community reinvestment act performance evaluation, Exercises of Lease Finance and Investment Banking

Download community reinvestment act performance evaluation and more Exercises Lease Finance and Investment Banking in PDF only on Docsity! PUBLIC DISCLOSURE August 24, 2020 COMMUNITY REINVESTMENT ACT PERFORMANCE EVALUATION Harvard University Employees Credit Union Certificate Number: 67696 104 Mount Auburn St Cambridge, MA 02138 Commonwealth of Massachusetts Division of Banks 1000 Washington Street, 10th Floor Boston, Massachusetts 02118 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 Division of Banks concerning the safety and soundness of this financial institution. 1 TABLE OF CONTENTS Institution Rating .............................................................................................................................2 Scope of Evaluation .........................................................................................................................3 Description of Institution .................................................................................................................3 Description of Assessment Area ......................................................................................................5 Conclusions on Performance Criteria ..............................................................................................6 Glossary ...........................................................................................................................................9 4 income census tract. Main office business hours are from 8:30 AM to 4:30 PM on Monday, Tuesday, Wednesday, and Friday, from 8:30 AM to 6 PM on Thursday, and from 8:30 AM to Noon on Saturdays. Since the previous examination, the credit union has not opened or closed any locations. Harvard University Employees Credit Union is a full-service financial institution that offers a wide variety of products and services. Savings and checking accounts offered by the credit union include money market accounts, retirement accounts, club accounts, and certificates of deposit. Home financing programs include mortgages, refinancing, home equity fixed and lines of credit, and home improvement loans. Consumer loans include personal loans, auto loans, education loans, personal loans, debt consolidation, Mass Save HEAT loans, holiday loans, and vacation loans. Other services offered by the credit union include online banking, online bill payment, Visa debit/ATM cards, credit cards, and overdraft protection. The credit union is a member of the CO-OP Shared Branch Network. This network is a shared financial delivery channel created by credit unions to provide members with convenient hours and locations. The CO-OP Shared Branch Network allows members within its network to access and do limited transactions through a nationwide network of participating credit unions. Ability and Capacity As of June 30, 2020, assets totaled approximately $866.4 million and shares totaled $688 million. Total loans were $703.7 million, representing approximately 81.2 percent of total assets. Since the previous CRA evaluation, assets increased 42.1 percent and the lending portfolio increased 34.6 percent. The following table illustrates the credit union’s loan portfolio. Examiners did not identify any financial, legal, or other impediments that affect the credit union’s ability to meet assessment area credit needs. Loan Portfolio Distribution as of 6/30/2020 Loan Category $ % Unsecured Credit Card Loans 30,271,020 4.3 Non-Federally Guaranteed Student Loans 193,675,523 27.5 Unsecured Loans/Lines of Credit 13,821,932 2.0 New Vehicle Loans 4,647,022 0.7 Used Vehicle Loans 11,837,108 1.7 Secured Non-Real Estate Loans/Lines of Credit 3,783,935 0.5 Total Loans/Lines of Credit Secured by 1st Lien 1-4 Family Residential Properties 409,790,109 58.2 Total Loans/Lines of Credit Secured by a Junior Lien 1-4 Family Residential Properties 35,817,061 5.1 Commercial Loans/Lines of Credit Not Real Estate Secured 88,067 0.0 Total Loans 703,731,777 100.0 Source: Reports of Income and Condition 5 DESCRIPTION OF ASSESSMENT AREA According to CRA regulations, an institution shall delineate one or more assessment areas within which the institution will meet the credit needs and by which the Division will evaluate the institution’s CRA performance. In accordance with 209 CMR 46.41, Harvard University Employees Credit Union delineates its membership as its assessment area. Credit Unions whose membership by-law provisions are not based upon geography are permitted to designate its membership as its assessment area. Therefore, since the credit union has defined its membership as its assessment area, as opposed to geographic area, an evaluation of credit extended within defined geographic areas was not conducted. Examiners used the 2018 and 2019 FFIEC estimated median family income levels to analyze home mortgage loans under the Distribution of Credit Among Different Income Levels criterion. The following table presents the low-, moderate-, middle-, and upper-income categories for the Boston, MA MD and the Cambridge-Newton-Framingham, MA MD, within which the majority of the credit union’s field of membership is located. Median Family Income Ranges Median Family Incomes Low <50% Moderate 50% to <80% Middle 80% to <120% Upper ≥120% Boston, MA MD Median Family Income (14454) 2018 ($99,300) <$49,650 $49,650 to <$79,440 $79,440 to <$119,160 ≥$119,160 2019 ($99,300) <$49,650 $49,650 to <$79,440 $79,440 to <$119,160 ≥$119,160 Cambridge-Newton-Framingham, MA MD Median Family Income (15764) 2018 ($110,300) <$55,150 $55,150 to <$88,240 $88,240 to <$132,360 ≥$132,360 2019 ($110,300) <$55,150 $55,150 to <$88,240 $88,240 to <$132,360 ≥$132,360 Source FFIEC 2018 and 2019 6 CONCLUSIONS ON PERFORMANCE CRITERIA LENDING TEST Harvard University Employees Credit Union demonstrated reasonable performance under the Lending Test. Loan-to-Share Ratio The average LTS ratio is more than reasonable given the credit union’s size, financial condition, and assessment area credit needs. The credit union’s LTS ratio, calculated from Call Report data, averaged 110.5 percent over the last eight quarters from September 30, 2018 to June 30, 2020. The ratio ranged from 116.4 percent as of December 31, 2018 to 102.3 percent as of June 30, 2020. Borrower Profile The distribution of home mortgage loans reflects reasonable penetration to individuals of different income levels. In 2018, the credit union originated 3.1 percent of loans to low-income borrowers and 11.3 percent of loans to moderate-income borrowers. In 2019, the level of lending to low-income borrowers decreased to 1.1 percent while lending to moderate-income borrowers increased to 13.9 percent. Please refer to the table below for more information. Distribution of Home Mortgage Loans by Borrower Income Level Borrower Income Level # % $ % Low 2018 17 3.1 3,044,905 1.5 2019 5 1.1 897,291 0.5 Moderate 2018 62 11.3 11,570,300 5.6 2019 66 13.9 15,624,509 8.7 Middle 2018 147 26.9 47,444,751 22.8 2019 136 28.7 44,328,285 24.7 Upper 2018 321 58.7 146,415,859 70.2 2019 267 56.3 118,954,953 66.2 Totals 2018 547 100.0 208,475,815 100.0 2019 474 100.0 179,805,038 100.0 Source: 2018 and 2019 HMDA Data 9 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. Area Median Income: The median family income for the MSA, if a person or geography is located in an MSA; or the statewide nonmetropolitan median family income, if a person or geography is located outside an MSA. Assessment Area: A geographic area delineated by the bank under the requirements of the Community Reinvestment Act. Census Tract: A small, relatively permanent statistical subdivision of a county. Census tract boundaries normally follow visible features, but they may follow governmental unit boundaries and other non-visible features in some instances. They always nest within counties. Census tracts average about 4,000 persons, and their physical size varies widely depending upon population density. Census tracts are designed to be homogenous for population characteristics, economic status, and living conditions to allow for statistical comparisons. Combined Statistical Area (CSA): A combination of several adjacent metropolitan statistical areas or micropolitan statistical areas or a mix of the two, which are linked by economic ties. Community Development: For loans, investments, and services to qualify as community development activities, their primary purpose must: (1) Support affordable housing for low- and moderate-income individuals; (2) Target community services toward low- and moderate-income individuals; (3) Promote economic development by financing small businesses or farms; or (4) Provide activities that revitalize or stabilize low- and moderate-income geographies, designated disaster areas, or distressed or underserved nonmetropolitan middle-income geographies; or (5) Enable or facilitate projects or activities that address needs regarding foreclosed or abandoned residential properties in designated target areas. Community Development Corporation (CDC): A CDC allows banks and holding companies to make equity type of investments in community development projects. Bank CDCs can develop innovative debt instruments or provide near-equity investments tailored to the development needs of the community. Bank CDCs are also tailored to their financial and marketing needs. A CDC may purchase, own, rehabilitate, construct, manage, and sell real property. Also, it may make equity or debt investments in development projects and in local businesses. The CDC activities are expected to directly benefit low- and moderate-income groups, and the investment dollars should not represent an undue risk on the banking organization. Community Development Financial Institutions (CDFIs): CDFIs are private intermediaries (either for profit or nonprofit) with community development as their primary mission. A CDFI 10 facilitates the flow of lending and investment capital into distressed communities and to individuals who have been unable to take advantage of the services offered by traditional financial institutions. Some basic types of CDFIs include community development banks, community development loan funds, community development credit unions, micro enterprise funds, and community development venture capital funds. A certified CDFI must meet eligibility requirements. These requirements include the following:  Having a primary mission of promoting community development;  Serving an investment area or target population;  Providing development services;  Maintaining accountability to residents of its investment area or targeted population through representation on its governing board of directors, or by other means;  Not constituting an agency or instrumentality of the United States, of any state or political subdivision of a state. Community Development Loan: A loan that (1) Has as its primary purpose community development; and (2) Except in the case of a wholesale or limited purpose bank: (i) Has not been reported or collected by the bank or an affiliate for consideration in the bank’s assessment area as a home mortgage, small business, small farm, or consumer loan, unless it is a multifamily dwelling loan (as described in Appendix A to Part 203 of this title); and (ii) Benefits the bank’s assessment area(s) or a broader statewide or regional area including the bank’s assessment area(s). Community Development Service: A service that (1) Has as its primary purpose community development; (2) Is related to the provision of financial services; and (3) Has not been considered in the evaluation of the bank’s retail banking services under § 345.24(d). 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. Core Based Statistical Areas (CBSAs): The county or counties or equivalent entities associated with at least one core (urbanized area or urban cluster) of at least 10,000 population, plus adjacent counties having a high degree of social and economic integration with the core as measured through commuting ties with the counties associated with the core. Metropolitan and Micropolitan Statistical Areas are the two categories of CBSAs. Distressed Middle-Income Nonmetropolitan Geographies: A nonmetropolitan middle-income geography will be designated as distressed if it is in a county that meets one or more of the following triggers: (1) an unemployment rate of at least 1.5 times the national average; 11 (2) a poverty rate 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 5-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 non-relatives living with the family. Families are classified by type as either a married-couple family or other family. Other family 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). Family Income: Includes the income of all members of a family that are age 15 and older. FFIEC-Estimated Income Data: The Federal Financial Institutions Examination Council (FFIEC) issues annual estimates which update median family income from the metropolitan and nonmetropolitan areas. The FFIEC uses American Community Survey data and factors in information from other sources to arrive at an annual estimate that more closely reflects current economic conditions. Full-Scope Review: A full-scope review is accomplished when examiners complete all applicable interagency examination procedures for an assessment area. Performance under applicable tests is analyzed considering performance context, quantitative factors (for example, geographic distribution, borrower profile, 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 applicants; the amount of loan requested; and the disposition of the application (approved, denied, and withdrawn). Home Mortgage Disclosure Loan Application Register (HMDA LAR): The HMDA LARs record all applications received for residential purchase, refinance, home improvement, and temporary-to-permanent construction loans. Home Mortgage Loans: Includes home purchase and home improvement loans as defined in the HMDA regulation. This definition also includes multi-family (five or more families) dwelling loans, loans to purchase manufactured homes, and refinancings of home improvement and home purchase loans. 14 the companies that it finances. Therefore, some SBICs primarily assist businesses with significant growth potential, such as new firms in innovative industries. SBICs finance small firms by providing straight loans and/or equity-type investments. This kind of financing gives them partial ownership of those businesses and the possibility of sharing in the companies’ profits as they grow and prosper. Small Business Loan: A loan included in “loans to small businesses” as defined in the Consolidated Report of Condition and Income (Call Report). These loans have original amounts of $1 million or less and are either secured by nonfarm nonresidential properties or are classified as commercial and industrial loans. Small Farm Loan: 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, including farm residential and other improvements, or are classified as loans to finance agricultural production and other loans to farmers. Underserved middle-income nonmetropolitan geographies: A nonmetropolitan middle- income geography will be designated as underserved if it meets criteria for  Population size, density, and dispersion indicating the area’s population is sufficiently small, thin, and  Distant from a population center that the tract is likely to have difficulty financing the fixed costs of meeting essential community needs. 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. Urban Area: All territories, populations, and housing units in urbanized areas and in places of 2,500 or more persons outside urbanized areas. More specifically, “urban” consists of territory, persons, and housing units in places of 2,500 or more persons incorporated as cities, villages, boroughs (except in Alaska and New York), and towns (except in the New England states, New York, and Wisconsin). “Urban” excludes the rural portions of “extended cities”; census designated place of 2,500 or more persons; and other territory, incorporated or unincorporated, including in urbanized areas. 15 PERFORMANCE EVALUATION DISCLOSURE GUIDE Massachusetts General Laws Chapter 167, Section 14, as amended, and the Uniform Interagency Community Reinvestment Act (CRA) Guidelines for Disclosure of Written Evaluations require all financial institutions to take the following actions within 30 business days of receipt of the CRA evaluation of their institution: 1) Make its most current CRA performance evaluation available to the public; 2) At a minimum, place the evaluation in the institution's CRA public file located at the head office and at a designated office in each assessment area; 3) Add the following language to the institution's required CRA public notice that is posted in each depository facility: "You may obtain the public section of our most recent CRA Performance Evaluation, which was prepared by the Massachusetts Division of Banks, at (Address at main office)." [Please Note: If the institution has more than one assessment area, each office (other than off-premises electronic deposit facilities) in that community shall also include the address of the designated office for that assessment area.] 4) Provide a copy of its current evaluation to the public, upon request. In connection with this, the institution is authorized to charge a fee which does not exceed the cost of reproduction and mailing (if applicable). The format and content of the institution's evaluation, as prepared by its supervisory agencies, may not be altered or abridged in any manner. The institution is encouraged to include its response to the evaluation in its CRA public file.