PUBLIC DISCLOSURE COMMUNITY REINVESTMENT ACT PERFORMANCE EVALUATION FARMERS STATE BANK RSSD# 542854 P.O. BOX 458 PINE BLUFFS, WYOMING 82082 Federal Reserve Bank of Kansas City 925 Grand Boulevard Kansas City, Missouri 64198 NOTE: This document is an evaluation of this institution s record of meeting the credit needs of its entire community, including low- and moderate-income neighborhoods, consistent with 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... 2 Description of Institution... 2 Description of Assessment Area... 3 Conclusions... 5 1
GENERAL INFORMATION INSTITUTION S CRA RATING: This institution is rated Satisfactory. Farmers State Bank has a satisfactory record of helping to meet the credit needs of its entire assessment area, including low- and moderate-income neighborhoods, in a manner consistent with its resources and capabilities. The rating of the bank was assessed under the following five core criteria developed for evaluating Community Reinvestment Act (CRA) performances of small banks: Loan-to-Deposit Ratio Lending Inside the Assessment Area Lending to Farms of Different Sizes and Individuals of Different Income Levels Distribution of Lending by Income Level of Geography Record of Responding to Complaints About the Bank s CRA Performance Conclusions for each performance criterion were based on data compiled from a statisticallyderived sample of files from the bank s major product lines. Discussions with bank management, a review of the bank s Report of Condition and Income (Call Report), and a review of the volume of loan originations were used to determine the major product lines of the bank. As a result, the loans sampled included those designated as agricultural loans and consumer loans. Farmer State Bank s loan-to-deposit ratio (LTD) is less than reasonable given the bank s size, financial capacity, and assessment area needs. However, the analysis shows that a majority of lending activity is within the bank s assessment area, and this lending reveals a reasonable penetration among borrowers of different income levels, including low- and moderate-income borrowers, and to farms of different revenue sizes. An analysis of the geographic distribution of loans was not conducted since the assessment area consists of only one middle-income tract. The response to complaints criterion was not rated as the bank has not received any complaints about its performance under the CRA. The bank s performance under the CRA was last evaluated on June 7, 1999, at which time an outstanding rating was assigned. DESCRIPTION OF INSTITUTION Farmers State Bank is a full-service financial institution located in Pine Bluffs, Wyoming. The bank has one main office without any automated teller machines or drive-thru facilities. The analysis of the bank s CRA performance considered the competitive environment in which the bank operates as well as local economic conditions and demographics. Currently, there are no legal or financial factors that would hinder the bank's ability to meet the credit needs of its assessment area. Based on Call Report information, total assets decreased 2 percent 2
between June 30, 2003, and June 30, 2004. As of June 2004, total assets were $15.5 million, including loans totaling $7.5 million and deposits totaling $12.8 million. Table 1 illustrates the breakdown of the bank s loan portfolio by product. TABLE 1 DISTRIBUTION OF LOANS IN FARMERS STATE BANK AS OF JUNE 30, 2004 Type of Loan Amount ($000s) Percent Secured by Real Estate: 1,409 20 Amount ($000s) Percent Secured by farmland 1,154 82 Secured by non-farm, non-residential properties 119 8 Secured by 1- to 4-family residential properties 115 8 Construction and land development 21 2 Agricultural 4,018 57 Commercial 954 13 Consumer 681 10 TOTAL 7,062 100 DESCRIPTION OF THE BANK'S ASSESSMENT AREA Pine Bluffs is located in the southeastern part of Wyoming, near the Colorado and Nebraska borders. The bank s assessment area includes one census tract in Laramie County. The tract is located in the Cheyenne MSA; however, the area is predominantly rural containing the small towns of Albin, Burns, Carpenter, and Pine Bluffs. As of 2000, Pine Bluffs had a population of 1,153. The assessment area s overall population has increased approximately 89 percent since 1990. The percentage of families in the assessment area that are below poverty level is 6.4 percent, which is 1.7 percent below the state figures. According to 2000 census data, the median family income for the assessment area was $43,933, compared to $45,685 for the state. The U.S. Department of Housing and Urban Development (HUD) indicates that the estimated 2004 median family income for Laramie County is $55,700. The 2000 census data also indicates the number of households with individuals 65 years and over represents approximately 11 percent of the population in the assessment area. The 2000 data reveals that the labor force for the assessment area was 2,625, or 67.5 percent of the population. The unemployment rate in the assessment area was 2.3 percent. Characteristics of the bank s assessment area are summarized in Table 2. 3
TABLE 2 CHARACTERISTICS OF BANK S ASSESSMENT AREA (Based on 2000 Census Data) Total number of census tracts 1 Number of Tracts Low-Income 0 Moderate-Income 0 Middle-Income 1 Upper-Income 0 Not categorized 0 Total Population 5,183 Median Family Income* $43,933 Percent of Low-Income Families 17 Percent of Moderate-Income Families 24 Percent of Middle-Income Families 25 Percent of Upper-Income Families 34 Housing Types Owner-Occupied 73 Rental Occupied 18 Vacant Units 9 Affordability Ratio** 46 Approximate Number of Farms*** 66 Percent of Farms <$1,000,000 in Total Revenue 94 * Based on the 2000 U.S. Department of Housing and Urban Development (HUD) figure for the assessment area. ** The affordability ratio is calculated by dividing 2000 median family income by 2000 median housing value. *** Based on 2003 Dun and Bradstreet data. Members of the community were interviewed to gain a perspective on local economic conditions and possible credit needs. The contacts included a representative from a local government office and from a local economic development organization. The contacts agreed that the town s economy is currently stable and has rebounded from the slowdown experienced over the last three years. The contacts also mentioned, however, that retail businesses in the area have a difficult time remaining competitive with retail stores in nearby Cheyenne and Kimball. Both contacts stated that the downtown area is in need of renovation, and three downtown area stores that burned in late 2003 have yet to be rebuilt. The community continues to experience modest growth rates, and one of the contacts stated that approximately two new houses are being constructed each year. The area continues to be primarily agricultural, and one of the largest employers in the area is Farmers Elevator Company, a multi-service agricultural co-op that employs approximately 25 people. The 4
largest employer in the area is the school district, followed by High West Energy, a company that supplies electricity to rural areas. CONCLUSIONS WITH RESPECT TO PERFORMANCE CRITERIA Loan-to-Deposit Ratio The bank's LTD ratio is low given the institution s capacity to lend, demographic and economic factors present in the assessment area, and the availability of lending opportunities. Farmers State Bank s average quarterly LTD ratio over the previous 16 quarters is 61 percent. The bank s local peer average LTD ratio over the previous 16 quarters is 76 percent. The LTD deposit ratio for the bank s national peer is 59 percent as of June 2004 and 58 percent for Farmers State Bank for the same time period. Part of the decline over the last few years has been the increased competition with the addition of another bank in Pine Bluffs. Lending in the Bank s Assessment Area This core performance criterion evaluates the concentration of agricultural and consumer loans originated by the bank in its assessment area. As shown in Table 3, a majority of agricultural and consumer loans were originated in the bank s assessment area. Consequently, the bank s performance is considered satisfactory for this criterion. TABLE 3 DISTRIBUTION OF LOANS IN AND OUT OF THE ASSESSMENT AREA Type of Loan Number of Loans Percent Inside the Assessment Area Amount Of Loans ($000s) Percent Number of Loans Outside the Assessment Area Percent Dollar Amount Of Loans Percent Agricultural 32 87 1,465 90 5 13 170 10 Consumer 26 81 226 93 6 19 17 7 TOTAL 58 84 1,691 90 11 16 187 10 Lending to Farms of Different Sizes and to Borrowers of Different Incomes This core performance criterion evaluates the bank s loan originations to farms of different sizes, based on their reported gross annual revenues, and to borrowers of different income levels, particularly low- and moderate-income individuals. The bank s overall performance on this criterion is considered satisfactory. The lending patterns to farms were given more weight in the analysis due to the greater dollar volume of these types of loans. 5
Farm Loans: The distribution of loans in the bank s assessment area represents a reasonable dispersion to farms of different sizes. Table 4 shows that 91 percent of the farm loans sampled were to farms with gross annual revenues of $1 million or less. According to Dun and Bradstreet s 2003 data, 94 percent of the farms in this assessment area have gross annual revenues of less than $1 million. In addition, 88 percent of the loan amounts were less than or equal to $100,000. This indicates a willingness on the part of the bank to make smaller loans, and smaller loans are generally made to the smallest farms. TABLE 4 LENDING TO FARMS OF DIFFERENT SIZES WITHIN THE ASSESSMENT AREA Gross Annual Revenue Number of Farm Loans % Total Amount of Loans ($000s) % Less than $100,000 21 66 500 34 $100,000 to $250,000 4 13 290 20 $250,001 to $500,000 3 9 57 4 $500,001 to $1,000,000 1 3 450 31 Greater than $1,000,000 3 9 168 11 TOTALS 32 100 1,465 100 Consumer Loans: The distribution of loans to borrowers represents an excellent dispersion to borrowers of different income levels. Table 5 shows that 85 percent of the consumer loans sampled were to low- or moderate-income individuals. According to 2000 census data, only 41 percent of the families within the assessment are considered low to moderate-income. Table 5 DISTRIBUTION OF CONSUMER LOANS IN THE ASSESSMENT AREA BY INCOME LEVEL OF BORROWER INCOME LEVEL OF BORROWER* 6 Percentage of Consumer Loans Percentage of Families in Assessment Area** % by # % by $ Low (Less than 50 percent of Median- Family Income) 46 35 17 Moderate (50 to 80 percent of Median-Family Income) 39 41 24 Middle (80 to 120 percent of Median-Family Income) 15 24 25 Upper (Greater than 120 percent of Median-Family Income) 0 0 34 * The income level of borrower is taken from the 2003 HUD estimated median family income for the nonmetropolitan areas of Wyoming ** The percentage of families in the assessment area is based on 2000 census data.
Geographic Distribution of Loans This core performance criterion evaluates the bank s distribution of loans throughout its assessment area, especially in low- and moderate-income tracts. This core performance criterion was not evaluated since there is only one census tract in the bank s assessment area. Record of Responding to Complaints The bank has not received any complaints about its performance in meeting assessment area credit needs. Therefore, the bank s performance in responding to complaints was not assessed. COMPLIANCE WITH ANTIDISCRIMINATION LAWS AND REGULATIONS The bank is in compliance with the substantive provisions of the antidiscrimination laws and regulations. A review of policies, credit applications, and loans revealed no prohibited practices designed to discourage loan applicants. Further, the bank was not engaged in other illegal practices inconsistent with helping to meet community credit needs. 7
GLOSSARY OF COMMON CRA TERMS (For additional information, please see the Definitions section of Regulation BB at 12 CFR 228.12.) Assessment Area The geographic area(s) delineated by the bank and used in evaluating the bank s record of helping to meet the credit needs of its community. The assessment area must include the geographies where the main office, branches, and deposit-taking automated tellers machines are located. The assessment area must consist only of whole geographies, may not reflect illegal discrimination, and may not arbitrarily exclude low- or moderate-income geographies. Census Tracts Census tracts are small, relatively permanent geographic entities within counties delineated by a committee of local data users. Generally, census tracts have between 2,500 and 8,000 residents and boundaries that follow visible features. Consumer Loans Loans to individuals for household, family and other personal expenditures. These loans do not include real estate-secured loans. Dun & Bradstreet Data Data collected by Dun & Bradstreet regarding types of businesses and their respective gross annual revenues. The data can be sorted by geographies. Geography A census tract or a block numbering area. Income Level Both geographies and individuals can be described in terms of their income levels. In MSAs, the level is based on the MSA median income. In nonmsa areas, the level is based on the statewide, nonmsa median income. Low-Income Less than 50 percent of the area median income Moderate-Income At least 50 percent and less than 80 percent of the area median income Middle-Income At least 80 percent and less than 120 percent of the area median income Upper-Income At least 120 percent or more of the area median income Metropolitan Statistical Area (MSA) - The general concept of an MSA is that of a core area containing a large population nucleus, together with adjacent communities having a high degree of economic and social integration with that core. Generally, a single city with at least 50,000 inhabitants or an urbanized area with a total population of at least 100,000 would meet the definition of an MSA. Small Farm A farm with gross annual revenues of $1 million or less. 8
Small Farm Loan A loan with an original amount of $500,000 or less that has been reported in the Consolidated Report of Condition and Income in the category Loans secured by farmland or Loans to finance agricultural production and other loans to farmers. 9