nd and 3 rd lowest unemployment rates of any county in California CA Agricultural Review Data (pg. 3); available from: 18 Santa Cruz County Economic Vitality Strategy, May 2014 (pg. 15). 19 Ibid (pg. 16). 20 Santa Cruz County Tourism Facts: available from: facts.php (accessed November 22, 2014). 21 Palo Alto Business Facts; available from: (accessed November 10, 2014). 22 City of Palo Alto Annual Report; available from: (accessed November 22, 2014). 23 Note: Due to the review period, this chart is comparing two annual unemployment rates (2012 and 2013) against a monthly unemployment rate (June 2014). Generally speaking, June 2014 unemployment rates tend to be slightly higher than annual averages. Bureau of Labor Statistics, Local Area Unemployment Statistics by County, annual average; available from: (accessed May 30, 2014). 24 Ibid. 7

10 EXHIBIT 4 UNEMPLOYMENT RATE (%) Jun San Francisco San Mateo Santa Cruz Palo Alto California Similar to the improving economic conditions overall, the assessment area has also seen its housing market rebound. Home prices in the area experienced declines consistent with the broader housing market downturn during the Great Recession. However, housing prices continued an upward trend through the review period, consistent with overall price increases in the state, as reflected in Exhibit 5, 25 on the next page. Although all counties within the assessment area had higher median home prices than the state throughout the review period, prices differed significantly by geographic division. For example, at the end of the review period, Santa Cruz County s median home price of $699,500 was the lowest in the assessment area while San Mateo County s median home price of $1,120,000 was the highest in the assessment area and state California Association of Realtors, Sales and Median Prices for Existing Detached Homes; available from: (accessed November 14, 2014). 26 Ibid. 8

11 EXHIBIT 5 MEDIAN HOME PRICES MEDIAN HOME PRICES JANUARY 2012 JUNE 2014 $1,400,000 $1,200,000 CA San Francisco San Mateo Santa Cruz Santa Clara $1,000,000 $800,000 $600,000 $400,000 $200,000 While the economy has continued to improve during the review period, a review of small business loan data reported by banks subject to the CRA suggests that, though improving from recession level lows, lending levels remain significantly depressed. 27 National surveys suggest that depressed demand, uncertainty about the economy, and issues with credit worthiness may help explain the lower levels of lending to small businesses. 28 As depicted in Exhibit 3, there were approximately 108,000 small businesses operating in the assessment area in 2013, representing 88.8 percent of all businesses. Credit and Community Development Needs A number of factors suggest that despite the improving economic conditions small businesses continue to face challenges in accessing credit. A review of surveys of senior loan officers conducted by the Federal Reserve Board indicates that only a small percentage of banks have reported some easing of their lending standards to small firms with annual sales of less than $50 million. 29 The limited easing of credit standards for small firms, which became more conservative during the Great Recession, combined with the depressed small business lending levels previously discussed suggest that small businesses face challenges in accessing credit, and that some level of small business credit needs remain unmet by area banks. Furthermore, a review of information obtained from community contacts throughout the assessment area generally supports this opinion and suggests that small businesses are most in need of small dollar loans, and that banks may be hesitant to extend these loans due to the higher risk involved. 27 Aggregate CRA Small Business data reports available from: 28 Wiersch, Anne Marie. Good News and Bad News on Small Business Lending in January 5, Available from: /Good%20News%20and%20Bad%20News%20on%20Small%20Business%20Lending%20in% aspx (accessed March 25, 2015). 29 Federal Reserve Board, October 2014 Senior Loan Officer Opinion Survey. 9

12 Scope of Examination Liberty s CRA performance was evaluated using the Interagency Small Institution CRA Examination Procedures for the review period. Performance for small institutions considers the bank s lending activities under the following criteria: Loan volume compared to deposits (Loan to Deposit Ratio); Lending inside versus outside the assessment area (Lending in Assessment Area); Dispersion of lending throughout the assessment area (Lending Distribution by Geography); and Lending to businesses of different sizes (Lending Distribution by Business Revenue). The bank s responsiveness to consumer complaints was not evaluated, as the bank had not received any complaints related to its CRA performance during the review period. The evaluation was based on 91 small business loans originated by Liberty from January 1, 2012 to June 30, All 91 loans were considered in the evaluation of Lending in Assessment Area. Of this total, 67 small business loans were used in the evaluation of Lending Distribution by Geography and the Lending Distribution by Business Revenue. The bank s multifamily lending and small farm lending 30 were considered, but the lending volumes were nominal and did not impact the overall assessment. 30 The small farm loan is captured in tables appearing in this report as other small business. 10

13 CONCLUSIONS WITH RESPECT TO PERFORMANCE CRITERIA Lending Test Liberty s overall performance under the lending test is satisfactory. The level of lending to small businesses is excellent in light of the challenges smaller businesses face in accessing credit, the geographic distribution of loans is reasonable, and the majority of the loans were originated within the bank s assessment area. Loan-to-Deposit Ratio Liberty s loan to deposit ratio is reasonable given the bank s size and financial condition. At 74.1 percent as of June 30, 2014, Liberty s ratio is in line with the state average of 79.2 percent and the national average of 74.6 percent. Lending in Assessment Area The majority of the bank s small business loans were originated within its assessment area. As illustrated in Exhibit 6 immediately below, nearly 74 percent of loans by volume and 83 percent by dollar were extended within the assessment area. This level of lending demonstrates that Liberty is effectively engaged in lending within its defined markets. EXHIBIT 6 LENDING INSIDE AND OUTSIDE THE ASSESSMENT AREA JANUARY 1, 2012 TO JUNE 30, 2014 Inside Outside Loan Type $ $ # % % # % ( 000s) ( 000s) % Small Business , , Other Small Business Total Business Related , , HMDA Refinance HMDA Multifamily , Total HMDA Related , Total Loans , , Lending Distribution by Geography Overall distribution of loans by geography is generally reasonable. The bank s lending in moderate income census tracts substantially exceeded the performance of the aggregate market and the percentage of business entities in moderate income geographies. While Liberty did extend loans in low income geographies, performance did not compare favorably to either the performance of the aggregate market or the percentage of business entities in low income census tracts. The low volume of lending and the absence of low income geographies in Santa Cruz County and Palo Alto help provide some context for this less favorable performance. 11

14 EXHIBIT 7 GEOGRAPHIC DISTRIBUTION OF SMALL BUSINESS LOANS Census Tract Low Moderate Middle Upper # % # % # % # % 2012 Bank Lending Aggregate Lending 9, , , , Business Concentration 21, , , , Bank Lending Aggregate Lending 8, , , , Business Concentration 19, , , , January 1, 2014 through June 30, 2014 Bank Lending Aggregate Lending N/A N/A N/A N/A N/A N/A N/A N/A Business Concentration N/A N/A N/A N/A N/A N/A N/A N/A Lending Distribution by Business Revenue Liberty s record of lending to businesses with different levels of revenue is excellent. The majority of its small business loans were extended to businesses with gross annual revenue of less than or equal to $1 million. The bank s percentage of lending to small businesses significantly exceeded the performance of the aggregate market. Liberty s performance also compared favorably to the percentage of small businesses, particularly in light of the depressed small business lending levels during the review period and tightened lending standards previously discussed. Further, the bank extended a high percentage of lending in smaller dollar loans, helping to meet a credit need articulated by local community development organizations and small businesses. Year Bank Lending # EXHIBIT 8 BUSINESS REVENUE DISTRIBUTION OF SMALL BUSINESS LOANS Lending to Businesses with Revenue <=$1 Million Bank Businesses Aggregate Lending <=$1M in Lending (%) (%) Revenue (%) Originations Regardless of Revenue Size by Loan Amount <=$100K (%) > $100K & <=$250K (%) >250K & <=$1M (%) January 1 through June 30, N/A

15 Response to Complaints Responsiveness to consumer complaints was not evaluated because the bank did not receive any CRArelated complaints during the review period. Fair Lending or Other Illegal Practices Review A review of the bank s compliance with consumer protection laws and regulations was conducted concurrently with this CRA evaluation and did not result in the identification of any violations of the substantive provisions of anti discrimination, fair lending, or other illegal credit practice rules, laws or regulations that were inconsistent with helping to meet community credit needs. 13

16 GLOSSARY OF TERMS Aggregate lending: The number of loans originated and purchased by all reporting lenders in specified income categories as a percentage of the aggregate number of loans originated and purchased by all reporting lenders in the metropolitan area/assessment area. Census tract: A small subdivision of metropolitan and other densely populated counties. Census tract boundaries do not cross county lines; however, they may cross the boundaries of metropolitan statistical areas. Census tracts usually have between 2,500 and 8,000 persons, and their physical size varies widely depending upon population density. Census tracts are designed to be homogeneous with respect to population characteristics, economic status, and living conditions to allow for statistical comparisons. Community development: All Agencies have adopted the following language. Affordable housing (including multifamily rental 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 Administration s Development Company or Small Business Investment Company programs (13 CFR ) or have gross annual revenues of $1 million or less; or, activities that revitalize or stabilize low or moderate income geographies. Effective September 1, 2005, the Board of Governors of the Federal Reserve System, Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation have adopted the following additional language as part of the revitalize or stabilize definition of community development. Activities that revitalize or stabilize include: (i) Low or moderate income geographies; (ii) Designated disaster areas; or (iii) Distressed or underserved nonmetropolitan middle income geographies designated by the Board, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency, based on: a. Rates of poverty, unemployment, and population loss; or b. Population size, density, and dispersion. Activities that revitalize and stabilize geographies designated based on population size, density, and dispersion if they help to meet essential community needs, including needs of low and moderate income individuals. Consumer loan(s): A loan(s) to one or more individuals for household, family, or other personal expenditures. A consumer loan does not include a home mortgage, small business, or small farm loan. This definition includes the following categories: motor vehicle loans, credit card loans, home equity loans, other secured consumer loans, and other unsecured consumer loans. Family: Includes a householder and one or more other persons living in the same household who are related to the householder by birth, marriage, or adoption. The number of family households always equals the number of families; however, a family household may also include non relatives living with the family. Families are classified by type as either a married couple family or other family, which is further classified into male householder (a family with a male householder and no wife present) or female householder (a family with a female householder and no husband present). Full scope review: Performance under the lending and community development tests is analyzed considering performance context, quantitative factors (for example, geographic distribution, borrower 14

17 distribution, and total number and dollar amount of investments), and qualitative factors (for example, responsiveness). Geography: A census tract delineated by the United States Bureau of the Census in the most recent decennial census. Home Mortgage Disclosure Act (HMDA): The statute that requires certain mortgage lenders that do business or have banking offices in a metropolitan statistical area to file annual summary reports of their mortgage lending activity. The reports include such data as the race, gender, and the income of applications, the amount of loan requested, and the disposition of the application (for example, approved, denied, and withdrawn). Home mortgage loans: Includes home purchase and home improvement loans as defined in the HMDA regulation. This definition also includes multifamily (five or more families) dwelling loans, loans for the purchase of manufactured homes and refinancings of home improvement and home purchase loans. Household: Includes all persons occupying a housing unit. Persons not living in households are classified as living in group quarters. In 100 percent tabulations, the count of households always equals the count of occupied housing units. Limited scope review: Performance under the lending and community development tests is analyzed using only quantitative factors (for example, geographic distribution, borrower distribution, total number and dollar amount of investments, and branch distribution). Low income: Individual income that is less than 50 percent of the area median income, or a median family income that is less than 50 percent, in the case of a geography. Market share: The number of loans originated and purchased by the institution as a percentage of the aggregate number of loans originated and purchased by all reporting lenders in the metropolitan area/assessment area. Metropolitan area (MA): A metropolitan statistical area (MSA) or a metropolitan division (MD) as defined by the Office of Management and Budget. A MSA is a core area containing at least one urbanized area of 50,000 or more inhabitants, together with adjacent communities having a high degree of economic and social integration with that core. A MD is a division of a MSA based on specific criteria including commuting patterns. Only a MSA that has a population of at least 2.5 million may be divided into MDs. Middle income: Individual income that is at least 80 percent and less than 120 percent of the area median income, or a median family income that is at least 80 percent and less than 120 percent, in the case of a geography. Moderate income: Individual income that is at least 50 percent and less than 80 percent of the area median income, or a median family income that is at least 50 percent and less than 80 percent, in the case of a geography. Multifamily: Refers to a residential structure that contains five or more units. Other products: Includes any unreported optional category of loans for which the institution collects and maintains data for consideration during a CRA examination. Examples of such activity include consumer loans and other loan data an institution may provide concerning its lending performance. 15

18 Owner occupied units: Includes units occupied by the owner or co owner, even if the unit has not been fully paid for or is mortgaged. Qualified investment: A qualified investment is defined as any lawful investment, deposit, membership share, or grant that has as its primary purpose community development. Rated area: A rated area is a state or multistate metropolitan area. For an institution with domestic branches in only one state, the institution s CRA rating would be the state rating. If an institution maintains domestic branches in more than one state, the institution will receive a rating for each state in which those branches are located. If an institution maintains domestic branches in two or more states within a multistate metropolitan area, the institution will receive a rating for the multistate metropolitan area. Small loan(s) to business(es): A loan included in 'loans to small businesses' as defined in the Consolidated Report of Condition and (Call Report) and the Thrift Financial Reporting (TFR) instructions. These loans have original amounts of $1 million or less and typically are either secured by nonfarm or nonresidential real estate or are classified as commercial and industrial loans. However, thrift institutions may also exercise the option to report loans secured by nonfarm residential real estate as "small business loans" if the loans are reported on the TFR as nonmortgage, commercial loans. Small loan(s) to farm(s): A loan included in loans to small farms as defined in the instructions for preparation of the Consolidated Report of Condition and (Call Report). These loans have original amounts of $500,000 or less and are either secured by farmland, or are classified as loans to finance agricultural production and other loans to farmers. Upper income: Individual income that is more than 120 percent of the area median income, or a median family income that is more than 120 percent, in the case of a geography. 16