PUBLIC DISCLOSURE August 23, 1999 COMMUNITY REINVESTMENT ACT PERFORMANCE EVALUATION Bank of Cairo and Moberly RSSD# 833646 27 E. Rollins Street Moberly, Missouri 6527-2 Federal Reserve Bank of St. Louis P.O. Box 442 St. Louis, Missouri 63166-442 NOTE: 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 Reserve concerning the safety and soundness of this financial institution.
GENERAL INFORMATION The Community Reinvestment Act (CRA) requires each federal financial supervisory agency to use its authority when examining financial institutions subject to its supervision, to assess the institution s 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. Upon conclusion of such examination, the agency must prepare a written evaluation of the institution s record of meeting the credit needs of its community. This document is an evaluation of the Community Reinvestment Act (CRA) performance of Bank of Cairo and Moberly prepared by The Federal Reserve Bank of St. Louis, the institution s supervisory agency, as of August 23, 1999. The agency evaluates performance in assessment area(s), as they are delineated by this institution, rather than individual branches. This assessment area evaluation may include visits to some, but not necessarily all of the institution s branches. The agency rates the CRA performance of an institution consistent with the provisions set forth in Appendix A to 12 CFR Part 228. INSTITUTION S CRA RATING: This institution is rated Satisfactory. The Bank of Cairo and Moberly meets the criteria for a Satisfactory rating. An institution in this category has a satisfactory performance record in activities undertaken to help meet the credit needs of its entire assessment area, particularly in low- and moderate-income (LMI) neighborhoods and to LMI borrowers. This performance is in a manner consistent with institutional capacity and constraints, assessment area credit needs and opportunities, relevant demographic and economic factors and safe and sound banking practices. DESCRIPTION OF INSTITUTION The Bank of Cairo and Moberly is a wholly-owned subsidiary of Cairo Moberly Bancshares, Inc., a one-bank holding company headquartered in Moberly, Missouri. The bank has three business locations, including its main office, all in Randolph County, Missouri. The main bank facility is located in the downtown area of the city of Moberly. The two branches are also located in the city of Moberly within two miles of the main banking facility, with one branch located inside a Wal-Mart Supercenter. The second branch is a freestanding facility. The bank s primary competitors for deposit and loan customers are three branches of large regional institutions, one building and loan company, one credit union, and one similarly situated, locally-owned bank with assets of $155 million. The bank closed its branch facility in Cairo, Missouri on December 17, 1998. The Cairo branch was located approximately 5 miles north of the city of Moberly. The facility was 1
closed following a robbery when it was determined by the Board of Directors that the safety of the Cairo staff could not be reasonably assured. The bank requested and was granted permission from the Federal Reserve Bank of St. Louis and the Missouri Division of Finance to close the without the prior notice requirements of Section 42 of the Federal Deposit Insurance Act because of extenuating circumstances. The Cairo branch was not located in an LMI geography. As of December 31, 1998, the bank reported total assets of $53.5 million. The bank s primary loan products include residential real estate loans (41.5 percent 1 ), commercial loans, including small business and small farm (4.7 percent), and consumer loans (9.5 percent). The bank was rated satisfactory at the last CRA evaluation date August 26, 1996. DESCRIPTION OF ASSESSMENT AREA The bank s assessment area is defined as all of Randolph County, which is located in central Missouri, approximately 3 miles north of Columbia, Missouri and equidistant between St. Louis and Kansas City, Missouri. The county is primarily rural, with a population of 24,37 according to 199 U.S. Census Bureau statistics. Current estimates note a slight decrease in county population at 23,976. 2 In 199, the city of Moberly, the largest city in Randolph County, had a population of 12,839 according to U.S. Census Bureau statistics. Estimates for 1997 indicate a slight decrease in population at 12,37. 3 Randolph County consists of six block numbering areas (BNAs): 991, 992, 993, 994, 995, and 996. According to 199 census data, BNAs 991, 992, 993, 995, and 996 are middle-income geographies, 3 while BNA 994 is an upper-income geography. Based on 199 census data, the median family income level for the assessment area was $26,627 compared to $24,325 for the state of Missouri non-msa median family income. The 1998 HUD estimated median family income for the state of Missouri non- MSA was $34,. Although the bank s assessment area contains no LMI geographies, LMI families are present throughout the area. The following table depicts the income characteristics of the assessment area according to 199 census. 1 Source: Total dollars from Uniform Bank Performance Report, December 31, 1998. 2 Source: Population Estimates Program, U.S. Bureau of the Census 1997. 3 Low-income is defined as individual income or, in the case of a geography, a median family income that is less than 5 percent of the Non MSA median family income. Moderate-income is defined as individual income or, in the case of a geography, a median family income that is at least 5 percent and less than 8 percent of the Non MSA median family income. Middle-income is defined as individual income or, in the case of a geography, a median family income that is at least 8 percent and less than 12 percent of the Non MSA median family income. Upper-income is defined as individual income or, in the case of a geography, a median family income that is 12 percent or more of the Non MSA median family income 2
Income Characteristics of Assessment Area Family Population 4 Income Level Low- Moderate- Middle- Upper- Assessment Area 17.8% 15.% 24.% 43.2% Non-Metropolitan Missouri 2.2% 17.9% 22.2% 39.7% Two community contacts were conducted in conjunction with the CRA assessment of the bank. Both contacts were involved in general economic development to include housing and small business. Housing statistics from 199 census data show that of the 1,131 5 housing units in Randolph County, 64.5 percent (6,532) are owner occupied, 23.8 percent (2,411) are rental units, and 11.7 percent ( 1,188) are vacant. In addition, 81.8 percent of the specified 6 owner-occupied housing units are valued below $6,. These statistics reinforce the opinion of the community contacts interviewed who stated that housing is affordable in the county; however, there is a need for additional units in the $6, - $99, price range. Five new subdivisions have been created as a result of the economic growth of the community, but more are needed for continued growth and future expansion. Randolph County has a broad employment base, with service, retail, government and manufacturing industries being the largest employers. According to 1995 Regional Economic Information Statistics, of the 11,616 employees living in Randolph County, 26.3 percent (3,6) worked in services, 18.3 percent (2,122) worked in retail trade, 17.2 percent (1,993) worked in government, and 12.2 percent (1,42) worked in manufacturing. These four categories accounted for almost 75 percent of the employees living in Randolph County. According to U.S. Department of Agriculture statistics, the number of farms and acres of farmland in Randolph County have increased slightly from 1992 to 1997. 7 Employment statistics 8 indicate that persons employed in farming represent 7.2 percent (834) of the total employment population of Randolph County. Income earned from farming, however, only represents 1.7 percent of the total income earned in Randolph County and has decreased from $4.9 million in 199 to $4.2 million in 1996. 9 Comments from community contacts indicate that while farming is still a major component to the economic stability of the county, it is declining in total economic impact in comparison to other industries. 4 Population income levels were determined using the 199 census median family income. 5 Housing units include 1,176 mobile homes. Source 199 Census Data. 6 Specified Owner Occupied Housing Units include only one-family houses on fewer than ten acres, without a business or medical office on the property. This excludes mobile homes. 7 745 farms in 1992, 81 farms in 1997. 221,122 acres in 1992, 229,86 acres in 1997. Source: 1997 U.S. Census of Agriculture. 8 Source: 1995 Regional Economic Information Statistics. 9 Source: U.S. Department of Commerce, Bureau of Economic Analysis. 3
According to the most current data (March 1999) from the U.S. Bureau of Labor Statistics, the unemployment rate for Randolph County was 3.9 percent. This figure is slightly higher than the Missouri State average of 3.1 percent, but comparable to the current rates in adjacent counties of Shelby (4.8 percent), Monroe (4.4 percent), Macon (5. percent), and Audrain (3. percent). 1 The unemployment figures for Randolph County have fluctuated up and down within the past ten years. 11 This pattern is consistent with community contact comments concerning the employment shifts from unskilled to skilled and service industries and the resulting effects on the labor market. Community contacts were very enthusiastic about the economic expansion that has occurred here within the past three years. The development of a unique fiber optic technology park in Moberly has already attracted three large leasing companies to the area and has spurred the growth of construction and service industries. The expansion of U.S. Highway 63 to four lanes will also have a positive effect on the county, providing greater accessibility to the city of Moberly from Columbia to the south and Kirksville to the north. CONCLUSIONS WITH RESPECT TO THE PERFORMANCE TESTS The bank s performance was evaluated using the CRA small bank performance standards. A sample of 1-4 family residential, motor vehicle, and small business and small farm loans from the bank s loan trial balance register from July 1, 1998 through August 2, 1999 was used in evaluating the bank s lending performance. 1 Source: 1999 U.S. Bureau of Labor Statistics. 11 Source: U.S. Department of Labor Statistics. 199-5.3 percent, 1991-8.6 percent, 1992-6.8 percent, 1993-9.5 percent, 1994-6.5 percent, 1995-6.4 percent, 1996-5.5 percent, 1997-5.9 percent, 1998-5.5 percent, 1999-3.9 percent (through March 1999). 4
The performance standards evaluate: The bank s lending to borrowers of different income levels 12 and businesses and farms of different sizes; Geographic distribution of loans; The proportion of lending within the assessment area; The bank s average loan-to-deposit ratio; and The bank s response to any written complaints since the last examination. Lending to Borrowers of Different Incomes and to Businesses and Farms of Different Sizes An indicator of the institution s lending efforts is reflected in an analysis of the incomes and revenues of borrowers used in granting credit. Borrowers are classified into low-, moderate-, middle-, and upper-income categories by comparing borrower income levels against HUD s estimated 1998 non-msa median family income level of $34,. As one measure of performance, lending levels to each classification of borrowers were then compared with the percentage of families within the income classification. The distribution of loans originated by the bank shows a reasonable penetration among borrowers of different income levels. 12 The borrowers income levels were categorized using the income definitions in footnote four, and 1998 HUD estimated median family income of $34,. 5
The following table illustrates the penetration of sampled motor vehicle and 1-4 family residential loans among borrowers of different income levels. Distribution of Consumer Loans (Number and Dollar Volume in $s) Inside Assessment Area by Income Level of Borrower Loan Type Borrower Income Classification Low- Moderate- Middle- Upper- Totals 12 19 32 29 92 Motor Vehicle 13.% 2.7% 34.8% 31.5% 1% $5 $13 $259 $323 $735 6.8% 14.1% 35.2% 43.9% 1% 1 4 Family % 13 21.7% 22 36.7% 25 41.6% 6 1% Residential $ % $326 14.1% $733 31.8% $1,248 54.1% $2,37 1% 12 32 54 54 152 13 Total 7.9% 21.1% 35.5% 35.5% 1% $5 $429 $992 $1,571 $3,42 1.7% 14.1% 32.6% 51.6% 1% Assessment Area Family Population 17.8% 15.% 23.9% 43.3% 1% The bank s motor vehicle and 1-4 family residential lending to LMI borrowers is reasonable. The bank extended 33.7 percent of its motor vehicle loans to LMI borrowers, while only 21.7 percent of 1-4 family residential real estate loans were extended to LMI borrowers. Overall, the bank extended 29. percent of loans sampled to LMI borrowers, who account for 32.8 percent of the families in the assessment area. Another indicator of the institution s lending efforts is reflected in the bank s distribution of loans to small businesses and small farms. 13 Income information was unavailable for three loans. 6
The following table reflects the distribution of small business loans by gross annual business revenue and loan amount. Gross Revenue Less than $1 million $1 million or more Total Loans Distribution of Small Business Loans Inside Assessment Area Loan Origination Amount ($s) $1 >$1 $25 >$25 $1, 29 74.4% 4 1.3% 33 84.7% 2 5.1% 2 5.1% 4 1.2% % 2 5.1% 2 5.1% Total Loans 31 79.5% 8 2.5% 39 1% The above table demonstrates a significant volume of loans made to small businesses, which are business entities having gross annual revenues of less than $1 million. The bank originated 79.5 percent of its commercial loans sampled to small businesses. This is comparable to the aggregate CRA loan data for Randolph County where 81.6 percent of reported loans were made to small businesses. This figure is also comparable to Dun & Bradstreet s small business data, which indicates that small businesses represent 92.1 percent of the total businesses in Randolph County. 14 In addition, of the small business loans originated, 84.7 percent were for loan amounts of $1, or less. This reflects both the relative size of businesses in the area and the bank s willingness to meet small business needs. 14 Source: Dun & Bradstreet Business Summary Report for Randolph County July 1998. 7
The following table reflects the distribution of small farm loans, by gross annual revenue and loan amount. Gross Revenue Less than $1 million $1 million or more Total Loans Distribution of Small Farm Loans Inside Assessment Area Loan Origination Amount ($s) $1 >$1 $25 >$25 $5 16 1% % 16 1% % % % % % % Total Loans 16 1% % 16 1% The above table demonstrates that all farm loans sampled were made to small farms, which are farm entities having gross annual revenues of less than $1 million. The bank originated 1 percent of its farm loans in amounts of $1, or less. This indicates a willingness to meet small farm needs. The bank shows a reasonable penetration among individuals of different income levels, including LMI individuals. It also shows good penetration of loans made to businesses and farms of different sizes. Geographic Distribution The geographic distribution of loans shows the dispersion of sampled loans throughout the designated assessment area. Among other measures of performance, a bank s lending by loan category may be evaluated by comparing the bank's loan penetration in each geography to the percentage of population residing, and/or the percentage of owner-occupied housing in each income level of geography. 8
The following table depicts the level of lending in each income category of geography. Distribution of Loans Inside the Assessment Area by Income Level of BNA (in $s) Loan Type Low- Moderate- Middle- Upper- Total 1-4 Family Residential N/A N/A Motor Vehicle N/A N/A Total N/A N/A Owner-Occupied Housing Percentage Percentage of Population Residing in Tracts 45 76.3% $1,723 75.6% 78 82.1% $637 84.7% 123 79.9% $2,361 77.9% 14 23.7% $554 24.6% 17 17.9% $115 15.3% 31 2.1% $669 22.1% 59 1% $2,277 1% 95 1% $752 1% 154 15 1% $3,3 1% N/A N/A 85.6% 14.4% 1% N/A N/A 86.4% 13.6% 1% The above table shows that by number of loans made, the bank has a reasonable distribution of all loan types across the assessment area. Of the loans made within the bank s assessment area, 123, or 79.9 percent, were within the middle-income BNAs. This figure is satisfactory given that 86.4 percent of the population resides within middle-income BNAs and 85.6 percent of owner-occupied housing units are located in middle-income BNAs. Although the bank s assessment area contains no LMI geographies, LMI families are represented in these figures Likewise, the bank made 82.1 percent of its small business loans and 93.8 percent of its small farm loans in middle-income tracts. This seems reasonable given that 83.3 percent of the small businesses and 81.8 percent of the farms within the assessment area are located in middle-income tracts according to Dun & Bradstreet data. 15 One loan could not be accurately geocoded. 9
Lending in the Assessment Area A review of the sample of loans originated by the bank revealed a majority of the loans were originated to borrowers within the assessment area. This meets the standard for satisfactory performance. The following table identifies, by loan type, the number, dollar volume and percentage of loans originated inside the assessment area. Loan Type Motor Vehicle 1 4 Family Small Business Small Farm Total Distribution of Loans In/Out of the Assessment Area ($s) Inside Assessment Area Outside Assessment Area Sample Size Number Dollar Number Dollar 11 $844 76 $3,5 67 $3,524 253 $7,868 95 86.4% 6 78.9% 55 82.1% 21 83.% $752 89.1% $2,37 65.9% $3,326 94.4% $6,385 81.2% 15 13.6% 16 21.1% 12 17.9% 43 17.% $92 1.9% $1,193 34.1% $198 5.6% $1,483 18.8% Overall, 21 of the 253 loans sampled, or 83. percent, were located within the assessment area. By dollar volume, 81.2 percent were located within the assessment area. All categories of loans sampled showed a high percentage of loans made within the assessment area. Loan-to-Deposit Ratio The bank s loan-to-deposit (LTD) ratio meets the standard for satisfactory performance. For the previous eleven quarters since the last examination (August 26, 1996), the bank s average LTD ratio was 67.8 percent, as compared to the local competitor 16 average of 62.9 percent. 16 Local competitors not used in the LTD ratio analysis include: a building and loan, a credit union, and three branches of larger commercial banks headquartered in another city. 1
The following chart illustrates the results of the loan-to-deposit analysis. Loan-to-Deposit Ratio Analysis 17 Quarter Bank of Cairo & Moberly Local Competitors 9/3/96 73.6% 67.8% 12/31/96 68.2% 65.9% 3/31/97 67.3% 64.1% 6/3/97 68.6% 66.8% 9/3/97 68.1% 69.2% 12/31/97 64.7% 65.8% 3/31/98 63.5% 61.8% 6/3/98 64.3% 62.5% 9/3/98 66.7% 6.3% 12/31/98 73.3% 51.9% 3/3/99 67.9% 56.3% Average 67.8% 62.9% Review of Complaints No CRA-related complaints have been received since the prior examination. Additional Information A fair lending analysis focusing on Regulation B (Equal Credit Opportunity) and the Fair Housing Act was performed during the examination. The analysis revealed that the bank is in compliance with the substantive provisions of anti-discrimination laws and regulations. 17 The ratios are based on net loans (total loans less allowance for loan losses) to total deposits for each reported quarter since August of 1996. Source: Consolidated Report of Condition for each bank. 11