PUBLIC DISCLOSURE September 17, 2007 COMMUNITY REINVESTMENT ACT PERFORMANCE EVALUATION Belgrade State Bank RSSD #761244 410 Main Street Belgrade, Missouri 63622 Federal Reserve Bank of St. Louis P.O. Box 442 St. Louis, Missouri 63166-0442 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 the 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.
TABLE OF CONTENTS Institution s CRA Rating...1 Scope of Examination...1 Description of Institution...1 Description of Assessment Areas...3 Conclusions with Respect to Performance Criteria...6 Appendix A: CRA Assessment Area.15 Appendix B: Glossary 16 Table of Contents
INSTITUTION S CRA RATING: This institution is rated OUTSTANDING. Belgrade State Bank meets the criteria for an outstanding rating based upon an evaluation of the bank s overall lending performance. Analyses of the bank s lending activity revealed an excellent geographic distribution throughout the bank s assessment areas. Secondly, borrower distribution analyses indicated excellent responsiveness to families/individuals of various income levels (including low- and moderate-income (LMI) levels) and among businesses of different sizes. The bank s loan-to-deposit (LTD) ratio is more than reasonable given the bank s size, financial condition, and assessment area credit needs, and a substantial majority of the bank's loans and other lending-related activities are in the bank's designated assessment areas. Lastly, no CRA-related complaints were filed against the bank for this review period. SCOPE OF EXAMINATION The bank s CRA performance was evaluated using the small bank examination procedures, and the review period was from the date of the bank s previous CRA evaluation on September 8, 2003, to September 17, 2007. Lending performance was based on loans originated in 2006 and 2007, specifically residential real estate loan activity reported under the Home Mortgage Disclosure Act (HMDA) for 2006; consumer motor vehicle loans, originated January 1 to June 30, 2007; and small business loans, originated January 1 to June 30, 2007. Previous to this examination, the bank operated within only one assessment area; however, since that time, the St. Louis, MO-IL metropolitan statistical area (St. Louis MSA) borders expanded, in light of U.S. Census Bureau changes. Consequently, even though Belgrade State Bank s lending territory actually decreased in size since the previous CRA evaluation, the bank must now be evaluated under two separate assessment area analyses (for the MSA and non-msa portions of their combined assessment areas). Lastly, performance in both assessment areas is weighted relatively similarly, as the bank maintains a significant presence in both assessment areas. However, the majority of the bank s branch offices, loan activity, and deposit activity occurs in the MSA assessment area. DESCRIPTION OF INSTITUTION 1 Belgrade State Bank is owned by Turner Bancshares Inc, Belgrade, Missouri, a one-bank holding company. The bank is a full-service financial institution offering a full line of commercial and consumer purpose loan and deposit products. The bank operates six banking facilities, with automated teller machines (ATM) at each location. The bank s main office is located in Belgrade, with other full-service offices located in Potosi, Farmington, and Park Hills, Missouri. There is also a drive-up facility in Caledonia, Missouri. In addition, the bank also operates seven stand-alone ATMs. Since the 2003 CRA evaluation of Belgrade State Bank, the bank has not opened any new branch offices, and the bank closed one branch office, which was located in Viburnum, Missouri. 1 Any percentage row or column figure displayed throughout this evaluation that does not equal exactly 100 percent is strictly due to rounding differences, which are considered immaterial to overall performance conclusions. 1
The bank has the ability to meet the credit needs of its assessment areas based on the bank s asset size, financial condition, and other resources. As of June 30, 2007, the bank reported total assets of $159.4 million. As of the same date, outstanding loans and leases were $132.8 million (83.3 percent of total assets), and deposits totaled $141.8 million. The bank s loan portfolio composition by credit category is displayed in the following table. 2 Distribution of Total Loans Credit Product Type Amount in $000s Percentage of Total Loans Construction and Development $ 14,753 11.1% Commercial Real Estate $ 39,886 30.0% Multifamily Residential $ 6,798 5.1% 1-4 Family Residential $ 41,722 31.4% Secure by First Liens $ 40,287 30.3% Secured by Junior Liens $ 1,372 1.0% Home Equity Loans $ 63 0.0% Farmland $ 1,820 1.4% Farm Loans $ 2,773 2.1% Commercial and Industrial $ 12,543 9.4% Loans to Individuals $ 10,859 8.2% Credit Cards $ - 0.0% Related Plans $ - 0.0% Other Loans to Individuals $ 10,859 8.2% Total Other Loans $ 1,689 1.3% $ 132,843 100% As indicated by the table above, the majority of the bank s lending resources are split between the 1-4 family residential and commercial real estate loan categories. As part of this evaluation under the CRA, the bank s performance was assessed in relation to the performance of local competitors. Four financial institutions were identified as regional peers, with asset sizes ranging from $120.1 million to $703.2 million. The bank received a satisfactory rating at its previous CRA evaluation conducted on September 8, 2003. 2 For purposes of this table, total loan information is derived from gross loans and leases data reported on the Consolidated Reports of Condition and Income as of June 30, 2007. 2
DESCRIPTION OF ASSESSMENT AREAS As noted under the Scope of Examination section of this report, Belgrade State Bank operates in two CRA assessment areas. Assessment Area One is comprised of Washington County in its entirety, which is located in the St. Louis MSA. Assessment Area Two is adjacent to Washington County, but it is in a non-metropolitan area of Missouri and is comprised of St. Francois County and the northern portion of Iron County. As mentioned earlier, Assessment Area One is comprised of Washington County, Missouri, in its entirety. This county, which is located in the southwestern portion of the St. Louis MSA, contains five census tracts (see Appendix A for additional details regarding the composition of the bank s assessment area). Despite being within the St. Louis MSA, Washington County is still primarily rural in nature. The following table reflects the number and population of Assessment Area One census tracts for each income category. 3 Assessment Area One Geographical Information by Income Category 2000 Census Data Low- Moderate- Middle- Upper- Unknown Assessment Area One Geographies Family Population 1 4 0 0 0 5 20.0% 80.0% 0.0% 0.0% 0.0% 100% 982 5,264 0 0 0 6,246 15.7% 84.3% 0.0% 0.0% 0.0% 100% The previous table reveals that Assessment Area One only contains LMI areas. Consequently, all of the families living inside the assessment area live in LMI designated census tracts. Whereas Assessment Area One only contains LMI census tracts, Assessment Area Two does not contain any LMI census tracts. Assessment Area Two Geographical Information by Income Category 2000 Census Data Low- Moderate- Middle- Upper- Unknown Assessment Area Two Geographies Family Population 0 0 10 1 0 11 0.0% 0.0% 90.9% 9.1% 0.0% 100% 0 0 14,017 2,438 0 16,455 0.0% 0.0% 85.2% 14.8% 0.0% 100% The previous table reveals that 10 Assessment Area Two census tracts are designated middleincome, and one is designated upper-income. Consequently, the vast majority of families inside Assessment Area Two live in a middle-income census tract. Based upon 2000 census data, the median family income for Assessment Area One was $31,840, which is significantly below the 2000 St. Louis MSA median family income of $53,435. More recently, the Department of Housing and Urban Development (HUD) estimates the 2007 St. 3 See the glossary in Appendix B for the definitions of the low-, moderate-, middle-, and upper-income categories. 3
Louis MSA median family income to be $63,300, representing an 18.5 percent increase from 2000. The following table displays population percentages of Assessment Area One families by income level, compared to the St. Louis MSA family population as a whole. 2000 Census Data Low- Moderate- Middle- Upper- Unknown Assessment Area One Families St. Louis MSA Assessment Area One Family Population by Income Level 2,558 1,610 1,127 951 0 6,246 41.0% 25.8% 18.0% 15.2% 0.0% 100% 137,988 131,220 161,155 282,274 0 712,637 19.4% 18.4% 22.6% 39.6% 0.0% 100% As displayed in the previous table, the Assessment Area One population characteristics represent a distinct downturn in wealth, compared to the entire St. Louis MSA. As mentioned previously, Assessment Area One contains only LMI designated census tracts. Not surprisingly, the majority of the family population is considered to be LMI. As noted in the previous table, 66.8 percent of Assessment Area One families are LMI, which is significantly higher than that of the entire St. Louis MSA. Further, the percentage of Assessment Area One families living below the poverty level, 17.1 percent, is more than twice that of the overall St. Louis MSA, 7.5 percent. For Assessment Area Two, the 2000 census data median family income figure was $36,856, which is substantially similar to the 2000 non-msa Missouri median family income figure of $36,175. More recently, HUD estimates the 2007 non-msa Missouri family income to be $42,800, representing an 18.3 percent increase from 2000. The following table displays population percentages of Assessment Area Two families by income level, compared to the non- MSA Missouri family population as a whole. 2000 Census Data Low- Moderate- Middle- Upper- Unknown Assessment Area Two Families State of Missouri NonMSA Assessment Area Two Family Population by Income Level 3,148 2,928 3,753 6,626 0 16,455 19.1% 17.8% 22.8% 40.3% 0.0% 100% 79,635 77,615 96,926 164,446 0 418,622 19.0% 18.5% 23.2% 39.3% 0.0% 100% As displayed in the previous table, the Assessment Area Two population characteristics are very similar to that of entire non-msa portion of the state of Missouri, despite the fact that the assessment area has no LMI census tracts. Although the vast majority of the assessment area families live in middle-income census tracts, this table reveals that a significant portion, 36.9 percent, are considered to be LMI, regardless of where they live. Further, the percentage of assessment area two families living below the poverty level, 11.4 percent, is substantially similar to that of the overall, non-msa Missouri figure, 11.5 percent. 4
Housing development in the bank s combined assessment area has been slow/stable in recent history. This fact is supported by a slightly younger median age of assessment area housing stock compared to that of the entire state of Missouri (27 years compared to 30 years). Further, housing in the combined assessment area is significantly more affordable, as compared to the state of Missouri. The median housing value for the combined assessment area is $61,658, compared to the state of Missouri, which is $86,900. Also, housing in the combined assessment area is relatively more affordable in relation to local income levels as well. The affordability ratio 4 for the combined assessment area is 48.0 percent, which is higher than the state of Missouri affordability ratio of 43.0 percent. Lastly, the median gross rent figure for the combined assessment area was $391, significantly below that of $484 for the state of Missouri. Therefore, it appears that despite relatively low wealth/income indicators for the combined assessment area, housing remains relatively affordable in comparison to overall state figures. Despite the fact that one of the bank s assessment areas is located in an MSA, and the other assessment area is very close to an MSA, both of the bank s assessment areas are primarily rural in nature. However, agricultural is not a major industry factor. In the past, mining has played a significant role in local industry, as have industrial-manufacturing companies. More recently, several correctional facilities have been constructed in the area. Major employers in the assessment area include The Doe Run Company, Mineral Area Community College, Farmington Correctional Center, Potosi Correctional Center, and the Red Wing Shoe Corporation. Historically, the bank s lending territory lags behind the state as a whole regarding economic development indicators. As of August 2007, the Washington County unemployment rate was estimated at 7.9 percent, the St. Francois County unemployment rate was 6.3 percent, and the Iron County unemployment rate was 6.1 percent. For the same period, the state of Missouri unemployment rate was 5.2 percent. As a part of this CRA examination, two community contacts were conducted in order to obtain information regarding the bank s assessment areas, including information relating to credit needs, community development opportunities, and the local economy. One interview was completed with a community service representative serving Washington County. The other interview was completed with the director of an affordable housing agency in St. Francois County. In general, these contacts echoed the economic sentiment previously described, noting that unemployment in the area is typically higher than most Missouri areas; further, contacts characterized the area as having mostly low-paying jobs. Contacts noted that few jobs in the area offer good benefits and, most importantly, health insurance. Also, the contacts noted that the waiting list for affordable housing was extremely long and that a good portion of current affordable housing stock is in need of repair. In addition, these contacts revealed pertinent information regarding the credit needs of the assessment area s residents and businesses. These comments were useful in determining the context in which to evaluate the bank s performance in their assessment areas. CONCLUSIONS WITH RESPECT TO PERFORMANCE CRITERIA 4 This figure 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 geography. Values closer to 100 percent indicate greater affordability. 5
Belgrade State Bank meets the criteria for an outstanding rating, based upon its lending performance as measured by the CRA small bank performance standards. This lending performance was based upon loan information from three categories: HMDA data, 5 consumer motor vehicle loans, and small business loans. These three loan categories are considered the bank s primary lines of business, based upon lending volume by number and dollar amounts, and in light of the bank s stated business strategy. Therefore, loan activity represented by these credit products is deemed indicative of the overall lending performance of the bank. The CRA small bank performance standards evaluate the following five criteria as applicable: The geographic distribution of loans within the various census tracts. The distribution of loans by borrower income and business revenue. The bank s average LTD ratio. The level of lending within the assessment areas. A review of written complaints. The remaining sections of this evaluation are based upon analyses of the bank s lending performance under these five performance criteria. Geographic Distribution As noted in the Description of Assessment Areas section, the bank s lending territory consists of two assessment areas. Assessment Area One, which consists of Washington County and is located inside the St. Louis MSA, is comprised of one low-income census tract and four moderate-income census tracts. Assessment Area Two is adjacent to Assessment Area One; however, it is not located inside an MSA. Assessment area two is comprised of 10 middleincome designated census tracts, and one upper-income census tract. The analysis in this section illustrates the distribution of the bank s loan activity across these geographies and is broken out by assessment area, in comparison to key demographic data for the assessment areas. Distribution of Loans (Number and Dollar Volume in $000s) Inside Assessment Area One by Income Level of Geography Geography Income Classification Low- Moderate- Middle- Upper- Unknown 30 111 0 0 0 141 2006 HMDA 21.3% 78.7% 0.0% 0.0% 0.0% 100% $ 1,924 $ 8,277 $ - $ - $ - $ 10,201 18.9% 81.1% 0.0% 0.0% 0.0% 100% Owner Occupied Housing 12.9% 87.1% 0.0% 0.0% 0.0% 100% 5 The HMDA loan category includes loans for the purpose of home purchase, refinancing, and home improvement. 6
Distribution of Loans (Number and Dollar Volume in $000s) Inside Assessment Area Two by Income Level of Geography Geography Income Classification Low- Moderate- Middle- Upper- Unknown 0 0 42 12 0 54 0.0% 0.0% 77.8% 22.2% 0.0% 100% 2006 HMDA $ - $ - $ 3,950 $ 1,367 $ - $ 5,317 0.0% 0.0% 74.3% 25.7% 0.0% 100% Owner Occupied Housing 0.0% 0.0% 83.6% 16.4% 0.0% 100% The analysis of HMDA loans reflects very favorably upon the bank s lending performance under the CRA. As noted in the first table, the bank does an excellent job of making mortgage-related loans in low-income geographies. Combining HMDA activity for both assessment areas, the bank s penetration to LMI geographies represents 72.3 percent of lending by number. In comparison, 28.4 percent of the assessment area owner occupied housing units are located in LMI tracts. The bank s lending performance also compares very favorably to 2006 HMDA aggregate data, 6 which indicates 21.3 percent of all HMDA loans originated to applicants inside the bank s combined assessment area were made to applicants residing in LMI geographies. Consequently, the geographic distribution of loans based upon this consumer loan category reflects excellent penetration throughout both assessment areas. Similarly, the geographic distribution of consumer motor vehicle loan activity reflects favorably upon the bank s CRA performance, as displayed in the following tables. Distribution of Loans (Number and Dollar Volume in $000s) Inside Assessment Area One by Income Level of Geography Geography Income Classification 2007 Motor Vehicle Household Population Low- Moderate- Middle- Upper- Unknown 46 30 0 0 0 76 60.5% 39.5% 0.0% 0.0% 0.0% 100% $435 $255 $ - $ - $ - $690 63.0% 37.0% 0.0% 0.0% 0.0% 100% 18.2% 81.8% 0.0% 0.0% 0.0% 100% 6 HMDA aggregate data represents all lending activity collected and reported under the HMDA for this assessment area, based upon all financial institutions required to report such data. 7
Distribution of Loans (Number and Dollar Volume in $000s) Inside Assessment Area Two by Income Level of Geography Geography Income Classification 2007 Motor Vehicle Household Population Low- Moderate- Middle- Upper- Unknown 0 0 30 11 0 41 0.0% 0.0% 73.2% 26.8% 0.0% 100% $ - $ - $233 $124 $ - $357 0.0% 0.0% 65.3% 34.7% 0.0% 100% 0.0% 0.0% 86.4% 13.6% 0.0% 100% Here again, as indicated in the first table, analysis of the bank s lending activity reflects excellent penetration to LMI geographies. Combining loan activity for both assessment areas, the bank s penetration to LMI geographies represents 64.9 percent of lending by number, which is significantly higher than the household population percentage of 26.6 percent. Consequently, the geographic distribution of loans based upon this consumer loan category reflects excellent penetration throughout the assessment areas. As with the two consumer loan categories, the bank s geographic distribution of small business loans was also reviewed. The following table displays the results of this review, along with estimated percentages of commercial institutions located in each geography income category used for comparison. 7 Distribution of Loans (Number and Dollar Volume in $000s) Inside Assessment Area One by Income Level of Geography 2007 Small Business Business Institutions Geography Income Classification Low- Moderate- Middle- Upper- Unknown 34 10 0 0 0 44 77.3% 22.7% 0.0% 0.0% 0.0% 100% $ 1,629 $ 174 $ - $ - $ - $ 1,803 90.3% 9.7% 0.0% 0.0% 0.0% 100% 33.5% 66.5% 0.0% 0.0% 0.0% 100% 7 These statistics are derived from Business Geodemographic Data for the assessment area, as reported by Dun & Bradstreet (for the year 2006). 8
Distribution of Loans (Number and Dollar Volume in $000s) Inside Assessment Area Two by Income Level of Geography Geography Income Classification Low- Moderate- Middle- Upper- Unknown 2007 Small Business Business Institutions 0 0 11 7 0 18 0.0% 0.0% 61.1% 38.9% 0.0% 100% $ - $ - $ 581 $ 351 $ - $ 932 0.0% 0.0% 62.3% 37.7% 0.0% 100% 0.0% 0.0% 90.4% 9.6% 0.0% 100% Analysis of the small business lending activity revealed lending performance well above that of comparison figures. As detailed in the first table, the bank makes a significant number of small business loans in LMI areas. Combined small business loan activity for both assessment areas revealed that 70.9 percent of small business loans were made in LMI geographies; this figure is significantly higher than the business geodemographic data estimate, which indicates that 19.1 percent of assessment area businesses are located in LMI areas. Further, the bank s lending performance appears strong in light of market performance for the assessment area. The 2006 CRA aggregate data 8 indicates that 15.7 percent of all small business loans made within the combined assessment area were located in LMI census tracts. Based on this analysis, the bank s geographic distribution of small business lending is considered to be excellent. Lastly, based on reviews from all three loan categories, Belgrade State Bank had loan activity in 93.8 percent of all assessment area census tracts, including all five LMI census tracts. Consequently, the geographic distribution of loans, based on activity from all three loan categories reviewed, reflects excellent penetration throughout both assessment areas and exceeds the standard for satisfactory performance under this criterion. Lending to Borrowers of Various Income Levels and to Businesses of Different Sizes The small bank performance standards evaluate the bank s lending to borrowers of various income levels. Borrowers are classified into low-, moderate-, middle-, and upper-income categories by comparing their reported income to the most recent median family income figure, as estimated by HUD. In 2006, this figure was $65,800 for the St. Louis MSA and $44,800 for the non-metropolitan portion of Missouri. 9 The following tables show the distribution of HMDA loans by borrower income level, as detailed by individual assessment area. 8 CRA aggregate data represent all lending activity collected and reported under the CRA for this assessment area, based upon all financial institutions required to report such data. 9 For 2007, the median family income for the St. Louis MSA was $63,300 and $42,800 for the non-metropolitan portion of the state of Missouri. 9
Distribution of Loans (Number and Dollar Volume in $000s) Inside Assessment Area One by Income Level of Borrower Borrower Income Classification 2006 HMDA Family Population Low- Moderate- Middle- Upper- Unknown 35 45 33 18 10 141 24.8% 31.9% 23.4% 12.8% 7.1% 100% $1,604 $2,266 $3,013 $2,169 $1,149 $10,201 15.7% 22.2% 29.5% 21.3% 11.3% 100% 41.0% 25.8% 18.0% 15.2% 0.0% 100% Distribution of Loans (Number and Dollar Volume in $000s) Inside Assessment Area Two by Income Level of Borrower Borrower Income Classification 2006 HMDA Family Population Low- Moderate- Middle- Upper- Unknown 6 9 11 22 6 54 11.1% 16.7% 20.4% 40.7% 11.1% 100% $354 $628 $855 $2,722 $758 $5,317 6.7% 11.8% 16.1% 51.2% 14.3% 100% 19.1% 17.8% 22.8% 40.3% 0.0% 100% As indicated in the previous tables, the bank is doing a good job of making mortgage loans to LMI borrowers. Although figures indicate strong lending performance to moderate-income borrowers, lending to low-income borrowers is below that of family population figures. However, in light of the assessment area population percentage living below the poverty level, the bank s performance still appears favorable. The 2000 census data indicates that 17.1 percent of the Assessment Area One population was estimated to be living below the poverty level (this is significantly higher than the overall St. Louis MSA figure, 7.5 percent). Further, the Assessment Area Two poverty level was estimated to be 11.4 percent. Therefore, it is likely that such a significant portion of the assessment area population living below the poverty level will substantially reduce the number of bankable, low-income individuals. Overall, the bank s combined assessment area lending performance to LMI borrowers totaled 48.7 percent by number of loans, which is higher than the combined assessment area LMI family population figure of 45.1 percent. In addition, the bank s performance looks significantly better than 2006 HMDA aggregate data, which indicates 29.0 percent of all HMDA loans were made to LMI applicants. Therefore, the bank s distribution of HMDA loans to LMI borrowers is considered to be excellent, as compared to demographic and competitor data. As with the bank s HMDA loan activity, the borrower distribution of consumer motor vehicle loans was also analyzed. The following table shows the distribution of consumer motor vehicle loans by income level of the borrower. 10
Distribution of Loans (Number and Dollar Volume in $000s) Inside Assessment Area One by Income Level of Borrower Borrower Income Classification 2007 Motor Vehicle Household Population Low- Moderate- Middle- Upper- Unknown 36 23 11 6 0 76 47.4% 30.3% 14.5% 7.9% 0.0% 100% $248 $233 $121 $88 $ - $690 35.9% 33.8% 17.5% 12.8% 0.0% 100% 42.2% 19.6% 18.8% 19.4% 0.0% 100% Distribution of Loans (Number and Dollar Volume in $000s) Inside Assessment Area Two by Income Level of Borrower Borrower Income Classification 2007 Motor Vehicle Household Population Low- Moderate- Middle- Upper- Unknown 12 14 9 6 0 41 29.3% 34.1% 22.0% 14.6% 0.0% 100% $64 $120 $66 $106 $ - $356 18.0% 33.7% 18.5% 29.8% 0.0% 100% 22.8% 16.1% 18.6% 42.5% 0.0% 100% As displayed in the previous tables, the bank s motor vehicle lending to LMI borrowers appears strong. The bank s lending performance to LMI borrowers is significantly above that of demographic comparison figures. Activity in both assessment areas revealed that 72.6 percent of motor vehicle loans were made to LMI borrowers, which is significantly higher than LMI household population of 45.0 percent. Consequently, the borrower distribution of this loan product is considered excellent, especially in light of the poverty level data discussed earlier. Similar to the borrower distribution analysis conducted for the two consumer loan categories, the bank s distribution of loans to businesses of various sizes was also reviewed. The following table reflects the bank s distribution of small business loans by gross annual revenue. 11
Assessment Area One Lending Distribution by Business Revenue Level Gross Revenue Loan Origination Amount (in $000s) >$100 >100<250 >250<1,000 $1 Million or 40 3 1 44 Less 90.9% 6.8% 2.3% 100% Greater Than $1 0 0 0 0 Million 0.0% 0.0% 0.0% 0.0% 40 3 1 44 90.9% 6.8% 2.3% 100% Assessment Area Two Lending Distribution by Business Revenue Level Gross Revenue Loan Origination Amount (in $000s) >$100 >100<250 >250<1,000 $1 Million or 15 3 0 18 Less 83.3% 16.7% 0.0% 100% Greater Than $1 0 0 0 0 Million 0.0% 0.0% 0.0% 0.0% 15 3 0 18 83.3% 16.7% 0.0% 100% Based on this analysis of business loans, the bank is doing an excellent job of meeting small business credit needs. 10 As noted in the previous tables, all of the bank s small business loans were made to businesses with gross annual revenues of $1 million or less. Business geodemographic data indicates that 90.6 percent of business institutions inside the assessment areas are small businesses. In addition, 2006 CRA aggregate data for the assessment areas reflect that 39.9 percent of business lending was to small businesses. Further, the fact that 88.7 percent of loans to small businesses reviewed were in amounts of $100,000 or less further indicates the bank s willingness to meet the credit needs of small businesses within the assessment area. In light of these findings, the bank s small business lending is considered excellent. In conclusion, based on the analyses of all three loan categories reviewed, the bank s overall borrower distribution of lending activity exceeds the standard for satisfactory performance. 10 Under the CRA, a small business is considered to be one in which gross annual revenues for the preceding calendar year are $1 million or less. 12
Loan-to-Deposit (LTD) Ratio One indication of the bank s overall level of lending activity is its LTD ratio. The following table displays the bank s average LTD ratio 11 in comparison to that of its regional competitors. Loan-to-Deposit Ratio Analysis Name Asset Size Average Headquarters (in $000s) LTD Ratio Belgrade State Bank $ 159,411 Belgrade, Missouri 88.8% $ 703,210 Farmington, Missouri 92.9% Regional Bank Competitors $ 120,136 Park Hills, Missouri 92.%5 $ 182,475 Irondale, Missouri 67.4% $ 239,966 Fredericktown, Missouri 93.1% Based on data from the previous table, the bank s level of lending indicates more than reasonable responsiveness to assessment area credit needs. For the last 16 quarters, the bank s LTD ratio has ranged from a low of 78.0 percent to a high of 95.0 percent and represents a generally increasing trend. In comparison, the average LTD ratios for the bank s regional competitors ranged from 67.4 percent to 93.1 percent. Therefore, in light of the bank s lending levels as analyzed for the previous review period, the Belgrade State Bank exceeds the satisfactory performance standard for this criterion. Lending in the Assessment Areas For the loan activity reviewed as part of this evaluation, the following table displays the number and dollar volume of loans inside the bank s assessment areas. 11 The average LTD ratio represents a 16-quarter average, dating back to the bank s previous CRA evaluation. 13
Lending Inside and Outside of Assessment Area (in $000s) Inside Assessment Outside Assessment Area Area 195 18 213 20006 HMDA 91.5% 8.5% 100% $ 15,518 $ 1,801 $ 17,319 89.6% 10.4% 100% 117 5 122 2007 Motor Vehicle 95.9% 4.1% 100% $ 1,046 $ 74 $ 1,120 93.4% 6.6% 100% 62 9 71 2007 Small Business 87.3% 12.7% 100% $ 2,735 $ 393 $ 3,128 87.4% 12.6% 100% 374 32 406 92.1% 7.9% 100% $ 19,299 $ 2,268 $ 21,567 89.5% 10.5% 100% The previous table demonstrates that a substantial majority of loans were extended to borrowers residing in the bank s assessment areas. Of the 406 loans reviewed, 92.1 percent by number and 89.5 percent by dollar volume were originated within the bank s assessment area. Therefore, the bank exceeds the performance standard for this criterion. Review of Complaints No CRA-related complaints were received for this institution during the time frame used for this evaluation. FAIR LENDING OR OTHER ILLEGAL CREDIT PRACTICES REVIEW Based upon past supervisory history and the Consumer Affairs review (including a fair lending analysis performed under Regulation B - Equal Credit Opportunity and the Fair Housing Act requirements) conducted concurrently with this CRA evaluation, Belgrade State Bank has demonstrated compliance with the substantive provisions of consumer protection laws and regulations. 14
Appendix A County Belgrade State Bank - Assessment Area One Geography Number Geography Income Category MSA Contains Bank Office Washington 9603.00 Low 41180 Yes Washington 9601.00 Moderate 41180 No Washington 9602.00 Moderate 41180 No Washington 9604.00 Moderate 41180 No Washington 9605.00 Moderate 41180 Yes County Belgrade State Bank - Assessment Area Two Geography Number Geography Income Category MSA Contains Bank Office Iron 9701.00 Middle n/a No Iron 9703.00 Middle n/a No St. Francois 9503.00 Middle n/a No St. Francois 9504.00 Middle n/a No St. Francois 9506.00 Middle n/a No St. Francois 9507.00 Middle n/a No St. Francois 9508.00 Middle n/a No St. Francois 9509.00 Middle n/a Yes St. Francois 9510.00 Middle n/a No St. Francois 9511.00 Middle n/a Yes St. Francois 9501.00 Upper n/a No Two offices in this census tract. Two Offices in this census tract including the main office. 15
Appendix B 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. 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 121.301) 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- (i) Low-or moderate-income geographies; (ii) Designated disaster areas; or (ii) Distressed or underserved non-metropolitan 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. 16
Appendix B 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 (for example, geographic distribution, borrower distribution, and total number and dollar amount of investments), and qualitative factors (for example, 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 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 refinancing 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, Investment, and Service 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. 17
Appendix B 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. 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. 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 multi-state 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 multi-state metropolitan area, the institution will receive a rating for the multi-state 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 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 non-mortgage, commercial loans. 18
Appendix B 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 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. 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. 19