First Keystone National Bank, Exams of Geography

Download First Keystone National Bank and more Exams Geography in PDF only on Docsity! O LARGE BANK Comptroller of the Currency Administrator of National Banks Washington, DC 20219 PUBLIC DISCLOSURE May 19, 2009 COMMUNITY REINVESTMENT ACT PERFORMANCE EVALUATION First Keystone National Bank Charter Number: 568 111 West Front Street Berwick, PA 18603 Office of the Comptroller of the Currency NORTHERN PENNSYLVANIA Field Office 60 Public Square Suite 602 Wilkes-Barre, PA. 18701 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, and should not 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. Charter Number: 568 i Table of Contents OVERALL CRA RATING.......................................................................................................... 1 DEFINITIONS AND COMMON ABBREVIATIONS................................................................... 2 DESCRIPTION OF INSTITUTION............................................................................................. 6 SCOPE OF THE EVALUATION................................................................................................ 7 FAIR LENDING OR OTHER ILLEGAL CREDIT PRACTICES REVIEW.................................. 8 CONCLUSIONS WITH RESPECT TO PERFORMANCE TESTS............................................. 9 LENDING TEST .................................................................................................................................................... 9 INVESTMENT TEST ........................................................................................................................................... 17 SERVICE TEST....................................................................................................................................... 18 Appendix A: Scope of Examination……………………………………………………………..A-1 APPENDIX B: MARKET PROFILES FOR FULL-SCOPE AREAS .......................................B-1 APPENDIX C: TABLES OF PERFORMANCE DATA ...........................................................C-2 Charter Number: 568 3 Community Reinvestment Act (CRA): the statute that requires the OCC to evaluate a bank’s record of meeting the credit needs of its local community, consistent with the safe and sound operation of the bank, and to take this record into account when evaluating certain corporate applications filed by the bank. 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 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 Review: Performance under the Lending, Investment, and Service Tests is analyzed considering performance context, quantitative factors (e.g., geographic distribution, borrower distribution, and total number and dollar amount of investments), and qualitative factors (e.g., 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 (e.g., approved, denied, and withdrawn). Beginning in 2004, the reports also include additional data on loan pricing, the lien status of the collateral, any requests for pre- approval and loans for manufactured housing. Home Mortgage Loans: Such loans include home purchase, home improvement and re- financings, as defined in the HMDA regulation. These include loans for multifamily (five or more families) dwellings, manufactured housing and one-to-four family dwellings other than manufactured housing. 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 Review: Performance under the Lending, Investment, and Service Tests is analyzed using only quantitative factors (e.g., geographic distribution, borrower distribution, total number and dollar amount of investments, and branch distribution). Charter Number: 568 4 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 MA/assessment area. Median Family Income (MFI): The median income determined by the U.S. Census Bureau every ten years and used to determine the income level category of geographies. Also, the median income determined by the Department of Housing and Urban Development annually that is used to determine the income level category of individuals. For any given area, the median is the point at which half of the families have income above it and half below it. Metropolitan Area (MA): Any metropolitan statistical area or metropolitan division, as defined by the Office of Management and Budget and any other area designated as such by the appropriate federal financial supervisory agency. Metropolitan Division: As defined by Office of Management and Budget, a county or group of counties within a Metropolitan Statistical Area that contains a population of at least 2.5 million. A Metropolitan Division consists of one or more counties that represent an employment center or centers, plus adjacent counties associated with the main county or counties through commuting ties. Metropolitan Statistical Area: An area, defined by the Office of Management and Budget, as having at least one urbanized area that has a population of at least 50,000. The Metropolitan Statistical Area comprises the central county or counties, plus adjacent outlying counties having a high degree of social and economic integration with the central county as measured through commuting. Middle-Income: Individual income that is at least 80 percent and less than 120 percent of the area median income, or a median family income that is at least 80 percent and less than 120 percent, in the case of a geography Moderate-Income: Individual income that is at least 50 percent and less than 80 percent of the area median income, or a median family income that is at least 50 percent and less than 80 percent, in the case of a geography. Multifamily: Refers to a residential structure that contains five or more units. Other Products: Includes any unreported optional category of loans for which the institution collects and maintains data for consideration during a CRA examination. Examples of such activity include consumer loans and other loan data an institution may provide concerning its lending performance. Owner-Occupied Units: Includes units occupied by the owner or co-owner, even if the unit has not been fully paid for or is mortgaged. Qualified Investment: A qualified investment is defined as any lawful investment, deposit, membership share, or grant that has as its primary purpose community development. Charter Number: 568 5 Rated Area: A rated area is a state or multi-state metropolitan area. For an institution with domestic branches in only one state, the institution’s CRA rating would be the state rating. If an institution maintains domestic branches in more than one state, the institution will receive a rating for each state in which those branches are located. If an institution maintains domestic branches in two or more states within a multi-state metropolitan area, the institution will receive a rating for the multi-state metropolitan area. Small Loan(s) to Business(es): A loan included in 'loans to small businesses' as defined in the Consolidated Report of Condition and Income (Call Report) and the Thrift Financial Reporting (TFR) instructions. These loans have original amounts of $1 million or less and typically are either secured by non-farm or nonresidential real estate or are classified as commercial and industrial loans. Small Loan(s) to Farm(s): A loan included in ‘loans to small farms’ as defined in the instructions for preparation of the Consolidated Report of Condition and Income (Call Report). These loans have original amounts of $500,000 or less and are either secured by farmland, or are classified as loans to finance agricultural production and other loans to farmers. Tier One Capital: The total of common shareholders’ equity, perpetual preferred shareholders’ equity with non-cumulative dividends, retained earnings and minority interests in the equity accounts of consolidated subsidiaries. Upper-Income: Individual income that is at least 120 percent of the area median income, or a median family income that is at least 120 percent, in the case of a geography. Charter Number: 568 8 Please refer to Appendix A for more information and Appendix B for further information regarding the market profile of full-scope assessment areas. Ratings The bank’s overall rating is based primarily on those areas that received full-scope reviews. The Columbia and Montour Counties, Non-MSA AA was weighted more heavily because a majority of the lending and deposits were in this AA. The Lending Test was more heavily weighted than the Investment Test or the Service Test. For the Lending Test, FKNB’s home mortgage loans received more weight than its small loans to businesses. During the evaluation period, approximately 65% of loans originated or purchased were home mortgage loans and 35% were small loans to businesses. Other For the Columbia and Montour Counties, Non-MSA AA, we contacted one organization whose primary purpose is affordable housing and one organization whose primary purpose is to serve the business community and promote economic development. These contacts identified the following needs: investments in affordable housing development projects for low- and moderate-income individuals, including the elderly and the special needs population, donations and grants to organizations that support economic development, affordable housing and community services for low- and moderate-income individuals, small business loans in the $50,000-$100,000 range, small business seminars and education, bank personnel to serve on the Board of Directors and advisory panels for organizations that support economic development and affordable housing, credit counseling, first time home buyer seminars, and credit education on fraud prevention, identity theft, and predatory lending practices. The contacts believed the general banking and credit needs were being met in the AA. Both contacts specifically named FKNB and stated FKNB’s responsiveness to the banking and credit needs of the area is outstanding. For the Scranton-Wilkes-Barre, PA, MSA 42540 AA, we reviewed a recent community contact with a community organization whose primary purpose is affordable housing. We determined through this community contact and our internal research that opportunities exist for community development lending, investments, and services. According to the community contact, the primary needs of the area include: home purchase and home repair loans with reduced rates, favorable terms, reduced points, and closing cost assistance, loans, grants, and donations to organizations that provide affordable housing because federal funding is not sufficient, the development of a consortium of banks that could pull their money together to provide funding to organizations that develop affordable housing, and the development of a committee that includes, but is not limited to, banks, local organizations, and realtors who would meet quarterly to discuss affordable housing needs, how to meet these needs, and what bank programs are available for low- and moderate-income people. The community contact indicated the financial institutions are active and have been meeting the needs of the area. Fair Lending or Other Illegal Credit Practices Review We found no evidence of discriminatory or other illegal credit practices inconsistent with helping to meet community credit needs. Charter Number: 568 9 Conclusions with Respect to Performance Tests LENDING TEST Conclusions for Areas Receiving Full-Scope Reviews The bank’s performance under the lending test is rated “Outstanding”. Based on full-scope reviews, the bank’s performance in the Columbia and Montour Counties, Non-MSA AA is excellent and in the Scranton-Wilkes-Barre, PA, MSA 42540 AA is good. Lending Activity Overall, FKNB’s lending activity is excellent. Refer to Table 1 Lending Volume in appendix C for the facts and data used to evaluate the bank’s lending activity. The Columbia and Montour Counties, Non-MSA AA FKNB’s lending activity was excellent in this AA and reflected excellent responsiveness to the credit needs of the community when considering the level of competition from larger local lenders. FKNB has six branches in this AA and 56.33% of the total deposits were in the AA. As of June 30, 2008, FKNB had a 25.87% deposit market share in Columbia and Montour counties, ranking it 1st among eight institutions in this market. Major competitors are: First Columbia Bank and Trust (21.01% deposit market share), FNB Bank, NA (15.74% deposit market share), Columbia County Farmers NB (15.41% deposit market share). FKNB’s lending market share is compared to FKNB’s deposit market share within this AA. During the evaluation period, approximately 60% of the bank’s lending was done in this AA. Approximately 61% of the home mortgage loans and 59% of the small loans to businesses were originated in this AA. Of the total loans originated in this AA, 65% of the loans were home mortgage loans and 35% were small loans to businesses. Among home mortgage originations, 24% were home purchase loans, 46% were home improvement loans, and 30% were home refinance loans. The 2007 market share data for all mortgage data indicates FKNB ranked 3rd out of 169 mortgage lenders with a market share of 7.37%. Based on the same 2007 market share data, FKNB ranked 6th out of 109 lenders in the AA with a 5.03% market share in home purchase lending, 1st out of 47 lenders in the AA with an 18.45% market share in home improvement lending, and 5th out of 124 lenders in the AA with a 4.29% market share in home refinance lending. Based on the 2007 CRA aggregating data, FKNB ranked 8th out of 40 lenders in the AA with a market share of 5.23%. The performance is good when considering the top three large, Charter Number: 568 10 nationwide lenders have a combined market share of 45% and offer small business credit cards. Although the bank’s market share in home purchase, home improvement, home refinance, and small business lending is below the bank’s deposit market share in this AA, FKNB’s performance is excellent when considering the competition from larger regional and nationwide mortgage lenders. The Scranton-Wilkes-Barre, PA, MSA 42540 AA FKNB’s lending activity was good in this AA and reflected good responsiveness to the credit needs of the community when considering the level of competition from larger local lenders. FKNB has four branches in this AA and 21.44% of the total deposits were in the AA. As of June 30, 2008, FKNB had a 1.10% deposit market share in the Scranton-Wilkes-Barre, PA, MSA 42520, ranking it 20th among 26 institutions in this MSA market. Major competitors are: PNC Bank, NA (21.66% deposit market share), Wachovia Bank, NA (13.23% deposit market share), First National Community Bank (8.16% deposit market share), and Manufacturers and Traders Trust Company (8.10% deposit market share). In Luzerne County, FKNB had a 2.01% deposit market share, ranking it 13th among 20 institutions in Luzerne County. FKNB’s lending market share is compared to FKNB’s deposit market share within this AA. During the evaluation period, approximately 34% of the bank’s lending was done in this AA. Approximately 36% of the home mortgage loans and 32% of the small loans to businesses were originated in this AA. Of the total loans originated in this AA, 68% of the loans were home mortgage loans and 32% were small loans to businesses. Among home mortgage originations, 27% were home purchase loans, 40% were home improvement loans, and 33% were home refinance loans. The 2007 market share data for all mortgage data indicates FKNB ranked 25th out of 315 mortgage lenders with a market share of 1.03%. Based on the same 2007 market share data, FKNB ranked 32nd out of 226 lenders in the AA with a .71% market share in home purchase lending, 12th out of 97 lenders in the AA with a 2.40% market share in home improvement lending, and 30th out of 226 lenders in the AA with a .84% market share in home refinance lending. Based on the 2007 CRA aggregating data, FKNB ranked 22nd out of 59 lenders in the AA with a market share of 0.54%. This performance is good when considering the top three large, nationwide lenders have a combined market share of 44% and offer small business credit cards. Although the bank’s market share in home purchase, home refinance, and small business lending is below the bank’s deposit market share in this AA, FKNB’s performance is good when considering the dominance of larger regional and nationwide mortgage lenders. Charter Number: 568 13 Small Loans to Businesses Refer to Table 6 in appendix C for the facts and data used to evaluate the geographic distribution of the bank’s origination/purchase of small loans to businesses. The geographic distribution of small loans to businesses is adequate. The percentage of small loans to businesses in moderate-income geographies is lower than the percentage of businesses in moderate-income geographies. FKNB’s market share of small loans to businesses in moderate-income geographies is lower than its overall market share. This performance is considered adequate when taking into consideration there are only 2,520 businesses located in moderate-income geographies and FKNB is in competition with larger nationwide lenders including American Express, Citibank, NA, Chase Bank, NA, PNC Bank, NA, and Capital One, F.S.B. Lending Gap Analysis Our review of the geographic distribution of loans did not detect any conspicuous or unexplained gaps in FKNB’s lending patterns. Inside/Outside Ratio FKNB originates a substantial majority of loans in their combined assessment areas. During the evaluation period, 94.17% of the number and 86.79% of the dollar amount of total home mortgage and small loans to businesses were within the bank’s assessment area. For all home mortgage products, 95.13% of the number and 91.94% of the dollar amount were within the bank’s assessment area. The number and dollar amount of home mortgage loans originated in the assessment area during the evaluation period by product type are as follows: 89.84% of the number and 87.42% of the dollar amount of home purchase loans, 97.80% of the number and 96.93% of the dollar amount of home improvement loans, and 96.29% of the number and 96.06% of the dollar amount of home refinance loans. Regarding small loans to businesses, 92.46% of the number and 82.39% of the dollar amount of total originations were within the assessment area. Distribution of Loans by Income Level of the Borrower The overall distribution of home mortgage loans by income level of the borrower is excellent, and the overall distribution of small loans to small businesses is excellent. The Columbia and Montour Counties, Non-MSA AA FKNB’s distribution of home mortgage loans by borrower income level is excellent, and FKNB’s distribution of small loans to small businesses is excellent. Home Mortgage Loans Refer to Tables 8, 9, and 10 in appendix C for the facts and data used to evaluate the borrower distribution of the bank’s home mortgage loan originations and purchases. Charter Number: 568 14 In our analysis, we considered the lack of affordability for a low-income family to purchase a home. The average median housing value in this AA was $88,458, and a low-income family earns less than $25,750. Additionally, 11% of the households in this AA are below the poverty level and are considered very low-income. This lack of affordability limits the opportunities for home purchase, home improvement, and home refinance lending to low-income families; therefore, we placed more emphasis on the moderate-income performance. Home Purchase Lending The borrower distribution for home purchase lending is excellent. The percentage of home purchase loans made to low-income borrowers is lower than the percentage of low-income families in the AA. The percentage of home purchase loans made to moderate-income borrowers exceeds the percentage of moderate-income families in the AA. FKNB’s market share to low-income borrowers exceeds its overall market share and ranks FKNB 3rd out of 26 lenders in lending to low-income borrowers. FKNB’s market share to moderate-income borrowers exceeds its overall market share and ranks FKNB 4th out of 56 lenders in lending to moderate-income borrowers. Home Improvement Lending The borrower distribution for home improvement lending is excellent. The percentage of home improvement loans made to low-income borrowers exceeds the percentage of low-income families in the AA. The percentage of home improvement loans made to moderate-income borrowers exceeds the percentage of moderate-income families in the AA. FKNB’s market share to both low- and moderate-income borrowers exceeds its overall market share. FKNB ranks 1st out of 13 lenders in lending to low-income borrowers, and FKNB ranks 1st out of 24 lenders in lending to moderate-income borrowers. Home Refinance Lending The borrower distribution for home refinance lending is excellent. The percentage of home refinance loans made to low-income borrowers is near to the percentage of low-income families in the AA. The percentage of home refinance loans made to moderate-income borrowers exceeds percentage of moderate-income families in the AA. FKNB’s market share to both low- and moderate-income borrowers exceeds its overall market share. FKNB ranks 7th out of 34 lenders in lending to low-income borrowers, and FKNB ranks 4th out of 63 lenders in lending to moderate-income borrowers. Small Loans to Businesses Refer to Table 11 in appendix C for the facts and data used to evaluate the borrower distribution of the bank’s origination/purchase of small loans to businesses. The borrower distribution of small loans to businesses is excellent. The percentage of small loans to small businesses (businesses with gross annual revenues of $1 million or less) exceeds the percentage of small businesses in the AA. FKNB’s market share of lending to small businesses exceeds its overall market share. FKNB ranked 4th out of 40 lenders in the AA with a 9.34% market share in lending to small businesses. The distribution by size of loan shows that approximately 77% of the loan originations are for $100,000 or less. This is another indication that business lending is primarily to small businesses. Charter Number: 568 15 The Scranton-Wilkes-Barre, PA, MSA 42540 AA FKNB’s distribution of home mortgage loans by borrower income level is excellent, given the strong competition from a large number of institutions competing for business in the AA and the affordability of home ownership for a low-income family. FKNB’s distribution of small loans to small businesses is excellent. Home Mortgage Loans Refer to Tables 8, 9, and 10 in appendix C for the facts and data used to evaluate the borrower distribution of the bank’s home mortgage loan originations and purchases. In our analysis, we considered the lack of affordability for a low-income family to purchase a home. The average median housing value in this AA was $83,155, and a low-income family earns less than $27,350. Additionally, 12% of the households in this AA are below the poverty level and are considered very low-income. This lack of affordability limits the opportunities for home purchase, home improvement, and home refinance lending to low-income families; therefore, we placed more emphasis on the moderate-income performance. Home Purchase Lending The borrower distribution for home purchase lending is good. The percentage of home purchase loans made to low-income borrowers is significantly lower than the percentage of low-income families in the AA. The percentage of home purchase loans made to moderate- income borrowers is near to the percentage of moderate-income families in the AA. FKNB’s market share to low-income borrowers is somewhat lower than its overall market share, and FKNB’s market share to moderate-income borrowers is somewhat lower than its overall market share. FKNB’s performance is good when considering the strong competition from large local, regional, and nationwide mortgage lenders. Home Improvement Lending The borrower distribution for home improvement lending is excellent. The percentage of home improvement loans made to low-income borrowers is somewhat lower than the percentage of low-income families in the AA. The percentage of home improvement loans made to moderate-income borrowers is near to the percentage of moderate-income families in the AA. FKNB’s market share to low-income borrowers exceeds its overall market share. FKNB’s market share to moderate-income borrowers is somewhat lower than its overall market share. FKNB ranks 8th out of 39 lenders in lending to low-income borrowers, and FKNB ranks 17th out of 57 lenders in lending to moderate-income borrowers. FKNB’s performance is excellent when considering the lack of affordability for low-income borrowers, the bank’s market share position, and the competition from larger local, regional, and national mortgage lenders. Home Refinance Lending The borrower distribution for home refinance lending is excellent. The percentage of home refinance loans made to low-income borrowers is significantly lower than the percentage of low-income families in the AA. The percentage of home refinance loans made to moderate- income borrowers exceeds the percentage of moderate-income families in the AA. FKNB’s market share to low-income borrowers is somewhat lower than its overall market share. FKNB’s market share to moderate-income borrowers exceeds its overall market share. Charter Number: 568 18 The Scranton-Wilkes-Barre, PA, MSA 42540 AA FKNB has a poor level of qualified community development investments and donations in the Scranton-Wilkes-Barre, PA, MSA 42540 AA, and the bank exhibits a poor responsiveness to credit and community economic development needs in the AA. We determined through our community contacts and internal research that investment opportunities exist. During the current evaluation period, FKNB made 12 donations for a total of $1 thousand to 7 different organizations that provide affordable housing and community services to low- and moderate-income individuals in the AA. Conclusions for Area Receiving Limited-Scope Reviews Based on a limited-scope review, the bank’s performance under the investment test in the Monroe County, Non-MSA AA is weaker than the bank’s overall “High Satisfactory” performance under the investment test. The bank’s performance is weaker than the bank’s overall performance because the number and dollar amount of investments and donations were minimal. The Monroe County, Non-MSA AA was not part of the bank’s assessment area until November, 2007, which attributed to the bank’s limited level of investments and donations. The weaker performance in the Monroe County, Non-MSA AA had minimal impact on the overall investment test conclusion. Refer to Table 14 in appendix C for the facts and data that support these conclusions. SERVICE TEST Conclusions for Areas Receiving Full-Scope Reviews The bank’s performance under the Service Test is rated “High Satisfactory”. Based on full- scope reviews, the bank’s performance in the Columbia and Montour Counties, Non-MSA AA and the Scranton-Wilkes-Barre, PA, MSA 42540 AA is good. Retail Banking Services Refer to Table 15 in appendix C for the facts and data used to evaluate the distribution of the bank’s branch delivery system and branch openings and closings. The Columbia and Montour Counties, Non-MSA AA FKNB’s delivery systems are accessible to geographies and individuals of different income levels. FKNB has six branches in this AA. There are four branches located in middle-income geographies, and there are two branches located in upper-income geographies. There are no branches located in the moderate-income geography. The percentage of branches located in the moderate-income geography is significantly lower than the percentage of the population located in this geography. While there are no branches in the one moderate-income geography, FKNB has four branches in middle-income geographies that are in close proximity to the one moderate-income geography in this AA. No branches have been opened or closed during the evaluation period. Charter Number: 568 19 In addition to the six branches, FKNB has eight Automated Teller Machines (ATMs) within the assessment area. Six ATMs are attached to the aforementioned branches, and two are stand alone ATMs. One stand alone ATM is located at the Berwick Hospital Center, and one stand alone ATM is located at the Susquehanna Valley Medical Center in Bloomsburg. The Berwick Hospital Center ATM is located in a moderate-income geography. Hours and services do not vary in a way that inconveniences certain portions of the assessment area, particularly the moderate-income geography and the low- and moderate- income individuals. All branches have ATMs and extended Friday evening hours. Four branches offer Saturday morning hours, and the supermarket branch offers extended evening hours during the week as well as Sunday hours. Five branches have drive-through facilities. All six branches offer a full line of traditional banking products and services. FKNB offers a variety of checking account products. One of the products is a no minimum balance and no monthly service charge basic checking account, which allows low- and moderate-income individuals to maintain regular checking accounts. FKNB also offers a no minimum balance and no monthly service charge checking account product for non-profit charitable groups. FKNB offers a variety of loan products. The First Time Homebuyer Program is tailored to assist low- and moderate-income individuals and families. FKNB will finance up to the lower of 95% of the purchase or appraised value of the home. The maximum purchase price is $95,000, and the bank provides the borrower with a fixed rate mortgage and up to a twenty year term based on a twenty-five year amortization. FKNB also participates in the First Front Door Homebuyer Program through the Federal Home Loan Bank (FHLB). Through this program, the FHLB will assist with closing costs and down payments by matching a qualified homebuyer’s contribution 3-1, based on the buyer’s need. For every $1 contribution the buyer makes, the FHLB will provide $3 in grant assistance, up to a maximum of $5,000. Participant contributions can take the form of savings, a gift, tax refund, inheritance or any other funds accumulated by the homebuyer. To qualify for the program, the borrower must be a first time homebuyer, complete at least four hours of homeownership counseling, contribute personal funds as part of the down payment and closing costs, and have an income at or below 80% of the area median income. FKNB also provides alternative systems for delivering retail banking services to its community through full service Internet banking and bank by phone, which are available 24 hours a day. Since FKNB could not provide specific information on how low- and moderate-income individuals have benefited from these services, no weight was place on alternative delivery systems. The Scranton-Wilkes-Barre, PA, MSA 42540 AA FKNB’s delivery systems are reasonably accessible to geographies and individuals of different income levels. FKNB has four branches in this AA, and all four branches are located in middle-income geographies. There are no branches in the moderate-income geographies in this AA. The percentage of branches located in moderate-income geographies is significantly lower than the percentage of the population located in these geographies. While there are no branches in the moderate-income geographies, FKNB has one middle-income branch that is in Charter Number: 568 20 close proximity to one of the moderate-income geographies in this AA. Additionally, there are two middle-income branches in this AA that are within close proximity to the one moderate- income geography in the Columbia and Montour Counties, Non-MSA AA. No branches have been opened or closed during the evaluation period. In addition to the four branches, FKNB has four Automated Teller Machines (ATMs) within the assessment area. All four ATMs are attached to the aforementioned branches. Hours and services do not vary in a way that inconveniences certain portions of the assessment area, particularly moderate-income geographies and low- and moderate-income individuals. All four branches have drive-through facilities, ATMs, and extended Friday evening hours. There are two branches that offer Saturday morning hours. All four branches offer a full line of traditional banking products and services. FKNB offers the same checking, loan programs, and alternative systems for delivering retail banking services in this AA as it does in the Columbia and Montour Counties, Non-MSA AA. Since FKNB could not provide specific information on how low- and moderate-income individuals have benefited from these services, no weight was place on alternative delivery systems. Community Development Services The Columbia and Montour Counties, Non-MSA AA FKNB provides a good level of community development services within its assessment area. Bank management and employees provided financial and technical expertise to six separate and qualified community development organizations. Their community development services focused on small business and economic development, affordable housing for low- and moderate-income individuals, and community services targeted to low- and moderate-income individuals. The following details the community development services that were provided during the evaluation period: • One employee provides financial and technical expertise by serving on the board of a local industrial development association that provides assistance to small businesses. • An employee provides financial and technical expertise by serving as Assistant Secretary/Treasurer for an organization that assists low- and moderate-income families with rental payments, provides a First Time Homebuyer Program to help with closing costs and down payments for income eligible first time home buyers, provides low- income housing for the elderly, and builds and sells low-income single family homes. • Two employees provide financial and technical expertise by serving on the Board of Directors of an organization that works locally, regionally, and internationally to combat hunger, improve health and sanitation, and provide education and job training. • One employee serves as the Treasurer/Secretary for an organization that promotes economic development. • One employee and one Board member assist with fundraising activities for an organization whose primary purpose is to provide food, shelter, and counseling to women and families of domestic violence. Charter Number: 568 B-1 Appendix B: Market Profiles for Full-Scope Areas The Columbia and Montour Counties, Non-MSA AA Demographic Information for Full-Scope Area: The Columbia and Montour Counties, Non-MSA AA Demographic Characteristics # Low % of # Moderate % of # Middle % of # Upper % of # NA* % of # Geographies (Census Tracts/BNAs) 19 0.00 5.26 73.68 21.05 0.00 Population by Geography 82,387 0.00 6.97 73.10 19.93 0.00 Owner-Occupied Housing by Geography 23,148 0.00 5.73 72.08 22.19 0.00 Businesses by Geography 4,980 0.00 8.94 70.02 21.04 0.00 Farms by Geography 296 0.00 2.36 76.35 21.28 0.00 Family Distribution by Income Level 21,525 15.86 19.39 25.68 39.07 0.00 Distribution of Low- and Moderate-Income Families throughout AA Geographies 7,588 0.00 10.27 74.62 15.12 0.00 Median Family Income HUD Adjusted Median Family Income for 2008 Households Below the Poverty Level = $41,475 = $51,500 =11% Median Housing Value Unemployment Rate: Columbia County Montour County = $88,458 =6.8 % =5.7 % (*) The NA category consists of geographies that have not been assigned an income classification. Source: 2000 U.S. Census, 2008 HUD updated MFI, and December 31, 2008 unemployment rate; Bureau of Labor Statistics The Columbia and Montour Counties, Non-MSA AA FKNB’s Columbia and Montour Counties, Non-MSA AA includes all fifteen census tracts in Columbia County and all four census tracts in Montour County for a total of 19 census tracts. There are no low-income geographies (0%), one moderate-income geography (5.26%), fourteen middle-income geographies (73.68%), and four upper-income geographies. FKNB’s assessment area includes two middle-income geographies (9501.00 and 9503.00) in Montour County that have been designated as distressed by the Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency based on the rates of poverty, unemployment, and population loss. The assessment area complies with regulatory requirements and does not arbitrarily exclude low- and moderate-income areas. The 2000 U.S. Census reported the total population of the AA at 82,387. Within the AA, there were 32,089 households and 21,525 families. The 2000 median income was $41,475, and the 2008 HUD updated median family income was $51,500. Approximately 16% of the families are low-income, 19% are moderate-income, 26% are middle-income, and 39% are upper- income. Approximately 11% of households are below the poverty level. There were 35,360 housing units in this AA with the following distribution: 65% were owner-occupied, 25% were rental-occupied and 10% were vacant housing units. The median housing cost was $88,458. Charter Number: 568 B-2 According to the 2008 business demographics, there are a total of 4,980 businesses in the AA. Approximately 64% of the businesses reporting have revenues less than $1 million, approximately 4% have revenues greater than $1 million, and the revenue was not reported for approximately 31% of the businesses. Approximately 9% of the businesses are located in the moderate-income geography, 70% are located in middle-income geographies, and 21% are located in upper-income geographies. According to the June 30, 2008 FDIC Summary of Deposit Market Share Report, FKNB was ranked first out of eight institutions in Columbia and Montour counties with a 25.87% deposit market share. Competitors in this market include: First Columbia Bank and Trust, ranked second with 21.01% of deposits, FNB Bank, NA, ranked third with 15.74% of deposits, Columbia County Farmers NB, ranked fourth with 15.41% of deposits, and PNC Bank, NA ranked fifth with 9.42% of deposits. FKNB has six branches in this AA. There are four branches located in middle-income geographies, and there are two branches located in upper-income geographies. No branches have been opened or closed during the evaluation period. In addition to the six branches, FKNB has eight Automated Teller Machines (ATMs) within the assessment area. Six ATMs are attached to the aforementioned branches, and two are stand alone ATMs. One stand alone ATM is located at the Berwick Hospital Center, and one stand alone ATM is located at the Susquehanna Valley Medical Center in Bloomsburg. The Berwick Hospital Center ATM is located in a moderate-income geography. The current local economy for the AA is characterized as being in the midst of a mild recession, but the downturn is less severe than that seen nationally or in Pennsylvania. Over the last year, the area has experienced three significant plant closures, which resulted in approximately 300 lost jobs. In addition to the jobs lost as a result of the plant closures, there were several hundred other layoffs in the area over the last year. The local university and Geisinger Medical Center help to stabilize the area and offset potential economic decline. In regards to housing, there is plenty of housing stock, but the uncertainty surrounding employment has hindered people from buying homes or upgrading to larger homes. The area has not experienced the volume of foreclosures seen in other areas; however, with the recent plant closings and layoffs, there may be an increase in foreclosures. Some of the major employers in Columbia County include: Bloomsburg University, Wise Foods, CHS Berwick Hospital Corporation, Magee Rieter Automotive Systems, Berwick Area School District, and Del Monte Corporation. Some of the major employers in Montour County include: Geisinger System Services, Geisinger Medical Center, Geisinger Clinic, Danville Area School District, and Great Dane LP. According to the Bureau of Labor Statistics, the December 31, 2008 unemployment rate for Columbia County was 6.8%, the unemployment rate for Montour County was 5.7%, the Pennsylvania state unemployment rate was 6.4%, and the national unemployment rate was 7.2%. During the examination, we contacted one organization whose primary purpose is affordable housing and one organization whose primary purpose is to serve the business community and promote economic development. These contacts identified the following needs: investments Charter Number: 568 B-3 in affordable housing development projects for low- and moderate-income individuals, including the elderly and the special needs population, donations and grants to organizations that provide affordable housing, economic development, and community services to low- and moderate-income individuals, small business loans in the $50,000-$100,000 range, small business seminars and education, bank personnel to serve on the Board of Directors and advisory panels for organizations that support economic development and affordable housing, credit counseling, first time home buyer seminars, and credit education on fraud prevention, identity theft, and predatory lending practices. The contacts believed the general banking and credit needs were being met in the AA. Both contacts specifically named FKNB and stated FKNB’s responsiveness to the banking and credit needs of the area is outstanding. Charter Number: 568 B-6 programs are available for low- and moderate-income people. The community contact indicated the financial institutions are active and have been meeting the needs of the area. Charter Number: 568 C-1 Appendix C: Tables of Performance Data Content of Standardized Tables References to the “bank” include activities of any affiliates that the bank provided for consideration (refer to appendix A: Scope of the Examination). For purposes of reviewing the lending test tables, the following are applicable: (1) purchased loans are treated as originations/purchases and market share is the number of loans originated and purchased by the bank as a percentage of the aggregate number of reportable loans originated and purchased by all lenders in the MA/assessment area; (2) Partially geocoded loans (loans where no census tract is provided) cannot be broken down by income geographies and, therefore, are only reflected in the Total Loans in Core Tables 2 through 7 and part of Table 13; and (3) Partially geocoded loans are included in the Total Loans and % Bank Loans Column in Core Tables 8 through 12 and part of Table 13. Tables without data are not included in this PE. The following is a listing and brief description of the tables: Table 1. Lending Volume - Presents the number and dollar amount of reportable loans originated and purchased by the bank over the evaluation period by MA/assessment area. Community development loans to statewide or regional entities or made outside the bank’s assessment area may receive positive CRA consideration. See Interagency Q&As __.12 (i) - 5 and - 6 for guidance on when a bank may receive positive CRA consideration for such loans. Refer to the CRA section of the Compliance Policy intranet page for guidance on table placement. Table 1. Other Products - Presents the number and dollar amount of any unreported category of loans originated and purchased by the bank over the evaluation period by MA/assessment area. Examples include consumer loans or other data that a bank may provide, at its option, concerning its lending performance. This is a two- page table that lists specific categories.-Not included in this PE. Table 2. Geographic Distribution of Home Purchase Loans - Compares the percentage distribution of the number of loans originated and purchased by the bank in low-, moderate-, middle-, and upper-income geographies to the percentage distribution of owner-occupied housing units throughout those geographies. The table also presents market share information based on the most recent aggregate market data available. Table 3. Geographic Distribution of Home Improvement Loans - See Table 2. Table 4. Geographic Distribution of Home Mortgage Refinance Loans - See Table 2. Table 5. Geographic Distribution of Multifamily Loans - Compares the percentage distribution of the number of multifamily loans originated and purchased by the Charter Number: 568 C-3 bank in low-, moderate-, middle-, and upper-income geographies to the percentage distribution of multifamily housing units throughout those geographies. The table also presents market share information based on the most recent aggregate market data available.-Not included in this PE. Table 6. Geographic Distribution of Small Loans to Businesses - The percentage distribution of the number of small loans (less than or equal to $1 million) to businesses originated and purchased by the bank in low-, moderate-, middle-, and upper-income geographies compared to the percentage distribution of businesses (regardless of revenue size) throughout those geographies. The table also presents market share information based on the most recent aggregate market data available. Because small business data are not available for geographic areas smaller than counties, it may be necessary to use geographic areas larger than the bank’s assessment area. Table 7. Geographic Distribution of Small Loans to Farms - The percentage distribution of the number of small loans (less than or equal to $500,000) to farms originated and purchased by the bank in low-, moderate-, middle-, and upper-income geographies compared to the percentage distribution of farms (regardless of revenue size) throughout those geographies. The table also presents market share information based on the most recent aggregate market data available. Because small farm data are not available for geographic areas smaller than counties, it may be necessary to use geographic areas larger than the bank’s assessment area.-Not included in this PE. Table 8. Borrower Distribution of Home Purchase Loans - Compares the percentage distribution of the number of loans originated and purchased by the bank to low-, moderate-, middle-, and upper-income borrowers to the percentage distribution of families by income level in each MA/assessment area. The table also presents market share information based on the most recent aggregate market data available. Table 9. Borrower Distribution of Home Improvement Loans - See Table 8. Table 10. Borrower Distribution of Refinance Loans - See Table 8. Table 11. Borrower Distribution of Small Loans to Businesses - Compares the percentage distribution of the number of small loans (less than or equal to $1 million) originated and purchased by the bank to businesses with revenues of $1 million or less to the percentage distribution of businesses with revenues of $1 million or less. In addition, the table presents the percentage distribution of the number of loans originated and purchased by the bank by loan size, regardless of the revenue size of the business. Market share information is presented based on the most recent aggregate market data available. Table 12. Borrower Distribution of Small Loans to Farms - Compares the percentage distribution of the number of small loans (less than or equal to $500,000) originated and purchased by the bank to farms with revenues of $1 million or less to the percentage distribution of farms with revenues of $1 million or less. In addition, the Charter Number: 568 C-5 Table 2. Geographic Distribution of Home Purchase Loans Geographic Distribution: HOME PURCHASE Geography: FKNB Evaluation Period: January 1, 2006 through December 31, 2008 Total Home Purchase Loans Low-Income Geographies Moderate-Income Geographies Middle-Income Geographies Upper-Income Geographies Market Share (%) by Geography* MA/Assessment Area: # % of Total** % Owner Occ Units*** % BANK Loans % Owner Occ Units*** % BANK Loans % Owner Occ Units*** % BANK Loans % Owner Occ Units*** % BANK Loans Over all Low Mod Mid Upp Full Review: Columbia and Montour Counties, Non-MSA AA 183 56.83 0.00 0.00 5.73 20.22 72.08 64.48 22.19 15.30 5.03 0.00 13.6 4 5.11 2.12 Scranton-Wilkes- Barre, PA, MSA 42540 AA 120 37.27 0.00 0.00 8.75 3.33 73.69 80.83 17.56 15.83 0.71 0.00 0.00 0.89 0.52 Limited Review: Monroe County, Non- MSA AA 19 5.90 0.00 0.00 0.00 0.00 33.63 36.84 66.37 63.16 0.00 0.00 0.00 0.00 19 * Based on 2007 Peer Mortgage Data: Eastern Region. ** Home purchase loans originated and purchased in the MA/AA as a percentage of all home purchase loans originated and purchased in the rated area. *** Percentage of Owner Occupied Units is the number of owner occupied housing units in a particular geography divided by the number of owner occupied housing units in the area based on 2000 Census information. Charter Number: 568 C-6 Table 3. Geographic Distribution of Home Improvement Loans Geographic Distribution: HOME IMPROVEMENT Geography: FKNB Evaluation Period: January 1, 2006 through December 31, 2008 Total Home Improvement Loans Low-Income Geographies Moderate-Income Geographies Middle-Income Geographies Upper-Income Geographies Market Share (%) by Geography* MA/Assessment Area: # % of Total** % Owner Occ Units*** % BANK Loans % Owner Occ Units*** % BANK Loans % Owner Occ Units*** % BANK Loans % Owner Occ Units*** % BANK Loans Over all Low Mod Mid Upp Full Review: Columbia and Montour Counties, Non-MSA AA 344 64.66 0.00 0.00 5.73 17.44 72.08 72.67 22.19 9.88 18.4 5 0.00 42.2 2 19.1 2 6.90 Scranton-Wilkes- Barre, PA, MSA 42540 AA 176 33.08 0.00 0.00 8.75 3.98 73.69 93.18 17.56 2.84 2.40 0.00 0.79 3.13 0.52 Limited Review: Monroe County, Non-MSA AA 12 2.26 0.00 0.00 0.00 0.00 33.63 16.67 66.37 83.33 0.00 0.00 0.00 0.00 0.00 * Based on 2007 Peer Mortgage Data: Eastern Region. ** Home improvement loans originated and purchased in the MA/AA as a percentage of all home improvement loans originated and purchased in the rated area. *** Percentage of Owner Occupied Units is the number of owner occupied housing units in a particular geography divided by number of owner occupied housing units in the area based on 2000 Census information. Charter Number: 568 C-7 Table 4. Geographic Distribution of Home Mortgage Refinance Loans Geographic Distribution: HOME MORTGAGE REFINANCE Geography: FKNB Evaluation Period: January 1, 2006 through December 31, 2008 Total Home Mortgage Refinance Loans Low-Income Geographies Moderate-Income Geographies Middle-Income Geographies Upper-Income Geographies Market Share (%) by Geography* MA/Assessment Area: # % of Total** % Owner Occ Units*** % BANK Loans % Owner Occ Units*** % BANK Loans % Owner Occ Units*** % BANK Loans % Owner Occ Units*** % BANK Loans Over all Low Mod Mid Upp Full Review: Columbia and Montour Counties, Non-MSA AA 224 58.49 0.00 0.00 5.73 16.96 72.08 69.20 22.19 13.84 4.29 0.00 11.2 7 4.32 2.30 Scranton-Wilkes- Barre, PA, MSA 42540 AA 147 38.38 0.00 0.00 8.75 4.76 73.69 87.07 17.56 8.16 0.84 0.00 0.20 1.04 0.45 Limited Review: Monroe County, Non-MSA AA 12 3.13 0.00 0.00 0.00 0.00 33.63 8.33 66.37 91.67 0.00 0.00 0.00 0.00 0.00 * Based on 2007 Peer Mortgage Data: Eastern Region. ** Home mortgage refinance loans originated and purchased in the MA/AA as a percentage of all home mortgage refinance loans originated and purchased in the rated area. *** Percentage of Owner Occupied Units is the number of owner occupied housing units in a particular geography divided by number of owner occupied housing units in the area based on 2000 Census information. Charter Number: 568 C-10 Table 9. Borrower Distribution of Home Improvement Loans Borrower Distribution: HOME IMPROVEMENT Geography: FKNB Evaluation Period: January 1, 2006 through December 31, 2008 Total Home Improvement Loans Low-Income Borrowers Moderate-Income Borrowers Middle-Income Borrowers Upper-Income Borrowers Market Share* MA/Assessment Area: # % of Total** % Families*** % BANK Loans**** % Families*** % BANK Loans**** % Families*** % BANK Loans**** % Families*** % BANK Loans**** Over all Low Mod Mid Upp Full Review: Columbia and Montour Counties, Non-MSA AA 344 64.66 15.86 19.47 19.39 26.84 25.68 24.78 39.07 28.91 18.6 2 37.50 21.01 20.77 12.36 Scranton-Wilkes- Barre, PA, MSA 42540 AA 176 33.08 19.48 14.88 18.97 17.26 22.94 27.98 38.61 39.88 2.26 3.18 1.55 2.28 2.34 Limited Review: Monroe County, Non-MSA AA 12 2.26 12.72 9.09 14.39 9.09 19.97 9.09 52.92 72.73 0.00 0.00 0.00 0.00 0.00 * Based on 2007 Peer Mortgage Data: Eastern Region. ** Home improvement loans originated and purchased in the MA/AA as a percentage of all home improvement loans originated and purchased in the rated area. *** Percentage of Families is based on the 2000 Census information. **** As a percentage of loans with borrower income information available. No information was available for 2.6% of loans originated and purchased by Bank. Charter Number: 568 C-11 Table 10. Borrower Distribution of Home Mortgage Refinance Loans Borrower Distribution: HOME MORTGAGE REFINANCE Geography: FKNB Evaluation Period: January 1, 2006 through December 31, 2008 Total Home Mortgage Refinance Loans Low-Income Borrowers Moderate-Income Borrowers Middle-Income Borrowers Upper-Income Borrowers Market Share* MA/Assessment Area: # % of Total** % Families*** % BANK Loans**** % Families*** % BANK Loans**** % Families*** % BANK Loans**** % Families*** % BANK Loans**** Over all Low Mod Mid Upp Full Review: Columbia and Montour Counties, Non-MSA AA 224 58.49 15.86 12.74 19.39 24.06 25.68 26.89 39.07 36.32 4.45 5.68 5.93 4.24 3.52 Scranton-Wilkes- Barre, PA, MSA 42540 AA 147 38.38 19.48 7.14 18.97 20.00 22.94 32.86 38.61 40.00 0.89 0.22 1.02 1.09 0.84 Limited Review: Monroe County, Non-MSA AA 12 3.13 12.72 0.00 14.39 16.67 19.97 0.00 52.92 83.33 0.00 0.00 0.00 0.00 0.00 * Based on 2007 Peer Mortgage Data: Eastern Region. ** Home mortgage refinance loans originated and purchased in the MA/AA as a percentage of all home mortgage refinance loans originated and purchased in the rated area. *** Percentage of Families is based on the 2000 Census information. **** As a percentage of loans with borrower income information available. No information was available for 5.0% of loans originated and purchased by Bank. Charter Number: 568 C-12 Table 11. Borrower Distribution of Small Loans to Businesses Borrower Distribution: SMALL LOANS TO BUSINESSES Geography: FKNB Evaluation Period: January 1, 2006 through December 31, 2008 Total Small Loans to Businesses Businesses With Revenues of $1 million or less Loans by Original Amount Regardless of Business Size Market Share* MA/Assessment Area: # % of Total** % of Businesses *** % BANK Loans**** $100,000 or less >$100,000 to $250,000 >$250,000 to $1,000,000 All Rev $1 Million or Less Full Review: Columbia and Montour Counties, Non-MSA AA 399 59.20 64.44 80.70 76.94 11.28 11.78 5.23 9.34 Scranton-Wilkes- Barre, PA, MSA 42540 AA 213 31.60 67.86 82.63 74.65 14.55 10.80 0.54 1.04 Limited Review: Monroe County, Non-MSA AA 62 9.20 69.73 72.58 41.94 27.42 30.65 0.02 0.04 * Based on 2007 Peer Small Business Data: US. ** Small loans to businesses originated and purchased in the MA/AA as a percentage of all small loans to businesses originated and purchased in the rated area. *** Businesses with revenues of $1 million or less as a percentage of all businesses (Source D&B – 2008). **** Small loans to businesses with revenues of $1 million or less as a percentage of all loans reported as small loans to businesses. No information was available for 3.26% of small loans to businesses originated and purchased by the Bank.