PUBLIC DISCLOSURE June 2, 2008 COMMUNITY REINVESTMENT ACT PERFORMANCE EVALUATION Legacy Bank & Trust Company RSSD # 397755 10603 Highway 32 P.O. Box D Plato, Missouri 65552 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 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.
TABLE OF CONTENTS Institution s CRA Rating...1 Scope of the Examination..........1 Description of Institution...2 Description of Assessment Area...3 Conclusions With Respect To Performance Criteria...9 Appendix A: CRA Assessment Area.....22 Appendix B: Glossary....24 Table of Contents
INSTITUTION S CRA RATING: This institution is rated SATISFACTORY. Legacy Bank & Trust Company (Legacy Bank) meets the criteria for a satisfactory rating, based upon the performance evaluation of the bank s lending activity as measured by the application of small bank performance criteria. The bank s loan distribution by borrower income characteristics reflects a good loan distribution to borrowers of different income levels, including low- and moderate-income borrowers (LMI), as well as to businesses and farms of different sizes. The bank s overall geographic distribution of lending reflects a reasonable dispersion throughout the census tracts of the combined assessment area. The bank s average loan-todeposit (LTD) ratio is good in comparison to similarly situated competitors. A majority of the loans sampled were originated within the combined assessment area. SCOPE OF THE EXAMINATION The bank s Community Reinvestment Act (CRA) performance was evaluated using the examination procedures for small banks. The evaluation period dates back to the previous CRA examination on April 5, 2004. For its CRA designated assessment area, Legacy Bank has identified two assessment areas, collectively referred to as the combined assessment area. Assessment Area One is comprised of 17 census tracts in Christian and Webster counties in Missouri. This assessment area is a part of the Springfield MO Metropolitan Statistical Area (MSA) #44180. Assessment Area Two is comprised of 17 census tracts in Douglas, Laclede, Texas, and Wright counties in Missouri and is part of the non-msa geographies of Missouri. The two assessment areas are contiguous to each other. The evaluation of the bank s lending performance was based on information from the bank s 2007 Home Mortgage Disclosure Act (HMDA) data. 1 In addition, a statistical sample of consumer motor vehicle loans, business loans and farm loans originated in 2007 were also reviewed. These four loan categories are considered the bank s primary lines of business and are therefore indicative of the overall lending performance of the bank. The loan data evaluation involved an analysis of the bank s distribution of loans by borrower income levels or business or farm revenues, the bank s distribution of loans among the various geographical income categories, loan volume relative to bank deposits, and the bank s lending within its assessment areas. The bank originated 66.3 percent of the sample of loans reviewed for this evaluation in Assessment Area Two. Although separate analyses will be performed for each assessment area under the Borrower and Geographic Distribution tests, the conclusions arrived at for Assessment Area Two will be given greater consideration in determining the overall performance rating for the bank. 1 The HMDA loan category includes loans for the purpose of home purchase, refinance, and home improvement. 1
Two community contacts were performed in order to establish a context for the communities in which the bank operates and to solicit information on the bank s performance in meeting the credit needs of the community it serves. One contact from each assessment area was interviewed. A brief summary of the information provided by the contacts is noted in the discussions of the individual assessment areas that follow. DESCRIPTION OF INSTITUTION 2 Legacy Bank is a full-service retail bank offering a variety of both consumer and business loan and deposit products. The bank is 100 percent owned by Ozarks Heritage Financial Group, Incorporated, a one-bank holding company located in Gainesville, Missouri. 3 The bank s four offices are located in the state of Missouri, with two offices in each assessment area. The banking locations consist of a main office in Plato (Texas County), and branches in Mountain Grove (Wright County), Sparta (Christian County), and Rogersville (Webster County). The Mountain Grove branch is in a moderate-income census tract, with the other branches in middle-income census tracts. Two branches have been opened since the previous CRA examination. The Sparta branch opened in March 2005 and the Rogersville branch opened in May 2008. These two branches are in census tracts included in Assessment Area One, which is in the Springfield MO MSA. The main office and each branch facility provide drive-up and automated teller machine (ATM) services. Loan and deposit services are available at all banking locations. The bank extends HMDA residential real estate loans, commercial/business loans, farmland/agricultural, and consumer loans to individuals. As of March 31, 2008, the bank reported total assets of $122.2 million. As of the same date, gross loans and leases outstanding were $91.8 million (75.1 percent of total assets), and deposits totaled $93.0 million. The bank has the ability to meet the credit needs of its assessment area based on its asset size, financial condition, and other resources. The bank s loan portfolio composition, by credit product type, is summarized in the table that follows. 2 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 conclusion. 3 The bank holding company is owned by Century Bancshares, Incorporated, of Gainesville, Missouri. Century Bancshares owns a state member bank, Century Bank of the Ozarks, Gainesville, Missouri. 2
Distribution of Total Gross Loans (as of March 31, 2008) Credit Product Type Amount in $000s Percentage of Total Loans Construction and Development $ 11,525 12.6% Commercial Real Estate 10,561 11.5% Multifamily Residential 1,087 1.2% 1-4 Family Residential - Revolving 38 0.0% 1-4 Family Residential - Other 28,820 31.4% Farmland 19,433 21.2% Agricultural 3,991 4.3% Commercial and Industrial 10,148 11.1% Loans to Individuals 6,031 6.6% Total Other Loans & Leases 169 0.2% GROSS LOANS $ 91,803 100% As indicated by the preceding table, a significant portion of the bank s lending resources is directed to loans secured by 1-4 family residential properties (31.4 percent), farmland loans (21.2 percent), and construction and development loans (12.6 percent). As part of this evaluation under the CRA, the bank s performance was considered in relation to the performance of its local competitors. Four financial institutions were identified as similarly situated competitors with asset sizes ranging from $69.8 million to $200.9 million. The bank received a satisfactory rating at its previous CRA evaluation conducted on April 5, 2004, by this Reserve Bank. That examination was conducted using the small bank examination procedures. DESCRIPTION OF ASSESSMENT AREAS 4 At the time of the previous examination, the bank had only one assessment area and it was comprised of ten geographies that covered portions of Texas, Pulaski, Wright, Laclede, and Douglas counties, all located in non-msa geographies in Missouri. 4 Statistical/demographic information cited in this evaluation is taken from 2000 United States Census Bureau data, unless stated otherwise. 3
For the current CRA evaluation period, the bank has two assessment areas that cover six counties. A brief description of the combined assessment area is provided below, followed by a more comprehensive description of both Assessment Area One (in an MSA geography) and Assessment Area Two (in a non-msa geography). A listing of all the census tracts in each assessment area can be found in Appendix A to this document. Combined Assessment Area The following table reflects the number and the family population of the census tracts within the combined assessment area for each income category. 5 Assessment Area Geographical Information by Income Category 2000 Census Data Low- Moderate- Middle- Upper- Unknown Combined 0 3 28 3 0 34 Assessment Area Census Tracts 0.0% 8.8% 82.4% 8.8% 0.0% 100% Family Population 0 4,070 40,498 4,545 0 49,113 0.0% 8.3% 82.5% 9.3% 0.0% 100% The preceding table shows that the bank s combined assessment area contains no low-income census tracts, 3 moderate-income census tracts, 28 middle-income census tracts, and 3 upperincome census tracts. Approximately 8.3 percent of the total family population (4,070 families) reside in the LMI census tracts. By far, the largest portion of the combined assessment area family population (82.5 percent) reside in middle-income census tracts. The following table displays the population percentages of the combined assessment area families, by income level, compared to the state of Missouri, the Springfield MO MSA, and non- MSA Missouri. 5 See the Glossary in Appendix B for definitions of low-, moderate-, middle- and upper-income categories. 4
Assessment Area Family Population by Income Level 2000 Census Data Low- Moderate- Middle- Upper- Unknown Combined 9,859 10,379 11,439 17,436 0 49,113 Assessment Areas 20.1% 21.1% 23.3% 35.5% 0.0% 100% State of Missouri 283,057 278,617 344,928 579,944 0 1,486,546 19.0% 18.7% 23.2% 39.0% 0.0% 100% Springfield MO MSA 17,103 19,239 23,652 38,151 0 98,145 17.4% 19.6% 24.1% 38.9% 0.0% 100% Non-MSA Missouri 79,635 77,615 96,926 164,446 0 418,622 19.0% 18.5% 23.2% 39.3% 0.0% 100% As shown in the preceding table, the distribution of family population by income level in the combined assessment area is similar to that of the state of Missouri, the statewide non-msa census tracts of Missouri, and the Springfield, MO MSA. LMI families make up 41.2 percent of the combined assessment area, compared to 37.7 percent of the families in the state of Missouri, 37.0 percent of the Springfield MO MSA, and 37.5 percent in non-msa of Missouri. Based on this comparison, the combined assessment area LMI population is slightly less affluent relative to the other three designated areas. Although the majority of the combined assessment area families live in middle- and upper-income census tracts (91.8 percent as shown in the table at the top of the previous page), a high percentage of combined assessment area families (41.2 percent) are considered LMI, regardless of their geographic location. As of December 2007, the unemployment rate 6 in the Springfield MO MSA was 4.1 percent. The unemployment rate at that date was 4.8 percent for Webster County and 3.9 percent for Christian County (the two MSA counties that comprise the bank s Assessment Area One). The unemployment rate for the state of Missouri at December 2007 was 5.2 percent. In the four non- MSA counties (Texas, Laclede, Douglas, and Wright) that comprise the bank s Assessment Area Two, the unemployment rates at that date ranged from 6.4 percent to 6.9 percent. This higher unemployment rate is an indication of a less healthy economy within the non-msa counties as compared to the Springfield MO MSA and the state of Missouri. One last note with regard to the combined assessment area is the level of competition between financial institutions. This is an important aspect in considering the bank s performance under the CRA because it explains the bank s ability to effectively penetrate certain LMI census tracts with its current line of lending products. As of June 30, 2007, there were a total of 87 branches of 33 different financial institutions in the assessment area. At June 30, 2007, Legacy Bank only had three offices, with a total deposit market share of 3.5 percent. Additional details with regard to the level of competition will be addressed during the discussions of each assessment area that follow. 6 All unemployment rates stated in this report are not seasonally adjusted. 5
Assessment Area One Assessment Area One is comprised of 17 census tracts. This includes all 13 census tracts of Christian County, Missouri, and all 4 census tracts of Webster County, Missouri. Both counties are part of the Springfield MO MSA (which has a total of five counties). Assessment Area Geographical Information by Income Category 2000 Census Data Low- Moderate- Middle- Upper- Unknown Assessment Area One 0 0 14 3 0 17 Census Tracts 0.0% 0.0% 76.5% 23.5% 0.0% 100% Family Population 0 0 19,813 4,545 0 24,358 0.0% 0.0% 81.3% 18.7% 0.0% 100% The preceding table shows that Assessment Area One contains 14 middle- and 3 upper-income census tracts. There are no low- or moderate-income census tracts in this assessment area. The following table displays the population percentages of Assessment Area One by family income level, compared to the state of Missouri and the Springfield MO MSA family population percentages. Assessment Area Family Population by Income Level 2000 Census Data Low- Moderate- Middle- Upper- Unknown Assessment Area One State of Missouri Springfield MO MSA #44180 4,076 4,985 5,820 9,477 0 24,358 16.7% 20.5% 23.9% 38.9% 0.0% 100% 283,057 278,617 344,928 579,944 0 1,486,546 19.0% 18.7% 23.2% 39.0% 0.0% 100% 17,103 19,239 23,652 38,151 0 98,145 17.4% 19.6% 24.1% 38.9% 0.0% 100% As shown in the preceding table, the distribution of family population, by income level, in Assessment Area One is similar to the state of Missouri and the Springfield MO MSA. LMI families make up 37.2 percent of Assessment Area One, compared to LMI families of 37.7 percent in the state of Missouri and LMI families of 37.0 percent in the Springfield MO MSA. Based on this comparison, the assessment area population has a level of affluence very similar to the other two designated areas. The total population for Assessment Area One as of 2000 census data is 85,330. Of the total population in the assessment area, 28.2 percent are age 17 years or younger and 10.9 percent are 65 years of age or older. 6
Housing costs for Assessment Area One tend to be a little less affordable, as compared to those of the state of Missouri and the Springfield MO MSA. For example, the median housing value and the median gross rent for Assessment Area One are $91,437 and $486, respectively. As for the state of Missouri and the Springfield MO MSA, the median housing value and the median gross rent are $86,900 and $484 and $87,570 and $460, respectively. Another comparison for the cost of housing in the assessment area is the affordability ratio. 7 As of the 2000 census, the affordability ratio was 39.0 percent for the assessment area, 43.0 percent for the state of Missouri, and 38.0 percent for the Springfield MO MSA. The percentage of owner-occupied housing units in Assessment Area One is 71.3 percent, which is higher than both the state of Missouri and the Springfield MO MSA comparisons of 63.2 and 62.9 percent, respectively. The assessment area contains a lower percentage of rental units, 21.7 percent, compared to the state of Missouri figure of 26.7 percent and the Springfield MO MSA figure of 30.0 percent. The level of vacant housing units in the assessment area is 7.0 percent, lower than the state of Missouri (10.1 percent), but similar to the Springfield MO MSA (7.2 percent). With regard to the level of families below the poverty level, the assessment area is slightly less than that of the Springfield MO MSA and the state of Missouri. For the assessment area, 8.0 percent of the families had incomes that were below the poverty level, as compared to 8.2 percent for the Springfield MO MSA and 8.6 percent for the state of Missouri. Based upon 2000 census data, the median family income for Assessment Area One was $41,644, with median family income for the Springfield MO MSA being $41,591. Currently, the Department of Housing and Urban Development (HUD) estimates the 2007 Springfield MO MSA median family income to be $50,700. In the CRA analyses, the 2000 census data for median family income is used to determine in which geographical income category a census tract in the assessment area is included. The current, estimated HUD MSA figure for median family income is used to classify borrowers as to whether they are considered to be at a low-, moderate-, middle-, or upper-income level. A community contact with a local real estate developer located within this assessment area was conducted. The comments provided were used in determining the context in which to evaluate the bank s performance in meeting the credit needs of its assessment area. The contact categorized the economy as stable and mentioned that Christian County is the fastest growing county in the state of Missouri. Major employers in the area are mostly located in Springfield and the rural areas are used as bedroom communities. Assessment Area Two Assessment Area Two is comprised of 17 census tracts located in non-msa geographies in Missouri. This encompasses all 4 census tracts in Texas County, all 4 census tracts in Wright County, all 6 census tracts in Laclede County, and all 3 census tracts of Douglas County. 7 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. 7
Assessment Area Geographical Information by Income Category 2000 Census Data Low- Moderate- Middle- Upper- Unknown Assessment Area Two 0 3 14 0 0 17 Census Tracts 0.0% 17.6% 82.4% 0.0% 0.0% 100% Family Population 0 4,070 20,685 0 0 24,755 0.0% 16.4% 83.6% 0.0% 0.0% 100% As the preceding chart shows, this assessment area is comprised of 3 moderate- and 14 middleincome census tracts. A majority of the family population (83.6 percent) is contained within the middle-income census tracts. The following table displays the population percentages of Assessment Area Two by family income level, compared to the state of Missouri and the Springfield MO MSA family population percentages. Assessment Area Family Population by Income Level 2000 Census Data Low- Moderate- Middle- Upper- Unknown Assessment Area Two State of Missouri Non-MSA Missouri 5,783 5,394 5,619 7,959 0 24,755 23.4% 21.8% 22.7% 32.2% 0.0% 100% 283,057 278,617 344,928 579,944 0 1,486,546 19.0% 18.7% 23.2% 39.0% 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% The total population for Assessment Area Two, as of 2000 census data, is 86,555. Of the total population in the assessment area, 26.2 percent are age 17 years or younger and 16.1 percent are 65 years of age or older. Housing costs for Assessment Area Two tend to be lower as compared to those of the state of Missouri and similar to the statewide non-msa geographies. For example, the median housing value and the median gross rent for Assessment Area Two are $66,804 and $337, respectively. As for the state of Missouri and the statewide non-msa, the median housing value and the median gross rent are $86,900 and $484 and $66,246 and $378, respectively. A final indicator, the affordability ratio, shows that the cost of housing is slightly less affordable as compared to that of the state of Missouri and the statewide non-msa geographies. As of the 2000 census, this ratio was 39.0 percent for the assessment area compared to 43.0 percent for the state of Missouri and 45.0 percent for the statewide non-msa geographies. 8
The percentage of owner-occupied housing units in Assessment Area Two is 66.1 percent, which is slightly higher than both the state of Missouri and the statewide non-msa geographies of 63.2 and 60.9 percent, respectively. The assessment area contains a lower percentage of rental units (22.2 percent) when compared to the rental units for the state of Missouri (26.7 percent), and a comparable percentage of rental units when compared to the statewide non-msa (22.9 percent). The level of vacant housing units in Assessment Area Two (11.6 percent) is slightly higher than that of the state of Missouri (10.1 percent) but lower than that of the statewide non-msa geographies (16.5 percent). With regard to the level of families with income below the poverty level, Assessment Area Two (at 14.2 percent) is higher than the state of Missouri at 8.6 percent and the statewide non-msa geographies at 11.5 percent. Based on 2000 census data, the median family income for Assessment Area Two was $31,490, with the median family income for the non-msa geographies of Missouri being $36,175. Currently, HUD estimates the 2007 statewide non-msa median family income to be $42,800. For CRA analysis, 2000 census data determines the geographical income categories and the estimated HUD MSA figures determine the borrower income levels. A community contact associated with the local housing authority located within this assessment area was conducted. The comments provided were used in determining the context in which to evaluate the bank s performance in meeting the credit needs of its assessment area. The contact categorized the economy as average with regard to Wright County, Missouri. The contact also said that there have been very few changes in the area recently and financial services are readily available to all people in the assessment area. CONCLUSIONS WITH RESPECT TO PERFORMANCE CRITERIA Legacy Bank meets the criteria for a satisfactory rating based upon its lending performance as measured by the CRA small bank performance standards. The bank s lending performance was based upon statistical samples of 2007 HMDA loans, consumer motor vehicle loans, business loans and farm loans. The analyses of the loan samples were conducted within the context of the assessment area s economy, credit needs, and competition among financial institutions. As discussed previously, 66.3 percent of the bank s lending considered in this analysis occurred in Assessment Area Two. Therefore, primary consideration in regard to the bank s overall performance rating will be given to the lending activity in this assessment area. The CRA small bank performance standards evaluate the following five criteria, as applicable: The distribution of loans by borrower income, or by business and farm revenue. The geographic distribution of loans within the various census tracts. The bank s average LTD ratio. The level of lending within the assessment area. 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. 9
Lending to Borrowers of Different Income Levels and to Businesses and Farms of Different Sizes The small bank performance standards evaluate the bank s lending to borrowers of various income levels and to businesses and farms of varying revenue sizes. Special emphasis is placed on loans originated to LMI borrowers and to small businesses and small farms. 8 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. Businesses and farms are classified according to those having gross annual revenues of $1 million or less, and those with revenues greater than $1 million. The number and amount of the bank s loan originations in each borrower income classification are then compared to the percentage of families or households in those categories, as applicable. Businesses and farms are analyzed based on their revenue sizes and the number and amount of the loans originated. Assessment Area One The following table shows the distribution of residential real estate loans in Assessment Area One by income level of the borrower. Distribution of Loans (Number and Dollar Volume in $000s) Inside Assessment Area by Income Level of Borrower Loan Type 2007 HMDA Family Population Borrower Income Classification Low- Moderate- Middle- Upper- Unknown 7 6 17 17 0 47 14.9% 12.8% 36.2% 36.2% 0.0% 100% $ 391 $ 456 $ 1,829 $ 2,764 $ - $ 5,440 7.2% 8.4% 33.6% 50.8% 0.0% 100% 16.7% 20.5% 23.9% 38.9% 0.0% 100% The preceding table indicates that in Assessment Area One the bank originated, by number, 27.7 percent of its HMDA loans to LMI borrowers, with LMI borrowers comprising 37.2 percent of the family population in the assessment area. The 2006 HMDA aggregate data indicates that of the HMDA reporters within this assessment area, 22.3 percent of the loans were originated to LMI borrowers. 9 Although less than the percentage of LMI families, the bank s percent of LMI originations compares favorably to the HMDA aggregate figure; therefore, the bank s distribution of HMDA loans is adequate. 8 Under the CRA, a small business or small farm is considered to be one in which gross annual revenues for the preceding calendar year were $1 million or less. 9 HMDA aggregate data represent all lending activity collected and reported under HMDA for the assessment area, based upon all financial institutions required to report such data. 10
As with the bank s 2007 HMDA loan activity, the borrower distribution of consumer motor vehicle loans was also analyzed, using household population as a comparison to measure the bank s performance. The following table shows the distribution in Assessment Area One of those motor vehicle loans by income level of the borrower. Distribution of Loans (Number and Dollar Volume in $000s) Inside Assessment Area by Income Level of Borrower Loan Type 2007 Motor Vehicle Household Population Borrower Income Classification Low- Moderate- Middle- Upper- Unknown 14 8 7 9 4 42 33.3% 19.0% 16.7% 21.4% 9.5% 100% $ 103 $ 59 $ 106 $ 84 $ 44 $ 396 26.0% 14.9% 26.8% 21.2% 11.1% 100% 18.5% 16.9% 20.9% 43.8% 0.0% 100% Of the 42 consumer motor vehicle loans reviewed for this analysis, 52.3 percent by number were originated to LMI borrowers. In comparison, LMI households account for 35.4 percent of the assessment area population. Based on this comparison, the distribution of consumer motor vehicle loans in Assessment Area One reflects good distribution to borrowers of different income levels, especially to low-income borrowers. Similar to the borrower distribution analysis conducted for the two consumer loan products, the bank s distribution of loans to businesses with varying revenues was reviewed in light of the assessment area demographics and market lending data. The following table reflects the bank s distribution of business loans in Assessment Area One by gross annual business revenue and the number and amount of the loan originations. Lending Distribution by Business Revenue Level Loan Origination Amount (in $000s) Gross Revenue <$100 >$100<$250 >$250<$1,000 $1 Million or Less 20 3 1 24 83.3% 12.5% 4.2% 100% Greater Than $1 0 0 0 0 Million 0.0% 0.0% 0.0% 0.0% 20 3 1 24 83.3% 12.5% 4.2% 100% 11
The preceding table demonstrates that each of the 24 loans sampled (100 percent) were originated to businesses with gross annual revenues of $1 million or less. In comparison, 2007 data from Dun & Bradstreet indicate that 90.0 percent of businesses inside Assessment Area One have gross annual revenues of $1 million or less. Furthermore, the data reviewed indicate 83.3 percent of the bank s loans to small businesses sampled were in amounts of $100,000 or less. In summary, the bank s level of lending to small businesses is considered favorable. Similar to the distribution of loans to businesses, the bank s distribution of loans to farms with varying revenues was reviewed in light of the assessment area demographics and market lending data. The following table reflects the bank s distribution of business loans in Assessment Area One by gross annual farm revenue and the number and amount of the loan originations. Lending Distribution by Farm Revenue Level Loan Origination Amount (in $000s) Gross Revenue <$100 >$100<$250 >$250<$500 $1 Million or Less 16 1 0 17 94.1% 5.9% 0.0% 100% Greater Than 0 0 0 0 $1 Million 0.0% 0.0% 0.0% 0.0% 16 1 0 17 94.1% 5.9% 0.0% 100% Of the 17 loans sampled, all were made to farms with gross revenues of $1 million or less. In comparison, 2007 data from Dun & Bradstreet indicate that 99.0 percent of farms inside Assessment Area One have gross annual revenues of $1 million or less. Furthermore, the data reviewed indicate 94.1 percent of the bank s loans to small businesses sampled were in amounts of $100,000 or less. In summary, the bank s level of lending to small businesses is considered favorable. Overall, based on the review of 2007 HMDA loans, motor vehicle loans, and loans to small businesses and small farms, Legacy Bank meets the standard for satisfactory CRA performance under the borrower distribution of loans criteria as it pertains to Assessment Area One. Assessment Area Two The following table displays the distribution of 2007 HMDA loans by income level of the borrower, in relation to the percentages of families in that income category in this assessment area. 12
Distribution of Loans (Number and Dollar Volume in $000s) Inside Assessment Area by Income Level of Borrower Loan Type 2007 HMDA Family Population Borrower Income Classification Low- Moderate- Middle- Upper- Unknown 3 22 25 61 9 120 2.5% 18.3% 20.8% 50.8% 7.5% 100% $ 74 $ 1,184 $ 2,466 $ 6,172 $ 471 $ 10,367 0.7% 11.4% 23.8% 59.5% 4.5% 100% 23.4% 21.8% 22.7% 32.2% 0.0% 100% In Assessment Area Two, the bank originated, by number, 20.8 percent of its HMDA loans to LMI borrowers, with LMI borrowers comprising 45.2 percent of the family population in the assessment area. As a further comparison, the 2006 HMDA aggregate data indicates that of the HMDA reporters within this assessment area, 25.5 percent of the loans were originated to LMI borrowers. Potential factors affecting the bank s distribution of HMDA loans to LMI borrowers in this assessment area include the high poverty level and high unemployment level. Recognizing these mitigating factors, the bank s distribution of HMDA loans is considered adequate. The borrower distribution of consumer motor vehicle loans was analyzed, using household population as a comparison to measure the bank performance. The following table shows the distribution in Assessment Area Two of those motor vehicle loans by the income level of the borrower. Distribution of Loans (Number and Dollar Volume in $000s) Inside Assessment Area by Income Level of Borrower Loan Type 2007 Motor Vehicle Household Population Borrower Income Classification Low- Moderate- Middle- Upper- Unknown 10 15 10 8 0 43 23.3% 34.9% 23.3% 18.6% 0.0% 100% $ 81 $ 154 $ 106 $ 110 $ - $ 451 18.0% 34.1% 23.5% 24.4% 0.0% 100% 27.3% 17.7% 19.9% 35.0% 0.0% 100% Of the 43 consumer motor vehicle loans reviewed for this analysis, 58.2 percent by number were originated to LMI borrowers. In comparison, LMI households account for 45.0 percent of the assessment area population. The distribution of consumer motor vehicle loans in Assessment Area Two reflects good distribution to borrowers of different income levels. 13
Similar to the borrower distribution analyses conducted for the two consumer products, the bank s distribution of loans to businesses with varying revenues was reviewed in light of the assessment area demographics and market lending data. The following table reflects the bank s distribution of business loans in Assessment Area Two by gross annual business revenue and the number and amount of originations. Lending Distribution by Business Revenue Level Loan Origination Amount (in $000s) Gross Revenue <$100 >$100<$250 >$250<$1,000 $1 Million or Less 33 4 1 38 86.8% 10.5% 2.6% 100% Greater Than $1 0 0 0 0 Million 0.0% 0.0% 0.0% 0.0% 33 4 1 38 86.8% 10.5% 2.6% 100% The preceding table demonstrates that all 38 (100 percent) of the loans sampled were originated to small businesses with gross annual revenues of $1 million or less. In comparison, 2007 data from Dun & Bradstreet indicate that 90.0 percent of businesses inside Assessment Area Two have gross annual revenues of $1 million or less. Furthermore, the data reviewed indicate 86.8 percent of the bank s loans to small businesses sampled were in amounts of $100,000 or less. In summary, the bank s level of lending to small businesses is considered good. Similar to the distribution of loans to businesses, the bank s distribution of loans to farms with varying revenues was reviewed in light of the assessment area demographics and market lending data. The following table reflects the bank s distribution of business loans in Assessment Area Two by gross annual farm revenue and loan amount. 14
Gross Revenue Lending Distribution by Farm Revenue Level Loan Origination Amount (in $000s) <$100 >$100<$250 >$250<$500 $1 Million or Less 43 7 5 55 78.2% 12.7% 9.1% 100% Greater Than $1 0 0 0 0 Million 0.0% 0.0% 0.0% 0.0% 43 7 5 55 78.2% 12.7% 9.1% 100% Of the 55 loans sampled, all (100 percent) were made to small farms with gross revenues of $1 million or less. In comparison, 2007 data from Dun & Bradstreet indicate that 99.1 percent of farms inside Assessment Area Two have gross annual revenues of $1 million or less. The data reviewed indicate 78.2 percent of the bank s loans to small businesses sampled were in amounts of $100,000 or less. In summary, the bank s level of lending to small farms is considered reasonable. Overall, based upon the review of 2007 HMDA loans, consumer motor vehicle loans, small business and small farm loans, Legacy Bank meets the standards for a satisfactory CRA performance under the borrower distribution of loans criteria within Assessment Area Two. Geographic Distribution of Loans The analysis of the geographic distribution of loans evaluates the bank s distribution of loans among the census tracts within the assessment areas by the income level of each geography. Under CRA, specific emphasis is placed on the bank s performance in LMI census tracts. Assessment Area One As noted previously in this evaluation, Assessment Area One does not include any LMI census tracts, and is comprised of 14 middle income census tracts and 3 upper-income census tracts. Therefore, a detailed analysis of the distribution of the bank s lending in the assessment area by census tract income level is not as meaningful for evaluating the bank s performance under this category. Nevertheless, the dispersion of the loan products sampled within the middle- and upper-income census tracts in this assessment area was reviewed. The analysis indicated that the loans of each product type were adequately dispersed within the census tracts in Assessment Area One. The dispersion was proportionate to the comparative factors (owner-occupied housing, household population, number of business institutions, and number of agricultural institutions). As such, the bank s geographic distribution of loans meets the standard for a satisfactory performance. 15
Assessment Area Two Assessment Area Two is comprised of 3 moderate-income census tracts and 14 middle-income census tracts. The following table displays the geographic distribution of the bank s 2007 HMDA loans by the income category of the census tracts, and in relation to the owner-occupied housing statistics for the assessment area. Distribution of Loans (Number and Dollar Volume in $000s) Inside Assessment Area by Income Level of Geography Loan Type Geography Income Classification Low- Moderate- Middle- Upper- Unknown 0 38 82 0 0 120 2007 HMDA 0.0% 31.7% 68.3% 0.0% 0.0% 100% $ - $ 2,968 $ 7,399 $ - $ - $ 10,367 0.0% 28.6% 71.4% 0.0% 0.0% 100% Owner Occupied Housing 0.0% 16.7% 83.3% 0.0% 0.0% 100% The bank originated 31.7 percent by number and 28.6 percent by dollar amount of its 2007 HMDA loans in LMI census tracts. In comparison, the percentage of owner-occupied housing units located in LMI census tracts is 16.7 percent. In addition, 2006 HMDA aggregate numbers show that all other financial institutions lending within this assessment area originated 11.5 percent of their loans within the LMI geographies. The bank s geographic distribution of HMDA loans reflects reasonable penetration throughout its assessment area. The geographic distribution of consumer motor vehicle loans was analyzed, and the bank s performance is displayed in the following table. Distribution of Loans (Number and Dollar Volume in $000s) Inside Assessment Area by Income Level of Geography Geography Income Classification Loan Type Low- Moderate- Middle- Upper- Unknown 2007 Motor Vehicle Household Population 0 7 36 0 0 43 0.0% 16.3% 83.7% 0.0% 0.0% 100% $ - $ 70 $ 382 $ - $ - $ 452 0.0% 15.5% 84.5% 0.0% 0.0% 100% 0.0% 16.8% 83.2% 0.0% 0.0% 100% 16
As shown in the preceding table, the bank originated 16.3 percent by number and 15.5 percent by dollar of its consumer motor vehicle secured loans to individuals residing in moderate-income census tracts. In comparison, 16.8 percent of the assessment area household population lives in moderate-income census tracts. The bank s geographic distribution of consumer motor vehicle loans is commensurate with population percentages in the census tracts and its performance is adequate. As with the two consumer loan products, the bank s geographic distribution of business loans was also reviewed. The following table displays the results of this review, along with estimated percentage of businesses located in each census tract income category used for comparison. Distribution of Loans (Number and Dollar Volume in $000s) Inside Assessment Area by Income Level of Geography Geography Income Classification Loan Type Low- Moderate- Middle- Upper- Unknown 2007 Small Business Business Institutions 0 14 24 0 0 38 0.0% 36.8% 63.2% 0.0% 0.0% 100% $ - $ 533 $ 1,357 $ - $ - $ 1,890 0.0% 28.2% 71.8% 0.0% 0.0% 100% 0.0% 14.7% 85.3% 0.0% 0.0% 100% The preceding table indicates the bank made 36.8 percent of its small business loans within this assessment area to small businesses located in moderate-income census tracts. Dun & Bradstreet statistics for 2007 reveal that within this assessment area, 14.7 percent of all small businesses are located within moderate-income census tracts. In addition, 2006 CRA aggregate numbers reveal that of all other financial institutions lending within this assessment area, 13.8 percent of all loans by number originated to small businesses were located within moderate-income census tracts. 10 Given this information, the bank s geographic distribution of small business lending is reasonable. The following table displays the results of the geographic distribution of farm loans, along with estimated percentages of agricultural institutions located in each census tract income category used for comparison. 10 CRA aggregate data represents all lending activity collected and reported under the CRA for the designated assessment area, based upon all financial institutions required to report such data. 17
Distribution of Loans (Number and Dollar Volume in $000s) Inside Assessment Area by Income Level of Geography Loan Type 0 2007 Small 0.0% Farm $ - 0.0% Agricultural Institutions Geography Income Classification Low- Moderate- Middle- Upper- Unknown 7 12.7% $ 303 8.1% 48 87.3% $ 3,424 91.9% 0 0.0% $ - 0.0% 0 0.0% $ - 0.0% 55 100% $ 3,727 100% 0.0% 14.9% 85.1% 0.0% 0.0% 100% The table shows that the bank made 12.7 percent of its small farm loans within this assessment area to small farms located in moderate-income census tracts. Dun & Bradstreet statistics for 2007 reveal that within this assessment area 14.9 percent of all small farms are located within moderate-income census tracts. In addition, 2006 CRA aggregate numbers reveal that of all other financial institutions lending within this assessment area, 7.3 percent of all loans by number originated to small businesses were located within moderate-income census tracts. Therefore, the bank s geographic distribution of small farm lending appears adequate. Loan-to-Deposit (LTD) Ratio One indication of the bank s overall level of lending activity is its LTD ratio. The table 11 below displays the bank s average LTD ratio 12 in comparison to that of four competitors within and near the bank s combined assessment area. These financial institutions were determined to be similarly situated to Legacy Bank in branch structure, asset size, and product lines. 11 Asset size figures in this table represent total assets as of March 31, 2008. 12 The average LTD ratio represents a 17-quarter average, dating back to the bank s last CRA evaluation. 18
Loan-to-Deposit Ratio Analysis for the Combined Assessment Area Asset Size Name (In $000s) Headquarters Average LTD Ratio Legacy Bank & Trust Company $122,186 Plato, Missouri 95.6% Competitors $124,495 Seymour, Missouri 77.4% $200,884 Ozark, Missouri 73.5% $86,019 Ozark, Missouri 102.7% $69,783 Cabool, Missouri 69.1% Based on data from the preceding table, the bank s LTD ratio indicates its willingness to lend in order to help meet the credit needs of its combined assessment area. The bank s LTD ratio for the past 17 quarters averaged 95.6 percent, which ranks second out of the five analyzed. The area competitors LTD ratios for the 17-quarter average ranged from 69.1 to 102.7 percent. In that time period, the bank s LTD ratio ranged from a high of 100.5 percent, to a low of 88.1 percent. Therefore, in comparison to peer performance data, the bank s average LTD ratio for this review period is considered good and meets the standard for satisfactory performance under this criterion. Lending in the Assessment Area 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 combined assessment area. 19
Lending Inside and Outside of the Combined Assessment Area by Number and Dollar Volume (in $000s) Inside Assessment Outside Loan Type Area Assessment Area 2007 HMDA 2007 Motor Vehicle 2007 Small Business 2007 Small Farm 167 29 196 85.2% 14.8% 100% $ 15,807 $ 2,987 $ 18,794 84.1% 15.9% 100% 85 16 101 84.2% 15.8% 100% $ 847 $ 142 $ 989 85.6% 14.4% 100% 62 12 74 83.8% 16.2% 100% $ 3,320 $ 3,278 $ 6,598 50.3% 49.7% 100% 72 8 80 90.0% 10.0% 100% $ 4,099 $ 379 $ 4,478 91.5% 8.5% 100% 386 65 451 85.6% 14.4% 100% $ 24,073 $ 6,786 $ 30,859 78.0% 22.0% 100% The preceding table demonstrates that 386 of 451 (85.6 percent by number) loans originated were within the bank s assessment area. This indicates that a majority of the bank s loans and other lending-related activities took place within the bank s combined assessment area. Therefore, the bank s overall lending practices under this performance criterion meet the standard for satisfactory performance. Review of Complaints No CRA-related complaints were received for this institution during the time period covered by this performance evaluation (April 4, 2004, to June 2, 2008). 20
Fair Lending or Other Illegal Credit Practices Review During the Consumer Affairs Examination conducted concurrently with this CRA evaluation, a fair lending analysis was performed to assess the bank s compliance under Regulation B (Equal Credit Opportunity) and the Fair Housing Act. The analysis concluded that the bank is in compliance with the substantive provisions of the antidiscrimination laws and regulations for the products and services reviewed. 21
Appendix A Listing of Census Tracts in Assessment Area One Legacy Bank & Trust Company County Census Tract Number Census Tract Income Category MSA Contains Bank Office Christian 201.01 Middle 44180 No Christian 201.02 Middle 44180 No Christian 202.03 Middle 44180 No Christian 202.04 Middle 44180 No Christian 202.05 Middle 44180 No Christian 203.02 Middle 44180 No Christian 203.03 Middle 44180 No Christian 203.04 Middle 44180 No Christian 204.00 Middle 44180 Yes Christian 205.00 Middle 44180 No Webster 9701.00 Middle N/A No Webster 9702.00 Middle N/A No Webster 9703.00 Middle N/A Yes Webster 9704.00 Middle N/A No Christian 202.01 Upper 44180 No Christian 202.02 Upper 44180 No Christian 203.01 Upper 44180 No
Appendix A (Continued) Listing of Census Tracts in Assessment Area Two Legacy Bank & Trust Company County Census Tract Number Census Tract Income Category MSA Contains Bank Office Douglas 9501.00 Moderate N/A No Texas 9802.00 Moderate N/A No Wright 9904.00 Moderate N/A Yes Douglas 9502.00 Middle N/A No Douglas 9505.00 Middle N/A No Laclede 9601.00 Middle N/A No Laclede 9602.98 Middle N/A No Laclede 9603.00 Middle N/A No Laclede 9604.00 Middle N/A No Laclede 9605.00 Middle N/A No Laclede 9606.00 Middle N/A No Texas 9801.00 Middle N/A No Texas 9803.00 Middle N/A Yes Texas 9804.00 Middle N/A No Wright 9901.00 Middle N/A No Wright 9902.00 Middle N/A No Wright 9903.00 Middle N/A No 23
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 nonmetropolitan middle-income geographies designated by the Board, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency, based on- a. Rates of poverty, unemployment, and population loss; or b. Population size, density, and dispersion. Activities that revitalize and stabilize geographies designated based on population size, density, and dispersion if they help to meet essential community needs, including needs of low- and moderate-income individuals. Consumer loan(s): A loan(s) to one or more individuals for household, family, or other personal expenditures. A consumer loan does not include a home mortgage, small business, or small farm loan. This definition includes the following categories: motor vehicle loans, credit card loans, home equity loans, other secured consumer loans, and other unsecured consumer loans. Distressed Census Tract: A non-metropolitan middle-income geography is designated as distressed if it is in a county that meets one or more of the following triggers: (1) An 24
unemployment rate of at least 1.5% times the national average, (2) a poverty rate that 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 five year period preceding the most recent census. 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 refinancings of home improvement and home purchase loans. Household: Includes all persons occupying a housing unit. Persons not living in households are classified as living in group quarters. In 100 percent tabulations, the count of households always equals the count of occupied housing units. Limited-scope review: Performance under the Lending, 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. 25