PUBLIC DISCLOSURE COMMUNITY REINVESTMENT ACT PERFORMANCE EVALUATION

Transcription

1 PUBLIC DISCLOSURE March 2, 2015 COMMUNITY REINVESTMENT ACT PERFORMANCE EVALUATION Stifel Bank and Trust RSSD# North Broadway St. Louis, Missouri Federal Reserve Bank of St. Louis P.O. Box 442 St. Louis, Missouri NOTE: This document is an evaluation of this institution s record of meeting the credit needs of its entire community, including low- and moderateincome 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.

2 TABLE OF CONTENTS I. Institution Rating a. Overall Rating...1 b. Performance Test Ratings Table...1 c. Summary of Major Factors Supporting Rating...1 II. III. Institution a. Description of Institution...2 b. Scope of Examination...3 c. Description of Assessment Area...5 d. Conclusions with Respect to Performance Tests...8 Appendices a. Scope of Examination Table...15 b. Assessment Area Detail...16 c Lending Performance Tables...17 d. Glossary...18 Table of Contents

3 INSTITUTION S CRA RATING INSTITUTION S CRA RATING: This institution is rated SATISFACTORY. Overall, Stifel Bank and Trust (Stifel Bank) meets the criteria for a Satisfactory CRA rating. The following table indicates the performance level of the bank with respect to the Lending, Investment, and Service Tests. The bank has a very limited product mix with a high volume of Home Mortgage Disclosure Act (HMDA) lending, and as such, performance in this product is indicative of the bank s overall performance. PERFORMANCE TESTS RATINGS Lending Test* Investment Test Service Test Outstanding X High Satisfactory X Low Satisfactory X Needs to Improve Substantial Noncompliance *Note: The Lending Test is weighted more heavily than the Investment and Service Tests when arriving at an overall rating. The major factors supporting the institution s rating include the following: The bank s lending levels reflect excellent responsiveness to assessment area credit needs. A small percentage of loans are made in the bank s assessment area. The distribution of loans by borrower s income profile reflects adequate penetration among customers of different income levels. The overall geographic distribution of loans reflects poor penetration throughout the bank s assessment area. Overall, the bank makes an adequate level of community development loans. The bank makes limited use of innovative and/or flexible lending practices in serving assessment area credit needs. The bank makes an excellent level of qualified community development investments and grants and is often in a leadership position. The bank provides a relatively high level of community development services. Service delivery systems are reasonably accessible to the geographies and individuals of different income levels in the assessment area. 1

4 The record of opening and closing branches has not adversely affected the access to its delivery systems, particularly in low- and moderate-income (LMI) geographies. The reasonableness of business hours and services does not vary in a way that inconveniences the needs of its assessment area. DESCRIPTION OF INSTITUTION INSTITUTION Stifel Bank is a wholly owned subsidiary of Stifel Financial Corporation (Stifel Financial), St. Louis, Missouri, and, through common ownership, is affiliated with Stifel, Nicolaus & Company, Inc. (Stifel Nicolaus), a registered broker-dealer headquartered in St. Louis, Missouri. The bank s main office is located in downtown St. Louis, and its only branch is in Creve Coeur, Missouri, a western suburb of St. Louis. Both of the offices are located in the Missouri portion of the St. Louis, Missouri-Illinois Metropolitan Statistical Area (St. Louis MSA). The main office has one automated teller machine (ATM) and conducts very few consumer transactions. While the bank originates a large volume of mortgages, it does not originate any other consumer loans, with the exception of Stifel Pledged Asset (SPA) accounts, which are large dollar lines of credit secured by investment accounts. Likewise, the bank does not open consumer deposit accounts aside from accounts for Stifel Bank employees and as accommodations for Stifel Nicolaus clients. For this review period, no legal impediments or financial constraints were identified that would have hindered the bank from serving the credit needs of its customers. The bank is capable of meeting the needs of its assessment area based on its available resources and financial products. Stifel Bank reported total assets of $5.2 billion as of December 31, 2014, which represents an increase in assets of percent since the previous evaluation. As of the same date, loans and leases outstanding were $2.3 billion (44.2 percent of total assets), and deposits totaled $4.8 billion. The bank s loan portfolio composition by credit category is displayed in the following table: Distribution of Total Loans as of December 31, 2014 Credit Product Type Amount in $000s Percentage of Total Loans Commercial Real Estate $15, % 1 4 Family Residential $484, % Farm Loans $610 <0.0% Commercial and Industrial $1,233, % Loans to Individuals $585, % TOTAL LOANS $2,319, % 2

5 The bank s most impactful product with regard to meeting its assessment area s credit needs is 1 4 family residential real estate. While this category represents only 20.9 percent of total loans, loans which the bank originates and subsequently sells to the secondary market are not fully reflected in this total. Stifel Bank originates the vast majority of its mortgage loans for eventual sale to secondary market investors, resulting in a much greater effect to its assessment area than the percentage of total loans would indicate. Based solely on percentage of total loans, commercial and industrial lending would appear to be the bank s major product line, as it accounted for 53.2 percent of all loans. However, these loans are not traditional commercial notes and primarily fall into three categories: large dollar syndication loans in which the bank participates, purchased SBA loans which the bank holds for its broker dealer affiliate, and SPA loans to business entities or trust accounts sourced through Stifel Nicolaus financial advisors. Given that the bank originates very few traditional commercial loans, this product was not considered for this analysis. Additionally, loans to individuals seems to be a substantial product for the bank, representing 25.2 percent of total loans. However, this category is also largely composed of SPA loans to Stifel Nicolaus investors. As discussed above, the bank originates very few consumer loans outside of this product and it was not considered as an applicable product for this analysis. As of the same date, 98.0 percent of the bank s total deposits were brokered deposits sourced from Stifel Nicolaus investment clients across the country. These deposits are in the form of money market deposit accounts held at the bank in the name of Stifel Nicolaus on behalf of its clients.this level of brokered deposits far exceeds that of a typical depository institution, and the clients are not likely to be low- or moderate-income. Stifel Bank received a Satisfactory rating at its previous CRA evaluation conducted by the Federal Deposit Insurance Corporation (FDIC) as of April 23, SCOPE OF EXAMINATION The bank s CRA performance was reviewed using the Federal Financial Institutions Examination Council s (FFIEC s) Interagency CRA Procedures for Large Institutions. The large bank performance standards consist of three performance tests: the Lending, Investment, and Service Tests. Lending Test For the Lending Test, Stifel Bank s home mortgage loans reported under HMDA were evaluated from January 1, 2013 through December 31, As discussed above, due to the nature of the bank s operations, neither consumer nor small business lending were evaluated. While the Lending Test analyses encompass HMDA lending activity from both 2013 and 2014, the body of this evaluation primarily details bank performance based on 2013 HMDA lending activity, noting significant divergences in performance between the two years, as applicable. See Appendix B for detailed performance figures based on 2014 HMDA lending activity. For community development lending, all qualified activity since the previous CRA evaluation was analyzed. 3

6 Under the Lending Test, the bank s performance is evaluated according to the following criteria, as applicable: Level of lending activity. Assessment areas concentration. Distribution of loans by borrower s income/revenue profile. Geographic distribution of loans. Community development lending activity. Product innovation. 1 Under the Lending Test criteria noted above, analyses often entail comparisons of bank performance to assessment area demographics and the performance of other lenders, based on HMDA aggregate lending data. Generally, when analyzing bank performance by comparing lending activity to both demographic data and aggregate lending data, greater emphasis is placed on the aggregate lending data, because it is expected to describe many factors impacting lenders within an assessment area. Aggregate lending datasets are also updated annually and are therefore expected to reflect more relevant comparisons. Investment Test For the Investment Test, all qualified community development investments, including qualified grants and donations, made since the previous CRA evaluation were reviewed. In addition, community development investments initiated prior to this review period but still outstanding were considered as part of this evaluation. Community development investments can include various debt and equity investment instruments, including municipal bonds, individual equities, mutual fund shares, and collateralized mortgage obligations. Monetary donations and grants with a community development purpose will also receive credit under the Investment Test. Qualified investments and grants were evaluated to determine the bank s overall level of activity, use of innovative and/or complex investments (see footnote 1), and responsiveness to assessment area credit and community development needs. Service Test The review period for retail and community development services includes activity from the date of the previous CRA evaluation to the date of the current evaluation. The Service Test considers the distribution and accessibility of bank branches and alternative delivery systems, changes in branch locations, reasonableness of business hours and retail services, and participation of bank personnel in community development services. 1 Unlike other large bank CRA performance criteria, a lack of innovative and/or flexible lending practices or a lack of innovative and/or complex investments does not necessarily impact the bank s performance negatively, as these activities are largely used to augment consideration given to an institution s performance under the quantitative criteria, potentially resulting in a higher performance rating. 4

7 Community Contacts To augment this evaluation, two community contact interviews were conducted with individuals with knowledge of the bank s assessment area. These community contact interviews were used to ascertain specific credit needs, opportunities, and local market conditions in the bank s assessment area. Information from these interviews also assisted in evaluating the bank s responsiveness to identified community credit needs and community development opportunities. Key details from these community contact interviews are included in the Description of Assessment Area section. DESCRIPTION OF ASSESSMENT AREA Stifel Bank has designated one CRA assessment area consisting of the City of St. Louis, St. Louis County, Jefferson County, and St. Charles County, all of which are in the Missouri portion of the St. Louis MSA. Based on 2010 Census data, the assessment area consists of 426 census tracts, marking a 13.6 percent increase from the number of census tracts noted at the prior evaluation, which used 2000 Census data. Of the 426 census tracts, there are 57 low-, 82 moderate-, 148 middle-, 137 upper-, and 2 unknown-income census tracts. General Demographics The bank s assessment area is comprised of four of the eight counties within the Missouri portion of the St. Louis MSA. Based on 2010 U.S. Census data, the assessment area has a total population of 1,897,466. This represents 67.5 percent of the St. Louis MSA s 2,812,896 residents. The majority of the assessment area population lives in St. Louis County with 998,954 residents, followed by St. Charles County with a population of 360,485, St. Louis City with 319,294, and Jefferson County with 218,733. As the demographics of this assessment area cover a wide metropolitan area and the population is diverse, credit needs in the area are also varied and include a blend of consumer and business credit products. Other particular credit needs in the assessment area, noted primarily during community contact interviews, include increased private and government funding for affordable housing programs, financial literacy programs, and products and services targeted to LMI families. Furthermore, as the St. Louis MSA is an environment with significant need coupled with a strong source of community development intermediaries such as nonprofit agencies and government assistance entities, there is a high level of community development opportunities available for financial institution participation. Income and Wealth Demographics As previously noted, the bank s assessment area consists of the 426 census tracts comprising St. Louis City, St. Louis County, Jefferson County, and St. Charles County in their entireties. The following table summarizes the distribution of assessment area census tracts by income level and the family population within those tracts. 5

8 Assessment Area Demographics by Geography Income Level Dataset Low- Moderate- Middle- Upper- Unknown TOTAL Census Tracts 13.4% 19.2% 34.7% 32.2% 0.5% 100% Family 36,698 85, , , ,589 Population 7.5% 17.5% 36.7% 38.2% 0.0% 100% As shown above, 32.6 percent of the census tracts in the assessment area are LMI geographies; however, only 25.0 percent of the family population resides in these tracts. These LMI areas are primarily concentrated in and around the city of St. Louis. Based on 2010 U.S. Census data, the median family income for the assessment area was $69,580. At the same time, median family income for the entire St. Louis MSA was $67,013. More recently, the FFIEC estimates the 2013 and 2014 St. Louis MSA median family income figures to be $69,200 and $71,000, respectively. The following table displays population percentages of assessment area families by income level compared to all families in the St. Louis MSA and Missouri. Family Population by Income Level Dataset Low- Moderate- Middle- Upper- TOTAL Assessment 97,542 80,664 99, , ,589 Area 20.0% 16.6% 20.5% 42.9% 100% St. Louis MSA 151, , , , , % 17.1% 21.2% 40.7% 100% The table reveals that 36.6 percent of the families in the assessment area are considered LMI, which is slightly lower than the LMI family percentages in the St. Louis MSA (38.1 percent). Similarly, the percentage of families below the poverty level in the assessment area (8.2 percent) falls slightly below the St. Louis MSA (8.6 percent). Housing Demographics Based on 2010 housing values, income levels, and rental costs, housing in the assessment area appears to be slightly less affordable than in the St. Louis MSA. The assessment area housing affordability ratio of 31.7 percent is below the St. Louis MSA figure of 33.3 percent. Of the four assessment area counties, Jefferson County is the most affordable (36.7 percent), followed by St. Charles County (35.7 percent), St. Louis County (32.1 percent), and St. Louis City (27.5 percent). The median housing value for the assessment area is $172,046, which is above the $159,800 value in the St. Louis MSA. Additionally, the median gross rent for the assessment area of $743 per month is above $730 per month for the St. Louis MSA, but varies significantly in the assessment area from a low of $658 in St. Louis City to a high of $819 in St. Charles County. Based on this information, home ownership is likely out of reach for many LMI individuals and families in the assessment area. 6

9 Industry and Employment Demographics The assessment area supports a large and diverse business community, including a strong small business sector. According to 2012 County Business Patterns data, 50,793 business entities were operating within the assessment area with 930,290 paid employees. By percentage of employees, the three largest job categories in the assessment area are healthcare and social assistance (15.0 percent), followed by retail trade (11.0 percent), and accommodation and food services (9.9 percent). The following table displays the average annual unemployment rates (not seasonally adjusted) for the assessment area and St. Louis MSA according to the U.S. Department of Labor Bureau of Labor Statistics. Area 2014 Annual Average 2013 Annual Average City of St. Louis 8.62% 9.30% St. Louis County 6.26% 6.67% St. Charles County 5.29% 5.78% Jefferson County 6.53% 7.08% Assessment Area 6.43% 6.92% St. Louis MSA 6.48% 7.28% Unemployment in the assessment area is similar to the St. Louis MSA as a whole; however the city of St. Louis has significantly higher unemployment rates than any other area, and St. Charles County has the lowest unemployment rate of all areas. For all areas, the unemployment rate decreased in 2014 from 2013 levels. Community Contact Information As a part of this CRA evaluation, two community contact interviews were conducted in this assessment area. These interviews were conducted with members of organizations providing affordable housing and community service. The interviewees categorized the local economy as weak but showing signs of improvement. The interviewees stated that there is an ongoing need for affordable housing and social services for LMI families. Both contacts stated that the lack of affordable, decent housing within the assessment area, along with unemployment and tighter underwriting guidelines, have contributed to the difficulty of obtaining home loans for many LMI families. One contact stated that their client base has increased, as families that were considered middle-income are now requiring their services. This increase in client base is a result of corporations downsizing, unemployment, or both. The other contact stated that their client base has also changed due to regulatory changes, and they are working with more moderate-income instead of low-income families. 7

10 CONCLUSIONS WITH RESPECT TO PERFORMANCE TESTS LENDING TEST Stifel Bank s performance under the Lending Test is rated low satisfactory. Lending levels reflect excellent responsiveness to the credit needs of the bank s assessment area. Similarly, an analysis of the loan distribution by borrower s income reflects good penetration among customers of different income levels. Conversely, the overall geographic distribution of loans analysis reflects poor penetration throughout the assessment area, and only a small percentage of loans are originated inside the bank s assessment area. In addition, the bank makes an adequate level of community development loans. Finally, the bank makes limited use of innovative and/or flexible lending practices in serving the credit needs of its assessment area. Lending Activity The bank s lending level within its assessment area is excellent given its balance sheet and business model. Stifel Bank s funding sources are unique in that $4.7 billion of its $4.8 billion customer deposits (98.0 percent) are in the form of brokered deposits originating from the bank s broker dealer affiliate (as of December 31, 2014). As mentioned in the Description of Institution, these deposits come from Stifel Nicolaus clients across the country. Even with the majority of the bank s deposits coming from higher-income borrowers outside the assessment area, Stifel Bank originated a total of 3,721 mortgage loans in 2013 and 2014 within the bank s assessment area, as noted in the table below. This level of lending in relation to the lack of funding derived from the assessment area reflects excellent responsiveness to the lending needs of the community. Summary of Lending Activity January 1, 2013 December 31, 2014 Loan Type # % $(000s) % Home Purchase Conventional 1, % 344, % Home Purchase Federal Housing Administration (FHA) % 56, % Home Purchase Veterans Affairs (VA) % 23, % Refinancing 1, % 342, % Home Improvement % 20, % TOTAL HMDA LOANS 3, % 788, % Assessment Area Concentration The following table displays the number and dollar volume of loans inside and outside the bank s assessment area. 8

11 Lending Inside and Outside of Assessment Area January 1, 2013 December 31, 2014 Loan Type Inside Assessment Area Outside Assessment Area TOTAL Total HMDA Loans 3,721 4,666 8, % 55.6% 100% $788,575 $1,450,325 $2,238, % 64.8% 100% By number of total loans reviewed, 44.4 percent were made to borrowers within the bank s assessment area. By dollar amount, 35.2 percent of the loans were made inside the assessment area. While the bank originates a small percentage of its loans within the assessment area, this performance is consistent with its business model. As described previously, the bank derives the vast majority of its funding from nationwide investors, yet it originates a disproportionally large volume of loans within the St. Louis assessment area. This indicates that Stifel Bank is meeting the needs of both its nationwide customer base and its St. Louis assessment area. Loan Distribution by Borrower s Profile Overall, the bank s loan distribution by borrower s profile is good based on HMDA loan performance. The following table shows the distribution of 2013 HMDA loans by borrower income level compared to family population demographics and 2013 aggregate HMDA data for the assessment area. Distribution of Loans Inside Assessment Area by Income Level of Borrower January 1, 2013 December 31, 2013 Dataset Borrower Income Level Low- Moderate- Middle- Upper- Unknown TOTAL Home Purchase % % % % 1 0.1% % Refinance % % % % % 1, % Home Improvement 5 7.2% % % % 0 0.0% % Multifamily 0 0.0% 0 0.0% 0 0.0% 0 0.0% 0 0.0% 0 100% TOTAL HMDA % % % 1, % % 2, % Family Population 20.0% 16.6% 20.5% 42.9% 0.0% 100% 2013 HMDA Aggregate 7.8% 16.9% 19.4% 37.3% 18.6% 100% As indicated in the preceding table, the bank s lending to low-income borrowers (4.9 percent) is significantly below the low-income family population figure (20.0 percent) and below the aggregate lending level to low-income borrowers (7.8 percent), reflecting poor performance. However, 2014 HMDA data shows that the bank made 141 loans (8.4 percent of all HMDA loans) to low-income borrowers, representing a 41.0 percent increase from Furthermore, 9

12 117 loans to low-income borrowers in 2014 (9.9 percent of home purchase loans) were home purchase loans, which reflects a positive trend. This performance is notable given the affordability of homeownership for low-income individuals mentioned previously in the Description of Assessment Area Housing Demographics section. Conversely, the bank s lending to moderate-income borrowers (18.1 percent) is above the moderate-income family population (16.6 percent) and aggregate performance (16.9 percent), reflecting excellent performance. Similarly, the bank s 2014 lending to moderate-income borrowers (20.3 percent) is above the family population of 16.5 percent. When combined, the bank s performance compares favorably to both the aggregate and the demographic. The percentage of the bank s total loans extended to LMI borrowers in 2013 was 23.0 percent, which is similar to aggregate performance of 24.7 percent, which reflects adequate performance. However, the bank s 2014 performance shows a positive trend in that 28.7 percent of the bank s loans were to LMI borrowers. Given the bank s performance in 2013 and the increasing trend in 2014, the bank s borrower distribution is considered good overall. Geographic Distribution of Loans As noted in the Description of Assessment Area section, this assessment area includes 57 lowand 82 moderate-income census tracts, representing 32.6 percent of all assessment area census tracts. The analysis in this section illustrates the distribution of the bank s loan activity across these geographies. Overall, the bank s geographic distribution of loans reflects poor penetration throughout the assessment area. The following table displays the geographic distribution of 2013 HMDA loans compared to owner-occupied housing demographics and 2013 HMDA aggregate data for the assessment area. Distribution of Loans Inside Assessment Area by Income Level of Geography January 1, 2013 through December 31, 2013 Dataset Geography Income Level Low- Moderate- Middle- Upper- Unknown TOTAL Home Purchase % % % % 0 0.0% % Refinance % % % % 0 0.0% 1, % Home Improvement 1 1.4% 5 7.2% % % 0 0.0% % Multifamily 0 0.0% 0 0.0% 0 0.0% 0 0.0% 0 0.0% 0 100% TOTAL HMDA % % % 1, % 0 0.0% 2, % Owner-Occupied Housing 2013 HMDA Aggregate 4.7% 16.1% 39.1% 40.1% 0.0% 100% 2.0% 10.2% 38.6% 49.3% 0.0% 100% As displayed above, the bank made 31 of 2,050 loans in low-income census tracts (1.5 percent), which is considered adequate performance. While this level of lending in low-income census 10

13 tracts is below the percentage of owner-occupied housing units in low-income census tracts (4.7 percent), it is in line with the 2013 aggregate lending data, which indicates that other lenders made 2.0 percent of HMDA loans within low-income census tracts. However, the bank s lending activity in moderate-income census tracts (6.1 percent) reflects poor performance. HMDA lending was significantly lower than the percentage of owner-occupied housing in moderate-income census tracts (16.1 percent) and lower than the 2013 aggregate performance (10.2 percent). The bank s 2014 lending level in moderate-income census tracts (9.1 percent) is trending upward and reflects positively on the bank s lending in LMI geographies. This performance is partially due to the bank recently hiring three lenders focused on bolstering lending in LMI communities throughout the assessment area. These lenders joined the bank in 2014, so their full impact is yet to be seen. Despite noted improvement, the bank s overall geographic distribution of HMDA loans in LMI census tracts is poor, given current levels of performance. Community Development Lending Activities Stifel Bank makes an adequate level of qualified community development loans that benefit its assessment area. During the review period, the bank originated or renewed ten qualified community development loans within the bank s assessment area and one loan that benefited the broader statewide area, which included the assessment area, for a total of $36.0 million. Of these community development loans, five ($12.7 million) were targeted to affordable housing and six ($23.4 million) were to revitalize and stabilize LMI areas. A few notable loans are detailed below: A loan for $10.0 million was used to acquire land for the purpose of improving blighted conditions in 472 acres of property located in an Enterprise Zone. A loan for $5.0 million was made to a registered 501(c)(3) nonprofit for the redevelopment, revitalization, and stabilization of an LMI area. A loan for $3.0 million was made to a registered 501(c)(3) nonprofit that provides affordable senior housing using Low-Income Housing Tax Credits. Product Innovation The bank makes limited use of innovative and/or flexible lending practices in serving assessment area credit needs given its resources and lending personnel. The mortgage lending products currently offered are detailed below. Loans made under these programs are given quantitative consideration under the Lending Test; however, the programs themselves are given qualitative consideration in the evaluation of the CRA performance of the bank in relation to the use of flexible lending practices. Missouri Housing Development Commission (MHDC). The bank uses various MHDC programs, which provide flexible credit options to LMI borrowers and strengthen communities by offering mortgage financing with affordable, below-market interest rates. During the review period, the bank originated 50 loans in 2012 totaling $186.0 million, 39 loans in 2013 totaling $143 million and 50 loans in 2014 totaling $207.0 million. 11

14 FHA- and VA-insured loan programs. These government-insured loan programs offer flexible, long-term financing to eligible borrowers with low or no down payments. In 2012, the bank originated 376 FHA loans totaling $57.6 million and 62 VA loans totaling $12.3 million. In 2013, the bank originated a total of 298 FHA loans totaling $44.2 million and 70 VA loans totaling $15.5 million, and in 2014, the bank originated 351 FHA loans totaling $45.6 million and 91 VA loans totaling $19.4 million. In addition, the bank originated 11 Rural Housing Service and Farm Service Agency loans totaling $1.5 million. Better Family Life Down Payment Assistance program. The bank is in partnership with this nonprofit agency that provides down payment and closing cost assistance to area residents. Beyond Housing Down Payment Assistance program. This program provides interest-free down payment loans to qualified LMI borrowers. INVESTMENT TEST The bank s Investment Test rating is Outstanding. The bank maintains an excellent level of qualified community development investments and grants within the assessment area. In addition, the bank s overall approach to community development investing exhibits excellent responsiveness to credit and community development needs in the assessment area. During the review period, the bank made $33.9 million in new community development investments and had prior period investments of $2.5 million, for a total of $36.4 million. Of the total community development investments, $7.5 million went to an investment fund that revitalizes LMI areas in the assessment area through the development of affordable housing. The remaining $28.9 million was in mortgage-backed securities for the benefit of affordable housing. Additionally, Stifel Nicolaus, the bank s primary affiliate, made numerous grants to community development organizations serving the assessment area. The bank made 64 grants totaling $1.6 million to organizations providing community services for the benefit of the LMI population and LMI geographies. Services provided through these grants include providing energy assistance for low-income, elderly, and disabled individuals/families; providing skills training and education to socioeconomically disadvantaged children; and distributing food, necessities, and educational programs to community partners that serve families dealing with the effects of hunger. SERVICE TEST The bank s Service Test is rated High Satisfactory. The bank provides a relatively high level of community development services in the assessment area. Delivery systems are reasonably accessible to the assessment area and to individuals of different income levels. Additionally, the bank s record of opening and closing branches has not adversely affected the accessibility of its delivery systems, particularly in LMI geographies and/or LMI individuals. Similarly, business hours and services do not vary in a way that inconveniences LMI geographies and/or LMI individuals. 12

15 Community Development Services The bank provides a relatively high level of community development services in the assessment area. During the review period, bank employees and officers provided 36 services to 12 different community development organizations within the assessment area. Bank representatives served on various boards and committees totaling hours. Eleven bank employees are active in providing ongoing financial expertise to community development organizations that serve the needs of LMI families and small businesses. These community development organizations promote affordable housing, economic development, financial education, and social services. The bank s senior management has also taken leadership roles in various community development initiatives. In addition to the services listed above, Stifel Nicolaus has provided a unique type of service for the bank s assessment area. During the examination period, Stifel Nicolaus underwrote, issued, provided temporary, and arranged permanent funding for 21 bonds issuances that injected $503.7 million into the assessment area. Of the 21 bonds, 3 were issued to revitalize and stabilize LMI communities located in Empowerment Zones, 6 were issued to low-income school districts, and 7 were issued to the MHDC to provide a home ownership loan program for LMI individuals. Accessibility of Delivery Systems Stifel Bank operates one branch and a main office in the assessment area. Due to its business model, the bank operates without a traditional branch-based delivery channel. Instead, the bank offers its lending products across the country through Stifel Nicolaus financial advisors and in the St. Louis area through mortgage loan officers. Neither the main office nor the branch provides customer-facing staff or conducts very many consumer transactions. The branch location does not operate an ATM, and the main office has one limited-service ATM, primarily used by bank employees. The following table illustrates the distribution of branch facilities by geography income level compared to the distribution of census tracts and households. Dataset Branches Census Tracts Household Population Branch Distribution by Geography Income Level Geography Income Level Low- Moderate- Middle- Upper- Unknown TOTAL % 50.0% 0.0% 50.0% 0.0% 100% 13.4% 19.2% 34.7% 32.2% 0.5% 100% 8.5% 19.2% 37.3% 35.0% 0.1% 100% The bank s primary delivery system within its assessment area is its team of loan officers, which source mortgage loans throughout the assessment area. As described above, Stifel Bank has employed three new loan officers in 2014 who focus specifically on LMI tracts and individuals. As a result, performance in LMI areas and to LMI individuals is showing an increasing trend. As such, the bank s delivery systems are reasonably accessible. 13

16 Changes in Branch Locations The bank s record of opening and closing branches in this assessment area has not adversely affected the accessibility of its delivery systems, particularly to LMI geographies and LMI individuals, given the nontraditional branching structure. During this period, the bank relocated its headquarters to a moderate-income census tract in downtown St. Louis and relocated the branch to an upper-income census tract. In addition, the bank closed one branch located in a middle-income census tract in Falls Church, Virginia. This branch was acquired as a result of an acquisition by Stifel Bank and was closed shortly after acquisition. Reasonableness of Business Hours and Services in Meeting Assessment Area Needs Business hours and services do not vary in a way that inconveniences certain segments of the assessment area, particularly LMI geographies or LMI individuals. Although the bank provides limited retail banking service, it should be noted that the mortgage loan offices have flexible schedules and are willing to serve their client base by meeting at alternative locations to accommodate their lending needs. In addition, customers have access to a limited-service ATM located in the main office. FAIR LENDING OR OTHER ILLEGAL CREDIT PRACTICES REVIEW Based on findings from the Consumer Affairs Examination (including a fair lending analysis performed under Regulation B Equal Credit Opportunity and the Fair Housing Act requirements) conducted concurrently with this CRA evaluation, no evidence of discriminatory or other illegal credit practices inconsistent with helping to meet community credit needs was identified. 14

17 Appendix A SCOPE OF EXAMINATION TABLE Scope of Examination Time Period Reviewed January 1, 2013 to December 31, 2014 (Reported HMDA) April 24, 2012 to March 2, 2015 (Community Development Lending, Investment, and Service Activities) Financial Institution Stifel Bank and Trust Products Reviewed HMDA Affiliate(s) Affiliate Relationship Products Reviewed Stifel, Nicolaus & Company Assessment Area St. Louis City, St. Louis County, St. Charles County, and Jefferson County, which are part of the St. Louis MSA # of Offices Offices Visited CRA Review Procedures 2 2 Full-Scope 15

18 Appendix B ASSESSMENT AREA DETAIL 16

19 Appendix C 2014 LENDING PERFORMANCE TABLES Distribution of Loans Inside Assessment Area by Borrower Income January 1, 2014 through December 31, 2014 Borrower Income Level TOTAL Low- Moderate- Middle- Upper- Unknown Home Purchase % % % % 2 0.2% 1, % Refinance % % % % 6 1.3% % Home Improvement 1 2.8% % % % 0 0.0% % Multifamily 0 0.0% 0 0.0% 0 0.0% 0 0.0% 0 0.0% 0 100% TOTAL HMDA % % % % 8 0.5% 1, % Family Population 20.0% 16.5% 20.5% 43.0% 0.0% 100% Distribution of Loans Inside Assessment Area by Income Level of Geography January 1, 2014 through December 31, 2014 Geography Income Level Low- Moderate- Middle- Upper- Unknown TOTAL Home Purchase % % % % 0 0.0% 1, % Refinance 7 1.6% % % % 0 0.0% % Home Improvement 1 2.8% 3 8.3% % % 0 0.0% % Multifamily 0 0.0% 0 0.0% 0 0.0% 0 0.0% 0 0.0% 0 100% TOTAL HMDA % % % % 0 0.0% 1, % Owner-Occupied Housing 4.4% 16.0% 39.1% 40.4% 0.0% 100% 17

20 Appendix D GLOSSARY 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. Assessment area: One or more of the geographic areas delineated by the bank and used by the regulatory agency to assess an institution s record of CRA performance. Census tract: A small subdivision of metropolitan and nonmetropolitan 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 contact: Interviews conducted as part of the CRA examination to gather information that might assist examiners in understanding the bank s community, available opportunities for helping to meet local credit and community development needs, and perceptions on the performance of financial institutions in helping meet local credit needs. Communications and information gathered can help to provide a context to assist in the evaluation of an institution s CRA performance. Community development: An activity associated with one of the following five descriptions: (1) affordable housing (including multifamily rental housing) for low- and moderate-income individuals; (2) community services targeted to low- and moderate-income individuals; (3) 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; (4) activities that revitalize or stabilize low- and moderate-income geographies, designated disaster areas, or distressed or underserved nonmetropolitan middleincome geographies; or (5) Neighborhood Stabilization Program (NSP) eligible activities in areas with HUD-approved NSP plans, which are conducted within two years after the date when NSP program funds are required to be spent and benefit low-, moderate-, and middle-income individuals and geographies. 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. Demographics: The statistical characteristics of human populations (such as age, race, sex, income, etc.) used especially to identify markets. 18

21 Appendix D (continued) Distressed nonmetropolitan middle-income geography: A middle-income, nonmetropolitan geography will be designated as distressed if it is in a county that meets one or more of the following triggers: (1) an unemployment rate of at least 1.5 times the national average, (2) a poverty rate of 20 percent or more, or (3) a population loss of 10 percent or more between the previous and most recent decennial census or a net migration loss of 5 percent or more over the 5-year period preceding the most recent census. Empowerment Zone: An economically distressed urban or rural area specifically designated for economic rejuvenation and job creation through tax incentives and grants by the Empowerment Zone Initiative and extended by subsequent pieces of legislation. 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 nonrelatives 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, Investment, and Service Tests is analyzed considering performance context, quantitative factors (e.g., geographic distribution, borrower distribution, and total number and dollar amount of investments), and qualitative factors (e.g., innovativeness, complexity, and 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 who 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 applicants, the amount of loan requested, and the disposition of the application (e.g., 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 refinancing of home improvement and home purchase loans. Household: One or more persons who occupy a housing unit. The occupants may be a single family, one person living alone, two or more families living together, or any other group of related or unrelated persons who share living arrangements. Housing affordability ratio: Is calculated by dividing the median household income by the median housing value. It represents the amount of single family, owner-occupied housing that a dollar of income can purchase for the median household in the census tract. Values closer to 100 percent indicate greater affordability. 19

22 Appendix D (continued) Limited-scope review: Performance under the Lending, Investment, and Service Tests is analyzed using only quantitative factors (e.g., 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. Median family income: The dollar amount that divides the family income distribution into two equal groups, half having incomes above the median, half having incomes below the median. The median family income is based on all families within the area being analyzed. Metropolitan area (MA): A metropolitan statistical area (MSA) or a metropolitan division (MD) as defined by the Office of Management and Budget. An 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. An MD is a division of an MSA based on specific criteria including commuting patterns. Only an 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. Nonmetropolitan statistical area (nonmsa): Not part of a metropolitan area. (See metropolitan area.) 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. 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. Performance context: The performance context is a broad range of economic, demographic, and institution- and community-specific information that an examiner reviews to understand the 20

23 Appendix D (continued) context in which an institution s record of performance should be evaluated. The performance context is not a formal or written assessment of community credit needs. Performance criteria: These are the different criteria against which a bank s performance in helping to meet the credit needs of its assessment area(s) is measured. The criteria relate to lending, investment, retail service, and community development activities performed by a bank. The performance criteria have both quantitative and qualitative aspects. There are different sets of criteria for large banks, intermediate small banks, small banks, wholesale/limited purpose banks, and strategic plan banks. Performance evaluation (PE): A written evaluation of a financial institution s record of meeting the credit needs of its community, as prepared by the federal financial supervision agency responsible for supervising the institution. 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 businesses/small farms: A small business/farm is considered to be one in which gross annual revenues for the preceding calendar year were $1 million or less. Small loan(s) to business(es): That is, small business loans are included in loans to small businesses as defined in the Consolidated Reports of Condition and Income (Call Report) and the Thrift Financial Reporting (TFR) instructions. These loans have original amounts of $1 million or less and typically are secured either 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): That is, small farm loans are included in loans to small farms as defined in the instructions for preparation of the Consolidated Reports of Condition and Income (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. Underserved middle-income geography: A middle-income, nonmetropolitan geography will be designated as underserved if it meets criteria for population size, density, and dispersion that indicate the area s population is sufficiently small, thin, and distant from a population center that the tract is likely to have difficulty financing the fixed costs of meeting essential community needs. Upper-income: Individual income that is 120 percent or more of the area median income, or a median family income that is 120 percent or more, in the case of a geography. 21