PUBLIC DISCLOSURE June 4,2012 COMMUNITY REINVESTMENT ACT PERFORMANCE EVALUATION Green Dot Bank, DBA Bonneville Bank RSSD #243375 1675 North Freedom Boulevard, 84604 Federal Reserve Bank of San Francisco 101 Market Street San Francisco, California 9410S 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 the 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 nat 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 RATING ~ 1 Institution's CRA Rating... 1 INSTITUTION....... 2 Description of Institution... 2 Description of Assessment Area... 3 Scope of Examination... 5 CONCLUSIONS WITH RESPECT TO PERFORMANCE CRITERIA... 7 Loan-to-Deposit Ratio... 7 Lending in Assessment Area... 7 Lending Distribution by Geography... 7 Lending Distribution by Borrower Income and Business Revenue... 8 Response to Complaints... 8 Fair Lending or Other Illegal Practices Review... 9 GLOSSARY OF TERMS....................................... 10
provo, Utah INSTITUTION RATING Institution's era Rating Green Dot Bank, DBA Bonneville Bank, is rated "SATISFACTORY." The major factors supporting the institution's rating include: A reasonable loan to deposit ratio; A substantial majority of loans made within the assessment area; A reasonable geographic distribution of small business loans; and. An excellent level of lending to small businesses, with a substantial majority of those loans in small dollar amounts. 1 of 12
INSTITUTION Description of Institution Green Dot Bank, DBA Bonneville Bank (GOB) is headquartered in and reported total assets of $68 million as of December 31, 2011. Green Dot Corporation (GDC) acquired Bonneville Bancorp on December 8, 2011. Bonneville Bancorp was the holding company of Bonneville Bank, a single-office, commercial bank located in and founded in May 1978. As a result, Bonneville Bank changed its name to Green Dot Bank; however it continues to do business under the Bonneville Bank name. GOB is a full-service community bank that offers a variety of products and services to local businesses. In addition, consumer loan products are available. Commercial loan products include real estate secured fixed rate term loans, fixed rate lines of credit, and unsecured loans. Consumer products offered include unsecured fixed rate installment loans and lines of credit, and new and used vehicle loans. As a result of the acquisition of Bonneville Bancorp, GDC agreed to make an initial cash injection of $13.6 million in GOB from cash on hand and maintain a tier 1 leverage ratio of at least 15 percent at Green Dot Bank for five years after consummation. This extra capital is to support the issuance of GDC's general purpose reloadable prepaid debit cards (GPR) which will begin in 2012 and is the primary reason for the 62 percent growth in total assets in the fourth quarter of 2011 (i.e., $42 million as of September 30, 2011 compared to $68 million as of December 31,2011). Below is the bank's loan portfolio as stated in the December 31, 2011 Consolidated Reports of Condition and Income, which shows the bank's commercial lending focus. EXHIBIT 1 LOANS AND LEASES AS OF DECEMBER 31,2011 Loan Type $ ('ODDs) % Commercial/Industrial & Non-Farm Non- 5,719 57.0 Residential Real Estate Secured by 1-4 Family Residential Real Estate 2,545 25.4 Consumer Loans & Credit Cards 1,108 11.0 Construction & Land Development 572 5.7 State, Political Subdivisions and All Other 57 0.6 Farm Land & Agriculture 35 0.3 Total (Gross) 10,036 100.0 GOB faces no legal or financial impediments that would prevent it from helping to meet the credit needs of its assessment area consistent with its business strategy, size, financial capacity, and local economic conditions. However, as noted in the description ofthe institution section above, GOB must hold additional capital to support its issuance of GPR cards. This requirement is part of the Federal Reserve Board's publically issued regulatory order approving the formation of GDC as a bank holding company. 2 of 12
The requirement to hold extra capital will impact certain CRA assessment criteria (e.g., the loan-todeposit ratio) as these funds are not available for lending or investment activities. The bank received a satisfactory rating at its previous Community Reinvestment Act (CRA) examination, conducted as of May 21,2007, by the Federal Deposit Insurance Corporation (FDIC) using the Interagency Small Institution Examination Procedures. Description of Assessment Area GDB has designated its assessment area as the Provo-Orem Metropolitan Statistical Area (MSA). The MSA is made up of two contiguous counties, Utah and Juab. Provo-Orem is nestled at the base of the Wasatch Range of the Rocky Mountains, just 40 minutes south of Salt Lake City. Most of the MSA is comprised of Utah County, which is known regionally as Utah Valley. GDB has a limited presence in this competitive assessment area and has only one branch, which is in the city of Provo. As of June 30, 2011, there were a total of 14 Federal Deposit Insurance Corporation insured institutions operating 92 offices with deposits totaling $4.1 billion in Provo-Orem.' The bank's deposit market share was 0.73 percent, ranking it 12th among these depository institutions.' In 2011, there were a total of 46 lenders that reported CRA small business loans. These lenders extended a total of 9,078 small business loans totaling over $253.3 million in Provo-Orem and reflect only a small portion of the commercial loan market.' Given the large number of financial institutions that operate in this market, competition for loan and deposit products was significant. Exhibit 2 below presents key demographic and business information, based on the 2000 U.S. Census and 2010 Dun and Bradstreet data, used to help develop a performance context for the assessment area. EXHIBIT 2 ASSESSMENT AREA DEMOGRAPHICS 4 PROVO-OREM Income Categories Tract Distribution Families by Tract Incom.e Families < Poverty Level as % of Families by Tract Families by Family Income # % # % # % # % Low-income 7 8.0 4,978 6.0 1,067 21.4 14,930 17.8 Moderate-income 12 13.8 12,512 15.0 1,572 12.6 16,265 19.4 Middle-income 41 47.1 42,779 51.1 2,426 5.7 20,546 24.6 Upper-income 24 27.6 23,377 27.9 621 2.7 31,905 38.1 Tract not reported 3 3.4 0 0.0 0 0.0 0 0.0 TotalAA 87 100.0 83,646 100.0 5,686 6.8 83,646 100.0 1 FDIC, Institution Directory, Deposit Market Share Report, Summary of Deposits, June 30, 2011, (accessed on June 6, 2012), available from http://www2.fdic.gov/sod/. 'Ibid. 'Ibid. 2000 U.s. Census and 2010 Dun & Bradstreet Data 3 of 12
CRA Public Evaluation.... ",;.-. '.'. c,. "..,....'. '. "EXH"lT2 (CONTI~UEDl.... ".'., - ~ ASSESSIIIIENTAREA DEM9GRAPHICS ". "..': '. Housing,:. - - PROVO-OREM.....,..,,'.... " Housing Types by Tract Income Categories Units by Owner-Occupied Rental Vacant Tract n % % n % n % Low-income 8,659 961 1.4 11.1 7,489 86.5 209 2.4 Moderate-income 17,912 7,542 11.0 42.1 9,687 54,1 683 3.8 Middle-income 53,806 37,495 54.5 69.7 13,611 25.3 2,700 5.0 Upper-income 26,748 22,758 33.1 85.1 2,850 10.7 1,140 4.3 TotalAA 107,125 68,756 100.0 64.2 33,637 31.4 4,732 4.4 Total Businesses Businesses by Tract & Revenue Size Income Categories by Tract less Than or Equal Greater than $1 Revenue Not to $1 Million Million Reported n % % % n % Low-income 442 2.1 394 " 2.0 26 " 2.5 22 3.1 Moderate-income 2,354 11.2 2,091 10.9 150 14.2 113 16.0 Middle-income 10,657 50.7 9,639 50.1 635 60.0 383 54.2 Upper-income 7,565 36.0 7,129 37.0 248 23.4 188 26.6 Tract not reported 4 0.0 4 0.0 0 0.0 0 0.0 TotalAA 21,022 100.0 19,257 100.0 1,059 100.0 706 100.0 Percentage oftotal Businesses 91.6 5.0 3.4 December 2011 Median Housing Value' 2004 Median Family Income $50,010 Utah County $175,000 Juab County $155,000 December 2011 Unemployment Rate' 2011 HUD Adjusted Median Family Income $66,200 Utah County 5.1% Juab County 6.4%.. As noted in Economy.com's August 2010 Precis Metro report for the Provo-Orem MSA, The Provo-Orem assessment area has a diverse economy that is driven by a large dynamic high-tech, sizable education, and healthcare industries. Top ten employers by number of employees are Brigham Young University, Utah Valley Regional Medical Center, Utah Valley State College, Wal-Mart Stores Inc., Utah Office Supply, Nestle USA Inc., Novel Inc., ESG Administration, 1M Flash Industries, and Heritage Woodworks. The five largest employers by sector are education and health services, government, retail trade, professional and business services, and manufacturing. Although these large employers have a substantial presence, small businesses (i.e., those with gross annual revenues of $1 million or less) remain a substantial majority of all businesses in the assessment area. As shown in Exhibit 2, small businesses comprised 91.6 percent of businesses in the assessment area. The Provo-Orem economy continued to experience the effects of the recession and financial crisis in 2010 and into 2011 but by the end of 2011, it was transitioning into recovery. The national downturn led by the widespread problems in the mortgage lending industry, put a damper on the demand for, Utah Association of Realtors, local Market Updates - Fourth Quarter 2011, (accessed May 15,2012); available from http://utahrealtors.com/news-center/housing-statlstics/quarterly'reports 'Bureau of labor Statistics, local Area Unemployment Statistics, not seasonally adjusted 4 of12
' June 4, 20ll locally produced software and other high tech products. During 2010, the stable support provided by the major education institutions in the area helped keep the unemployment rate at seven percent, which is below the national average at ten percent. During this time, job losses were heaviest in manufacturing, trade, and construction, with some offsetting gains in education and health services, and other services. Housing prices continued to decline through most of the review period, with some signs of recovery beginning by the end of 2011. From 2008 to 2011, housing prices dropped more than 30.0 percent. Home sales were up at the midpoint of 2011 by two percent compared to sales in 2010, and mortgage delinquencies fell during this period as well. Despite these improvements, a sizable foreclosed home inventory is keeping prices down. Consequently home equity loans as a source of funding, instead of traditional business loans, was an option for less business owners during the review period as compared to prior periods. 7 The declining economic conditions noted during the review period resulted in financial institutions tightening credit standards and terms on all major loan types. According to the Senior loan Officer Opinion Survey on Bank lending Practices, conducted by the Board of Governors of the Federal Reserve System as of January 2011, the trend for tightening credit standards and terms for business loans continued throughout the review period, originally starting in 2008, and continuing through January 2011. During the same period, credit demand by both businesses and households was reported by the Board survey as consistently weak; however, demand for deposits increased as business put off new expenditures and held cash." These national trends were confirmed at the local level as community contacts indicated most lenders had tightened credit standards and reported that many businesses were too financially weak to obtain credit as sales declined in reaction to the slowing economy and high unemployment rate. Nonetheless, there are small businesses that have been able to weather the economic storm and playa major role in the Provo-Orem economy. Meeting the financial needs of these small businesses through the provision of start-up and working capital loans in small dollar amounts is crucial to the economic health ofthe community. Scope of Examination The CRA examination of GDB was conducted using the Interagency Small Institution Examination Procedures. The evaluation was based upon the following performance criteria: loan volume in comparison to deposits (loan-to-deposit Ratio); lending inside and outside the assessment area (lending in Assessment Area); o Dispersion of lending throughout the assessment area (lending Distribution by Geography); and, o Distribution of lending by businesses revenue (lending by Business Revenue). Responsiveness to consumer complaints was not evaluated since the bank did not receive any complaints related to its CRA performance for the review period. 7 Economy.com's Precis Metro, Provo-Orem, August 2010. S Board of Governors of the Federal Reserve System, The October 2009 Senior Loan Officer Opinion Survey on Bank Lending Practices, page 2, October 2009, (accessed June 30, 2010), available from http://www.federalreserve.gov/boarddocs/snloansurvey/201122/fullreport.pdf. 50f12
The evaluation was based on 143 small business loans originated from January 1, 2010 through December 31,2011. Most all of the loans included in the evaluation were originated prior to the December 8, 2011 acquisition of Bonneville Bank by GDC. All 143 loans were used in the evaluation of Lending in Assessment Areo criterion; a sample of 77 small business extended within the assessment area were used in the evaluation of the Lending Distribution by Geography and Lending Distribution by Business Revenue criteria. 6of12
June 4,2012 CONCLUSIONS WITH RESPECT TO PERFORMANCE CRITERIA Loan-to-Deposit Ratio The loan-to-deposit ratio is reasonable. The bank's eight-quarter average loan-to-deposit ratio during the review period is 48.3 percent as of December 31, 2011. This ratio compares reasonably well to the national peer loan-to-deposit ratio of 58 percent, but is substantially lower than the state's average loan-to-deposit ratio of 80.8 percent. The reasonable assessment takes into account previously noted factors including the lower demand for loans, higher demand for deposits, and the extra capital the bank is required to hold. Lending in Assessment Area A substantial majority of the small business loans were originated inside the bank's assessment area. As shown in Exhibit 3, the bank extended very high levels of loans by number and dollar volume within the assessment area. EXHIBIT 3 LENDING INSIDE AND OUTSIDE THE ASSESSMENT AREA. JANUARY 1, 2010 - DECEMBER 31, 2011 Inside Outside Loan Type $ $ % #I % #I % ('OOOs) ('OOOs) % Small Business 132 92.3 10,846 81.7 11 7.7 2,429 18.3 Lending Distribution by Geography The overall geographic distribution of small business loans is reasonable. As shown in Exhibit 4 on the following page, the bank's distribution of small business loans reasonably compares to the percentage of business entities and aggregate lending, with strong performance in moderate-income census tracts. Loans were generally made in close proximity to the bank's office with no conspicuous gaps in lending. Although no loans were made in low-income census tracts in 2010, performance context regarding limited opportunity reasonably explained the lack of lending. Specifically, low-income census tracts in Provo-Orem are primarily clustered in and around Brigham Young University and its associated student housing. Therefore, these census tracts have the smallest concentration of businesses, which lim its small business lending opportunities. 7 of 12
Census Tract EXHIBIT4 GEOGRAPHIC DISTRIBUTION OF SMALL BUSINESS LOANS Low Moderate Middle Upper # % " J % 2010 Bank tending 0 0.0 9 24.3 13 35.1 15 40.5 Aggregate Lending 169 2.3 706 9.6 3,680 50.3 2,766 37.8 Business Concentration 442 2.1 2,354 11.2 10,657 50.7 7,565 36.0 2011 Bank lending 2 5.0 11 27.5 11 27.5 16 40.0 Aggregate Lending 183 2.0 1,000 11.0 4,541 50.0 3,353 36.9 Business Concentration 9 N/A N/A N/A N/A N/A N/A N/A N/A " % " % Lending Distribution by Business Revenue The distribution of lending to small businesses is excellent. As shown in Exhibit 5, the majority of small business loans were extended to businesses with gross annual revenues of $1 million or less. In addition, the bank originated a substantial majority of loans in amounts less than $100 thousand meeting an identified assessment area credit need. EXHIBIT 5 BUSINESS REVENUE DISTRIBUTION OF SMALL BUSINESS LOANS Lending to Businesses with Revenue Originations Regardless of Revenue Size <=$1 Million by Loan Amount Bank Year Businesses Lending" Bank Aggregate <=$100K > $100K& >250K & <=$1M in Lending (%) Lending (%) (%) <=$250K(%) <=$1M (%) Revenue(%) 2010 37 51.4 91.6 34.4 83.8 10.8 5.4 2011 40 50.0 N/A lo 45.7 87.5 12.5 0.0 Response to Complaints There were no complaints related to CRA during the review period. Consequently, the bank's performance in responding to complaints was not considered in evaluating its overall CRA performance. 9 This data is not available for 2011 as of the date of this document. 10 Ibid. 80f12
Proyo, Utah Fair Lending or Other Illegal Practices Review The fair lending review performed concurrently with this examination did not evidence any discriminatory or other illegal credit practices. The bank's compliance risk management program was found to be adequate to ensure compliance with fair lending and other credit practices rules, laws, and regulations. 90f12
June 4,2012 GLOSSARY OF TERMS 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 lowor 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 (iii) 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. 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 non-relatives living with the family. Families are classified by type as either a married-couple family or other family, which is 10 of12
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 and community development 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, 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 and community development 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. Metropolitan area (MA): A metropolitan statistical area (MSA) or a metropolitan division (MD) as defined by the Office of Management and Budget. A 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. A MD is a division of a MSA based on specific criteria including commuting patterns. Only a 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. 11 of 12
June 4,2012 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 multistate metropolitan area. For an institution with domestic branches in only one state, the institution's CRA rating would be the state rating. If an institution maintains domestic branches in more than one state, the institution will receive a rating for each state in which those branches are located. If an institution maintains domestic branches in two or more states within a multistate metropolitan area, the institution will receive a rating for the multistate metropolitan area. Smaliloan(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 either secured 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. Smaliloan(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 more than 120 percent of the area median income, or a median family income that is more than 120 percent, in the case of a geography. 12 of 12