PUBLIC DISCLOSURE January 22, 2013 COMMUNITY REINVESTMENT ACT PERFORMANCE EVALUATION Bank of Texas RSSD: 925653 306 West Wall Midland, Texas 79701 Federal Reserve Bank of Dallas 2200 North Pearl Street Dallas, Texas 75201 NOTE: This document is an evaluation of this institution’s record of meeting the credit needs of its entire community, including low- and moderate-income neighborhoods, consistent with safe and sound operation of the institution. This evaluation is not, nor should it be construed as, an assessment of the financial condition of this institution. The rating assigned to this institution does not represent an analysis, conclusion or opinion of the federal financial supervisory agency concerning the safety and soundness of this financial institution.
Transcript
PUBLIC DISCLOSURE
January 22, 2013
COMMUNITY REINVESTMENT ACT PERFORMANCE EVALUATION
Bank of Texas RSSD: 925653
306 West Wall
Midland, Texas 79701
Federal Reserve Bank of Dallas 2200 North Pearl Street
Dallas, Texas 75201 NOTE: This document is an evaluation of this institution’s record of meeting the credit needs of
its entire community, including low- and moderate-income neighborhoods, consistent with safe and sound operation of the institution. This evaluation is not, nor should it be construed as, an assessment of the financial condition of this institution. The rating assigned to this institution does not represent an analysis, conclusion or opinion of the federal financial supervisory agency concerning the safety and soundness of this financial institution.
Bank of Texas CRA Performance Evaluation Midland, Texas January 22, 2013
TABLE OF CONTENTS
I. Institution’s CRA Rating .............................................................................................................1
II. Scope of Examination ..................................................................................................................1
III. Description of Institution .............................................................................................................2
IV. Description of Assessment Areas .................................................................................................3
V. Conclusions with Respect to Performance Tests ........................................................................12
VI. Appendix A – Loan Distribution Tables for Midland Assessment Area ....................................16
VII. Appendix B – Loan Distribution Tables for El Paso Assessment Area .....................................18
VIII. Appendix C – Loan Distribution Tables for Kent, Dickens, and Stonewall Counties Assessment Area ....................................................................................................................20
IX. Glossary .............................................................................................................................................................. 22
Bank of Texas CRA Performance Evaluation Midland, Texas January 22, 2013
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INSTITUTION’S CRA RATING: This institution is rated Satisfactory. Bank of Texas’ (bank) performance demonstrates a reasonable record of meeting the credit needs of its assessment areas, including low- and moderate-income individuals, in a manner consistent with its resources, operating philosophy, and credit needs of the community it serves. The factors supporting this rating include: • A majority of small business loans, 83.3% of the number and 79.2% of the dollar volume
were originated within the bank’s assessment areas. • A reasonable loan-to-deposit ratio (LTD) of 68.4% as of September 30, 2012, with a
quarterly average of 70.1% since the previous CRA evaluation, given the bank’s resources and competition in the assessment areas.
• A reasonable penetration of loans among businesses of different sizes. • A reasonable dispersion of loans throughout the bank’s assessment areas. SCOPE OF EXAMINATION The bank’s lending performance with respect to the CRA was assessed by analyzing a sample of 54 commercial loans totaling $47.9 million originated by the bank between January 1, 2011 and December 31, 2011. The bank made one Home Mortgage Disclosure Act (HMDA) reportable loan in 2011. Since one loan is not enough to draw any reasonable conclusions about the bank’s performance, no HMDA loans were analyzed in connection with this performance assessment. The evaluation was conducted using the CRA small bank performance standards. Small bank CRA performance standards evaluate the following criteria:
• Average LTD since the last CRA evaluation. • The overall level of lending within the assessment area. • The bank’s lending to borrowers of different income levels and businesses and farms of
different sizes. • The bank’s geographic distribution of loans within its assessment area. • The bank’s response to written complaints with respect to CRA performance in the
assessment area. Each standard is viewed as part of an overall picture of the bank’s performance in meeting the credit needs of its delineated assessment areas. The assessment of the bank’s performance placed the most weight on the lending activities related to meeting the credit needs associated with small businesses in the Midland and El Paso assessment areas. These assessment areas received full scope reviews. The review of the bank’s performance in its non-metropolitan assessment area was conducted on a limited scope basis. The non-metropolitan assessment area has limited lending and deposits, and the bank’s focus is on El Paso and Midland where there are more opportunities for loans and a larger deposit base.
Bank of Texas CRA Performance Evaluation Midland, Texas January 22, 2013
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DESCRIPTION OF INSTITUTION The bank is a $232.5 million retail institution with branches located in Midland, Texas; El Paso, Texas; and Jayton, Texas. In 2010, the bank changed its name from Kent County State Bank, established branches in Midland and El Paso, and moved its headquarters from Jayton to Midland. The bank has no automated teller machines or drive-through services. The institution offers online banking from its website, www.bankoftexasonline.com.
BRANCH ADDRESS CENSUS TRACT/ INCOME LEVEL
COUNTY LOBBY HOURS
Midland Branch 306 W. Wall St. Midland, TX 79701
102.00/Moderate
Midland Mon.-Fri. 9 am – 3 pm
Jayton Branch 102 Donaho St. Jayton, TX 79528
9501.00/Middle
Kent Mon.-Fri. 9 am – 3 pm
El Paso Branch 320 Texas Ave. El Paso, TX 79901
17.00/Low
El Paso Mon.-Fri. 9 am – 3 pm
As of September 30, 2012 the bank reported total assets of approximately $232.5 million, gross loans of $143.9 million, total deposits of $207.6 million, and a net loan-to-deposit ratio of 70.1%. The following table reflects the loan portfolio mix:
PRODUCT 9/30/2012 $(000’S)
% OF LOANS
Real Estate 1-4 Family Res Construction Lns 10,434 7.25 Other Const Lns & Land Dev & Other 14,543 10.10 Farm Land 1,285 0.89 1-4 Family Res Secured by First Liens 4,661 3.24 1-4 Family Res Secured by Junior Liens 64 0.04 Multifamily 741 0.52 Lns Secured Owner Occupd NonFrm NonRes 9,560 6.64 Lns Secured by Other NonFrm NonRes 44,150 30.68 Total Real Estate 85,438 59.36 Agricultural 59 0.04 Commercial and Industrial 52,477 36.46 Consumer 463 0.32 State and Political Subdivisions 5,500 3.82 Other 2 >0.00 Gross Loans 143,939 100.00
The bank’s ability to meet various credit needs of the community has not been hampered by its capacity to lend, its financial condition and size, product offerings, prior performance, legal
Bank of Texas CRA Performance Evaluation Midland, Texas January 22, 2013
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impediments, or other factors. The bank received a Satisfactory rating on its last CRA performance evaluation dated December 30, 2008 performed by the Federal Deposit Insurance Corporation. DESCRIPTION OF ASSESSMENT AREAS The bank’s three assessment areas consist of two Metropolitan Statistical Areas (MSAs) and three contiguous non-MSA counties. The Midland MSA, the El Paso MSA, along with Dickens, Kent, and Stonewall counties comprise the bank’s assessment areas. Demographic and economic information impacting the bank’s performance context are discussed below. Information was obtained from publicly available sources including the U.S. Department of Commerce’s Bureau of the Census, 2000; the U.S. Department of Labor; the U.S. Department of Housing and Urban Development (HUD); Dun & Bradstreet; and the Texas Workforce Commission. DESCRIPTION OF MIDLAND MSA This assessment area consists of the Midland MSA, which is comprised of Midland County. The 2011 estimated population for the Midland County is approaching 141,000. The assessment area population grew 20.9% between 2000 and 2011. The city of Midland, population 111,147, is the county seat. The other significant municipality in the area is Odessa, which falls mostly in Ector County. Midland is also a component of the Midland-Odessa Combined Statistical Area, which includes the counties of Midland and Ector. As of the assessment date, the bank operated one retail branch in the assessment area. The Midland branch contained $96.0 million in deposits as of June 30, 2012. The bank ranks 12th in deposit market share out of 15 FDIC-insured financial institutions operating in the Midland banking market. The deposits in the bank’s one branch represented 1.89% of the total deposits in FDIC-insured financial institutions. Wells Fargo, N.A. dominates the market, with approximately 22% of total deposits, followed by Bank of America, N.A, and Community National Bank. The following table details selected characteristics of the assessment area.
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Combined Demographics Report
Assessment Area(s): Midland MSA
Income Categories
Tract Distribution
Families by Tract Income
Families < Poverty Level as % of
Families by Tract
Families by Family Income
#
%
#
%
#
%
#
%
Low-income
2
7.4
1,570
5.0
503
32.0
6,512
20.9
Moderate-income
6
22.2
5,678
18.2
1,095
19.3
5,799
18.6
Middle-income
11
40.7
13,768
44.2
1,140
8.3
6,025
19.3
Upper-income
8
29.6
10,142
32.6
465
4.6
12,822
41.2
Unknown-income
0
0.0
0
0.0
0
0.0
0
0.0
Total Assessment Area
27
100.0
31,158
100.0
3,203
10.3
31,158
100.0
Housing
Housing Types by Tract
Units by
Owner-Occupied
Rental
Vacant
Tract
#
%
%
#
%
#
%
Low-income
2,305
1,338
4.5
58.0
628
27.2
339
14.7
Moderate-income
8,319
5,475
18.4
65.8
1,907
22.9
937
11.3
Middle-income
21,534
13,281
44.7
61.7
5,772
26.8
2,481
11.5
Upper-income
15,902
9,630
32.4
60.6
4,714
29.6
1,558
9.8
Unknown-income
0
0
0.0
0.0
0
0.0
0
0.0
Total Assessment Area
48,060
29,724
100.0
61.8
13,021
27.1
5,315
11.1
Total Businesses by
Businesses by Tract & Revenue Size
Tract
Less Than or = $1 Million
Over $1 Million
Revenue Not Reported
#
%
#
%
#
%
#
%
Low-income
487
5.1
420
4.9
46
7.1
21
7.6
Moderate-income
2,388
25.0
2,094
24.2
217
33.5
77
27.7
Middle-income
3,745
39.1
3,375
39.0
267
41.2
103
37.1
Upper-income
2,949
30.8
2,754
31.9
118
18.2
77
27.7
Unknown-income
0
0.0
0
0.0
0
0.0
0
0.0
Total Assessment Area
9,569
100.0
8,643
100.0
648
100.0
278
100.0
Percentage of Total Businesses:
90.3
6.8
2.9
Total Farms by
Farms by Tract & Revenue Size
Tract
Less Than or = $1 Million
Over $1 Million
Revenue Not Reported
#
%
#
%
#
%
#
%
Low-income
3
1.3
3
1.3
0
0.0
0
0.0
Moderate-income
47
19.6
44
18.7
2
100.0
1
33.3
Middle-income
116
48.3
115
48.9
0
0.0
1
33.3
Upper-income
74
30.8
73
31.1
0
0.0
1
33.3
Unknown-income
0
0.0
0
0.0
0
0.0
0
0.0
Total Assessment Area
240
100.0
235
100.0
2
100.0
3
100.0
Percentage of Total Farms:
97.9
.8
1.3
Based on 2011 D&B information according to 2000 Census Boundaries.
Bank of Texas CRA Performance Evaluation Midland, Texas January 22, 2013
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Income Characteristics: As of the 2000 census, there were 31,158 families in the assessment area, about 10.3% of which live below the poverty level. The poverty rate is slightly below the 12% statewide poverty level. The Midland MSA contains 27 census tracts comprised of two low-income (7.4%), six moderate-income (22.2%), eleven middle-income (40.7%), and eight upper-income (29.6%) tracts. Approximately 21% of the families are low-income, 19% are moderate-income, 19% are middle-income, and 41% are upper-income. The Midland MSA median family income for 2011 was $66,000 as depicted in the table below.
Housing: According to the 2000 census, there were 48,060 housing units in the assessment area. Almost 62% of housing units are owner-occupied. Of the owner-occupied housing units, 4.5% are located in low-income census tracts, 18.4% in moderate-income, almost 44.7% in middle-income, and 32.4% in upper-income census tracts. The owner-occupancy rate is slightly above the state average of 58%, with 62% of Midland MSA housing units being owner-occupied, 27% rental, and 11% vacant. Housing is more affordable than the state average based on the 2011 Texas Housing Affordability Index1 (THAI) of 2.18 versus the State index of 2.43. Just over one percent of the assessment area’s population lives in college dormitories, other group quarters, nursing homes, and correctional facilities. Labor, Employment, and Economic Characteristics: Oil and gas production, healthcare, and education are the primary industries in the community. The Midland area regularly supplies more than 60% of all oil and gas produced in Texas, and is home to more than 20% of the nation’s oil reserves. Major area employers include the Midland Independent School District, Midland Memorial hospital, the City of Midland, Midland College, and Warren Equipment Companies. The following table provides unemployment rates for the state of Texas and the assessment area.
1 The Texas Housing Affordability Index (THAI) is an index score, which is calculated by the Texas Real Estate Center at Texas A&M University. Researchers first calculate the income required to qualify for a conventional 80/20, 30-year home loan to purchase a home at the median price for the area, based on the prevailing area interest rate. The index score is computed by dividing median family income for the area by the required income to purchase a median-priced home. An index score of more than 1 means that homes are relatively affordable in the area, and households of median income should be able to qualify to buy a median-priced home with ease and have more income left over for other purchases.
INCOME LEVEL 2011 MIDLAND MSA Median Income $66,000 Low-income $0>$33,000 Moderate-income $33,000>$52,800 Middle-income $52,800>$79,200 Upper-income $79,200 and up
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According to 2011 Dun & Bradstreet data, there were approximately 9,569 business establishments in the assessment area, with just over 90% reporting gross annual revenues of $1 million or less. Approximately 5% of small businesses were located in low-income census tracts, 2% in moderate-income census tracts, 39% in middle-income census tracts, and 32% in upper-income census tracts. The MSA has one of the state’s lowest 2011 annual unemployment rates at 4.4%, well below the state average of 7.9%. Community Contacts and Credit Needs: Contact was made with a community leader working in small business development. The contact stated that the credit needs in the community include small business lending. In addition, there are opportunities for financial institutions to participate in reinvestment activities such as the Small Business Administration’s 504 lending program. DESCRIPTION OF EL PASO MSA The El Paso MSA consists solely of El Paso County. The 2011 estimated population for the assessment area is approaching 821,000. The assessment area population grew 20.8% between 2000 and 2011. The city of El Paso, population 649,121, is the county seat. Other municipalities in the county include Horizon City and Socorro. As of the assessment date, the bank operated one retail branch in the assessment area. The El Paso branch contained $22.4 million in deposits as of June 30, 2012. The bank ranks 17th in deposit market share out of 18 FDIC-insured financial institutions operating in the El Paso banking market. The deposits in the bank’s one branch represented 0.34% of the total deposits in FDIC-insured financial institutions. Wells Fargo, N.A. dominates the market, with approximately 22% of total deposits, followed by JP Morgan Chase Bank, N.A. and Bank of America, N.A. Demographic and economic information impacting the bank’s performance context are discussed below. Information was obtained from publicly available sources including the U.S. Department of Commerce’s Bureau of the Census, 2000; the U.S. Department of Labor; the U.S. Department of Housing and Urban Development (HUD); Dun & Bradstreet; and the Texas Workforce Commission. The following table details selected characteristics of the assessment area.
UNEMPLOYMENT RATES FOR YEARS 2010-2011 (NOT SEASONALLY ADJUSTED)
Area 2010 2011 United States 9.6% 8.9% Texas State 8.2% 7.9% Midland MSA 5.3% 4.4%
Bank of Texas CRA Performance Evaluation Midland, Texas January 22, 2013
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Combined Demographics Report
Assessment Area(s): El Paso
Income Categories
Tract Distribution
Families by Tract Income
Families < Poverty Level as % of
Families by Tract
Families by Family Income
#
%
#
%
#
%
#
%
Low-income
8
6.3
5,527
3.3
3,243
58.7
37,070
22.2
Moderate-income
41
32.5
49,573
29.6
15,733
31.7
29,243
17.5
Middle-income
41
32.5
56,292
33.7
10,756
19.1
31,667
18.9
Upper-income
36
28.6
55,884
33.4
4,532
8.1
69,296
41.4
Unknown-income
0
0.0
0
0.0
0
0.0
0
0.0
Total Assessment Area
126
100.0
167,276
100.0
34,264
20.5
167,276
100.0
Housing
Housing Types by Tract
Units by
Owner-Occupied
Rental
Vacant
Tract
#
%
%
#
%
#
%
Low-income
8,615
1,233
0.9
14.3
6,470
75.1
912
10.6
Moderate-income
66,259
35,665
26.7
53.8
25,772
38.9
4,822
7.3
Middle-income
73,165
46,621
34.9
63.7
22,301
30.5
4,243
5.8
Upper-income
76,408
50,077
37.5
65.5
21,883
28.6
4,448
5.8
Unknown-income
0
0
0.0
0.0
0
0.0
0
0.0
Total Assessment Area
224,447
133,596
100.0
59.5
76,426
34.1
14,425
6.4
Total Businesses by
Businesses by Tract & Revenue Size
Tract
Less Than or = $1 Million
Over $1 Million
Revenue Not Reported
#
%
#
%
#
%
#
%
Low-income
2,118
7.0
1,834
6.7
194
12.0
90
6.7
Moderate-income
8,379
27.7
7,445
27.3
544
33.7
390
29.0
Middle-income
8,393
27.7
7,647
28.0
387
24.0
359
26.7
Upper-income
11,372
37.6
10,375
38.0
489
30.3
508
37.7
Unknown-income
0
0.0
0
0.0
0
0.0
0
0.0
Total Assessment Area
30,262
100.0
27,301
100.0
1,614
100.0
1,347
100.0
Percentage of Total Businesses:
90.2
5.3
4.5
Total Farms by
Farms by Tract & Revenue Size
Tract
Less Than or = $1 Million
Over $1 Million
Revenue Not Reported
#
%
#
%
#
%
#
%
Low-income
6
2.9
6
3.0
0
0.0
0
0.0
Moderate-income
89
43.0
81
41.1
8
88.9
0
0.0
Middle-income
46
22.2
45
22.8
1
11.1
0
0.0
Upper-income
66
31.9
65
33.0
0
0.0
1
100.0
Unknown-income
0
0.0
0
0.0
0
0.0
0
0.0
Total Assessment Area
207
100.0
197
100.0
9
100.0
1
100.0
Percentage of Total Farms:
95.2
4.3
.5
Based on 2011 D&B information according to 2000 Census Boundaries.
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Income Characteristics: As of the 2000 census, the El Paso MSA contains 126 census tracts comprised of eight low-income (6.3%), 41 moderate-income (32.5%), 41 middle-income (32.5%), and 36 upper-income (28.6%) tracts. Twenty-two percent of the families are low-income, 17% are moderate-income, about 19% are middle-income, and almost 42% are upper-income. The 20.5% of families living below the poverty rate is far above the state average at 12%. The El Paso MSA median family income for 2011 was $41,100 as depicted in the table below. Housing: According to the 2000 census, there were 224,447 housing units in the assessment area. Of the owner-occupied housing units, 0.9% are located in the low-income census tracts, 26.7% are in moderate-income, 3.9% are in middle-income, and 37.5% are in upper-income census tracts. At 59.5%, the home ownership rate is slightly above the state average of 58%. Approximately 34% of the housing units are rental, and 6% are vacant. The median home price in 2010 was approximately $91,000. Housing is more affordable than the state average based on the 2011 THAI of 1.92 versus the State index of 2.5. Almost 2% of the assessment area’s population lives in college dormitories, other group quarters, nursing homes, and correctional facilities. Labor, Employment, and Economic Characteristics: Manufacturing, tourism, education, and the service sector are the primary industries in the community. Additionally, the military and certain federal government agencies have a major presence in the area. El Paso is home to Fort Bliss, which is the U.S. Army’s second largest installation. Major area employers include Fort Bliss, El Paso Independent School District, Ysleta Independent School District, and the City of El Paso. The following table provides unemployment rates for the state of Texas and the assessment area.
UNEMPLOYMENT RATES FOR YEARS 2010-2011 (NOT SEASONALLY ADJUSTED)
Area 2010 2011 United States 9.6% 8.9% Texas State 8.2% 7.9% El Paso MSA 9.8% 10.3%
INCOME LEVEL 2011 EL PASO MSA Median Income $41,100 Low-income $0> $20,550 Moderate-income $20,550>$32,880 Middle-income $32,880>$49,320 Upper-income $49,320 and up
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According to 2011 Dun & Bradstreet data, there were approximately 30,262 business establishments in the assessment area, with just over 90% reporting gross annual revenues of $1 million or less. Almost seven percent of small businesses were located in the low-income census tract, 27% in moderate-income census tracts, 28% in middle-income census tracts, and 38% in upper-income census tracts. The MSA has one of the state’s highest 2011 annual unemployment rates at 10.3%, above the state average of 7.9%. Community Contacts and Credit Needs: Contact was made with community leaders working in economic development and small business development. These contacts stated that the credit needs in the community include small dollar loans – particularly $50,000 and less, a willingness to make riskier loans, and flexible lending standards. DESCRIPTION OF DICKENS/KENT/STONEWALL COUNTIES This assessment area consists of the non-metropolitan counties of Dickens, Kent, and Stonewall. The 2011 estimated population for the three counties is nearly 5,000. The assessment area’s population declined 0.9% between 2010 and 2011. The city of Dickens is the largest city and is the county seat of Dickens County. Jayton is the largest city and county seat in Kent County. Aspermont is the largest city and county seat of Stonewall County. Each of the counties contain only one census tract. The three tracts are middle-income and designated as “distressed.” A nonmetropolitan middle-income geography is 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, (2) a poverty rate of 20% or more, or (3) a population loss of 10% or more between the previous and most recent decennial census or a net migration loss of 5% or more over the five year period preceding the most recent census. According to the Federal Financial Institution Examination Council (FFIEC) Dickens County is distressed due to poverty, and Kent and Stonewall Counties are distressed due to population loss. The three counties are also designated as underserved. A nonmetropolitan middle-income geography is designated as underserved if it meets criteria for population size, density, and dispersion that indicate the area’s population is sufficiently small, thin, and distant from a population center and that the census tract is likely to have difficulty financing the fixed costs of meeting essential community needs. As of the assessment date, the bank operated one retail branch in Jayton, Texas. The Dickens/Kent/Stonewall assessment area branch contained $16.7 million in deposits at June 30, 2012. The bank ranks 3rd in deposit market share out of three FDIC-insured financial institutions operating in the Dickens/Kent/Stonewall banking market. The deposits in the bank’s one branch represented approximately 17% of the total deposits in FDIC-insured financial institutions. Spur Security Bank has almost 42% of market share, and The First National Bank of Aspermont has roughly 41% of the market. Demographic and economic information impacting the bank’s performance context are discussed below. Information was obtained from publicly available sources including the U.S. Department of Commerce’s Bureau of the Census, 2000; the U.S. Department of Labor; the U.S. Department
Bank of Texas CRA Performance Evaluation Midland, Texas January 22, 2013
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of Housing and Urban Development (HUD); Dun & Bradstreet; and the Texas Workforce Commission. The following table details selected characteristics of the assessment area.
Combined Demographics Report
Assessment Area(s): Dickens Co, Kent, Stonewall Co
Income Categories
Tract Distribution
Families by Tract Income
Families < Poverty Level as % of
Families by Tract
Families by Family Income
#
%
#
%
#
%
#
%
Low-income
0
0.0
0
0.0
0
0.0
290
21.2
Moderate-income
0
0.0
0
0.0
0
0.0
271
19.8
Middle-income
3
100.0
1,367
100.0
184
13.5
336
24.6
Upper-income
0
0.0
0
0.0
0
0.0
470
34.4
Unknown-income
0
0.0
0
0.0
0
0.0
0
0.0
Total Assessment Area
3
100.0
1,367
100.0
184
13.5
1,367
100.0
Housing
Housing Types by Tract
Units by
Owner-Occupied
Rental
Vacant
Tract
#
%
%
#
%
#
%
Low-income
0
0
0.0
0.0
0
0.0
0
0.0
Moderate-income
0
0
0.0
0.0
0
0.0
0
0.0
Middle-income
2,855
1,598
100.0
56.0
448
15.7
809
28.3
Upper-income
0
0
0.0
0.0
0
0.0
0
0.0
Unknown-income
0
0
0.0
0.0
0
0.0
0
0.0
Total Assessment Area
2,855
1,598
100.0
56.0
448
15.7
809
28.3
Total Businesses by
Businesses by Tract & Revenue Size
Tract
Less Than or = $1 Million
Over $1 Million
Revenue Not Reported
#
%
#
%
#
%
#
%
Low-income
0
0.0
0
0.0
0
0.0
0
0.0
Moderate-income
0
0.0
0
0.0
0
0.0
0
0.0
Middle-income
304
100.0
267
100.0
11
100.0
26
100.0
Upper-income
0
0.0
0
0.0
0
0.0
0
0.0
Unknown-income
0
0.0
0
0.0
0
0.0
0
0.0
Total Assessment Area
304
100.0
267
100.0
11
100.0
26
100.0
Percentage of Total Businesses:
87.8
3.6
8.6
Total Farms by
Farms by Tract & Revenue Size
Tract
Less Than or = $1 Million
Over $1 Million
Revenue Not Reported
#
%
#
%
#
%
#
%
Low-income
0
0.0
0
0.0
0
0.0
0
0.0
Moderate-income
0
0.0
0
0.0
0
0.0
0
0.0
Middle-income
67
100.0
66
100.0
0
0.0
1
100.0
Upper-income
0
0.0
0
0.0
0
0.0
0
0.0
Unknown-income
0
0.0
0
0.0
0
0.0
0
0.0
Total Assessment Area
67
100.0
66
100.0
0
.0
1
100.0
Percentage of Total Farms:
98.5
.0
1.5
Based on 2011 D&B information according to 2000 Census Boundaries.
Bank of Texas CRA Performance Evaluation Midland, Texas January 22, 2013
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Income Characteristics: As of the 2000 census, the assessment area contained only three middle-income census tracts. Approximately, 21% of families are low-income, about 20% are moderate-income, almost 25% are middle-income, and 34% are upper-income. The 13.46% poverty rate is slightly above the state average at 12%. The non-MSA median family income for 2011 was $48,600 as depicted in the table below. Housing: According to the 2000 census, there were 2,855 housing units in the assessment area. The home ownership rate is slightly below the state average of 58%, with 56% of assessment area housing units being owner-occupied. Almost 16% of the housing units are rental and 28% are vacant. Housing is more affordable than the state average based on the 2011 THAI of 1.65 for Dickens, 1.33 for Kent, and 0.93 for Stonewall versus the State index of 2.5. Just over 9% of the assessment area’s population lives in correctional facilities, while approximately 2% live in nursing homes. Labor, Employment, and Economic Characteristics: Agriculture and oil production are the major industries. According to Dun & Bradstreet, there were approximately 304 business establishments in the assessment area as of 2011, with 88% reporting gross annual revenues of $1 million or less. Dickens County has one of the state’s highest 2011 annual unemployment rates at 13.6%, above the state average of 7.9%, while Kent and Stonewall counties were below the state average at 6.0% and 5.0%, respectively. The following table provides unemployment rates for the state of Texas and the assessment area.
UNEMPLOYMENT RATES FOR YEARS 2010- 2011 (NOT SEASONALLY ADJUSTED)
Area 2010 2011 United States 9.6% 8.9% Texas State 8.2% 7.9% Dickens County 10.1% 13.6% Kent County 5.9% 6.0% Stonewall County 5.1% 5.0%
Community Contacts and Credit Needs: No community contacts were made in this assessment area.
INCOME LEVEL 2011 NON MSA/MD Median Income $48,600 Low-income $0> $24,300 Moderate-income $24,300>38,800 Middle-income $38,800>58,320 Upper-income $58,320 and up
Bank of Texas CRA Performance Evaluation Midland, Texas January 22, 2013
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CONCLUSIONS WITH RESPECT TO PERFORMANCE TESTS LOAN-TO-DEPOSIT RATIO The general purpose of CRA is to encourage banks to meet the credit needs in their assessment areas while operating in a safe and sound manner. To gain an understanding of the bank’s lending activity, the net LTD ratio is reviewed to approximate the credit demand of the assessment area and assess the bank’s willingness to meet the community’s demand for credit. The bank’s net LTD ratio is considered reasonable, given the bank’s size and financial condition, the credit needs of the assessment area, and the competitive local banking environment. As of September 30, 2012, the net LTD ratio was 68.4%, and the quarterly average since the previous evaluation was 70.1%. To better understand the bank’s performance in relation to its assessment areas, a comparison of two similarly situated local banks was performed. These banks were chosen for analysis based on their proximity and similar size and structure. The similarly situated banks have net LTD ratios of 72.7% and 75.5% as of September 30, 2012. Their quarterly average net LTD ratios were 69.9% and 77.9%. As noted, the bank’s LTD ratios are in line with its peers and reflect favorably upon the bank’s efforts to meet the credit needs of its community. LENDING IN ASSESSMENT AREA A substantial majority of the bank’s 54 sampled loans were originated inside its assessment areas. The bank extended 45 loans, or 83.3% by number inside its assessment areas, These loans represent $37,965,000 or 79.2% by amount in the assessment areas. This level of lending inside the assessment areas indicates the bank is serving the credit needs of its assessment areas. The remaining analyses will be based on loans made inside the bank’s assessment area. LENDING TO BORROWERS OF DIFFERENT INCOMES AND TO BUSINESSES AND FARMS OF DIFFERENT SIZES The distribution of lending based on revenue levels of the borrowers reflects a reasonable penetration among businesses of different sizes. A majority of the loans were made to businesses with gross annual revenues under $1 million. Data supporting this analysis can be seen in detail in the separate assessment area discussions. GEOGRAPHIC DISTRIBUTION OF LOANS The geographic distribution by the income level of geographies within the assessment areas is reasonable. This conclusion is based on the bank’s performance in each assessment area in comparison to demographic and to the aggregate of lenders that report CRA data. Loans were
Bank of Texas CRA Performance Evaluation Midland, Texas January 22, 2013
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generally made in close proximity to the bank’s branches, and there were no conspicuous gaps or anomalies in the lending patterns. Data supporting this analysis can be seen in detail in the separate assessment area discussions. 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. FAIR LENDING OR OTHER ILLEGAL CREDIT PRACTICES REVIEW No evidence of discriminatory or other illegal credit practices inconsistent with helping to meet community credit needs was identified. The bank is in compliance with the substantive provisions of the anti-discrimination laws and regulations. Established policies and procedures are designed to ensure ongoing compliance with applicable laws and regulations. CONCLUSIONS WITH RESPECT TO PERFORMANCE CRITERIA BY ASSESSMENT AREA MIDLAND MSA ASSESSMENT AREA Performance context issues in the separate assessment areas determined the overall conclusion. Detailed information concerning the bank’s lending in the assessment area can be found in the tables located in Appendix A. LENDING TO BUSINESSES OF DIFFERENT SIZES The distribution of lending based on revenue levels of the businesses reflects a reasonable penetration among businesses of different sizes. To determine the bank’s performance, the bank’s lending is compared to the assessment area demographics. Because of its size, the bank is not required to report small business loan data. However, to obtain a sense of loan demand, the bank’s lending is compared to the aggregate data of banks that report small business loan data annually. Based on the business demographic data, there are 9,569 businesses within the assessment area. Of this number, approximately 98% of the businesses reported revenues of less than or equal to $1 million. The bank made 13 of the sampled commercial loans in this assessment area. Six loans (46.2%) totaling $5.4 million the loans were to businesses with gross annual revenues of $1 million or less. Three loans (23.1%) totaling $3.8 million were made to start-up businesses, where the bank relied upon pro forma income statements. The bank made four loans (30.8%) totaling $8.3 million to businesses of greater than $1 million. The bank’s performance compares favorably to the aggregate lenders. The aggregate lenders made approximately 35% of the number of loans originated to small businesses.
Bank of Texas CRA Performance Evaluation Midland, Texas January 22, 2013
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Another way to gauge the bank’s small business lending performance is to review the data by loan amount. Small businesses2 typically require smaller dollar credits. The bank made five loans (83.3%) totaling $339 thousand in amounts under $100,000 to small businesses. GEOGRAPHIC DISTRIBUTION OF LOANS The geographic distribution by the income level of geographies within the assessment area is reasonable. The Midland MSA includes only two low-income census tracts, only 5% of businesses in the assessment area are located in those tracts, and aggregate lenders reported 4.5% of loans originated in those tracts. The bank originated none of its 13 sampled loans in low-income census tracts. The bank made five loans for $14.8 million, or 38.5% of the number of sampled loans, in moderate-income census tracts. This compares favorably to the percent of small businesses located in moderate-income tracts and the volume of loans originated by the aggregate lenders in those tracts. The bank made three loans totaling $380 thousand, or 23.1% of the number of sampled loans, in middle-income census tracts and five loans totaling $2.3 million, or 38.5% of the sampled loans, in upper-income census tracts. While the bank’s performance in low-income census tracts compared unfavorably to the demographics and to aggregate lenders, the performance in moderate-income census tracts exceeded the demographics and aggregate lenders. EL PASO ASSESSMENT AREA Detailed information concerning the bank’s lending in the assessment area can be found in the tables located in Appendix B. LENDING TO BUSINESSES OF DIFFERENT SIZES The distribution of lending based on revenue levels of the borrowers reflects a reasonable penetration among businesses of different sizes. Based on the business demographic data, there are 30,262 businesses within the assessment area. Of this number, just over 95% of the businesses reported revenues of less than or equal to $1 million. The bank made 14 loans for a total of $5.4 million, or 60.9% of the 23 commercial loans sampled, to businesses with gross annual revenues of $1 million or less, with six totaling $13.2 million, or 26.1% of the number of sampled loans, to businesses of greater than $1 million in revenues. Additionally, three totaling $1.7 million, or 13% of the loans of sampled loans, in the El Paso assessment area were made to start-up businesses with pro forma income. The bank’s performance compares favorably to the aggregate lenders. The aggregate lenders made only 45.1% of their loans to small businesses. Another way to gauge the bank’s small business lending performance is to review the data by loan amount. Small businesses typically require smaller dollar credits. The bank made five loans (35.7%) totaling $280 thousand in amounts under $100,000 to small businesses. 2 Small businesses are those with gross annual revenues of $1million or less.
Bank of Texas CRA Performance Evaluation Midland, Texas January 22, 2013
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GEOGRAPHIC DISTRIBUTION OF LOANS The geographic distribution by the income level of geographies within the assessment area is reasonable. The El Paso MSA includes eight low-income census tracts, with almost seven percent of small businesses in the assessment area located in those tracts, and aggregate lenders reported 7.9% of loans originated in low-income census tracts. The bank made four loans totaling $2.3 million, or 17.4% of the number of sampled loans, in low-income census tracts. Eight loans totaling $5.7 million, or 34.8% of the number of sampled loans, were originated in moderate-income census tracts. The bank originated two loans totaling $3.6 million, or 8.7% of the number of sampled loans, in middle-income census tracts, and nine loans for $8.8 million, or 39.1% of the number of sampled loans, in upper-income census tracts. The bank’s performance in moderate-income census tracts exceeds the demographics, with 27.7% of businesses being located in moderate-income census tracts, and slightly exceeds the aggregate banks’ performance, with 26.3% of loans in moderate-income census tracts. Aggregate banks exceeded the bank’s performance in middle-income census tracts and the bank was in line with aggregate lenders in upper-income census tracts. CONCLUSIONS WITH RESPECT TO PERFORMANCE TESTS IN KENT/DICKENS/STONEWALL ASSESSMENT AREA The bank’s performance in the assessment area received a limited review and is considered to be generally consistent with the overall performance in the other assessment areas. The bank’s market share and branch presence in the Kent/Dickens/Stonewall Counties market is limited, containing just 12% of the bank’s total deposits and seven or 17% of loans sampled during this analysis. Therefore, the following conclusion regarding performance did not weigh heavily in the overall rating. Facts and data reviewed can be found in Appendix C.
ASSESSMENT AREA LENDING INSIDE ASSESSMENT AREA
BORROWER INCOME GEOGRAPHIC DISTRIBUTION
Kent/Dickens/Stonewall Consistent Consistent Not rated
Bank of Texas CRA Performance Evaluation Midland, Texas January 22, 2013
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Appendix A Loan Distribution Tables for Midland Assessment Area
Bank of Texas CRA Performance Evaluation Midland, Texas January 22, 2013
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Small Business Loan Distribution Table Assessment Area: Midland MSA
Aggregate Lenders CRA Loan Distribution Table Small Business Aggregate Lenders: Midland MSA
By Revenue Total $1 Million or Less 6 46.2% 5,339 30.5% Over $1 Million 4 30.8% 8,310 47.5% Not Known 3 23.1% 3,830 21.9% Total 13 100.0% 17,479 100.0%
By Loan Size $100,000 or less 6 46.2% 369 2.1% $100,001 - $250,000 0 0.0% 0 0.0% $250,001 - $1 Million (Bus)-$500k (Farm) 2 15.4% 1,100 6.3% Over $1 Million (Bus)-$500k (Farm) 5 38.5% 16,010 91.6% Total 13 100.0% 17,479 100.0%
By Loan Size and Revenue $1 Million or Less $100,000 or less 5 83.3% 339 6.3% $100,001 - $250,000 0 0.0% 0 0.0% $250,001 - $1 Million (Bus)-$500k (Farm) 0 0.0% 0 0.0% Over $1 Million (Bus)-$500k (Farm) 1 16.7% 5,000 93.7% Total 6 100.0% 5,339 100.0%
Bank of Texas CRA Performance Evaluation Midland, Texas January 22, 2013
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Appendix B Loan Distribution Tables for El Paso Assessment Area
Bank of Texas CRA Performance Evaluation Midland, Texas January 22, 2013
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Small Business Loan Distribution Table Assessment Area: El Paso
Aggregate Lenders CRA Loan Distribution Table Small Business Aggregate Lenders: El Paso MSA
SMALL BUSINESS
# % $(000s) % By Tract Income Low 4 17.4% 2,288 11.3% Moderate 8 34.8% 5,684 28.0% Low/Moderate Total 12 52.2% 7,972 39.3% Middle 2 8.7% 3,550 17.5% Upper 9 39.1% 8,771 43.2% Total 23 100.0% 20,293 100.0% By Revenue Total $1 Million or Less 14 60.9% 5,432 26.8% Over $1 Million 6 26.1% 13,200 65.0% Not Known 3 13.0% 1,661 8.2% Total 23 100.0% 20,293 100.0% By Loan Size $100,000 or less 6 26.1% 380 1.9% $100,001 - $250,000 6 26.1% 1,032 5.1% $250,001 - $1 Million (Bus)-$500k (Farm) 6 26.1% 3,471 17.1% Over $1 Million (Bus)-$500k (Farm) 5 21.7% 15,410 75.9% Total 23 100.0% 20,293 100.0% By Loan Size and Revenue $1 Million or Less $100,000 or less 5 35.7% 280 5.2% $100,001 - $250,000 5 35.7% 882 16.2% $250,001 - $1 Million (Bus)-$500k (Farm) 2 14.3% 1,160 21.4% Over $1 Million (Bus)-$500k (Farm) 2 14.3% 3,110 57.3% Total 14 100.0% 5,432 100.0%
By Revenue Total $1 Million or Less 13 28.9% 186 35.0% 11 91.7% 1,137 69.5%
By Loan Size $100,000 or Less 45 100.0% 531 100.0% 7 58.3% 303 18.5% $100,001 - $250,000 0 0.0% 0 0.0% 3 25.0% 480 29.3% $250,001 - $1 Million (Bus)-$500k (Farm) 0 0.0% 0 0.0% 2 16.7% 854 52.2% Over $1 Million (Bus)-$500k (Farm) 0 0.0% 0 0.0% 0 0.0% 0 0.0% Total 45 100.0% 531 100.0% 12 100.0% 1,637 100.0%
SMALL BUSINESS
# % $(000s) % By Tract Income
Middle 9 100.0% 194 100.0% Total 9 100.0% 194 100.0%
By Revenue Total $1 Million or Less 9 100.0% 194 100.0% Total 9 100.0% 194 100.0%
By Loan Size $100,000 or less 9 100.0% 194 100.0% Total 9 100.0% 194 100.0%
By Loan Size and Revenue $1 Million or Less $100,000 or less 9 100.0% 194 100.0% Total 9 100.0% 194 100.0%
Bank of Texas CRA Performance Evaluation Midland, Texas January 22, 2013
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GLOSSARY
Aggregate lending: The number of loans originated and purchased by all reporting lenders in specified income categories as a percentage of the aggregate number of loans originated and purchased by all reporting lenders in the metropolitan area/assessment area. Census tract: A small, relatively permanent statistical subdivision of a county. Census tract boundaries do not cross county lines; however, they may cross the boundaries of metropolitan statistical areas. Census tracts average about 4,000 inhabitants, and their physical size varies widely depending upon population density. Census tracts are designed to be homogeneous with respect to the population characteristics, economic status, and living conditions to allow for statistical comparisons. Community development: All agencies have adopted the following language: Affordable housing (including multifamily rental housing) for low- or moderate-income individuals; community services targeted to low- or moderate-income individuals; activities that promote economic development by financing businesses or farms that meet the size eligibility standards of the Small Business Administration’s Development Company or Small Business Investment Company programs (13 CFR 121.301) or have gross annual revenues of $1 million or less; or activities that revitalize or stabilize low- or moderate-income geographies. Effective September 1, 2005, the Board of Governors of the Federal Reserve System, Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation have adopted the following additional language as part of the revitalize or stabilize definition of community development. Activities that revitalize or stabilize-
i. Low-or moderate-income geographies; ii. Designated disaster areas; or
iii. Distressed or underserved nonmetropolitan middle-income geographies designated by the Board, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency, based on- a) Rates of poverty, unemployment, and population loss; or b) Population size, density, and dispersion. Activities that revitalize and stabilize geographies designated
based on population size, density, and dispersion if they help to meet essential community needs, including needs of low- and moderate-income individuals.
Consumer loan(s): A loan(s) to one or more individuals for household, family, or other personal expenditures. A consumer loan does not include a home mortgage, small business, or small farm loan. This definition includes the following categories: motor vehicle loans, credit card loans, home equity loans, other secured consumer loans, and other unsecured consumer loans. 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). 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 income of the applicants; the amount of loan requested; and the disposition of the application (for example, approved, denied, or 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 refinancing of home improvement and home purchase loans.
Bank of Texas CRA Performance Evaluation Midland, Texas January 22, 2013
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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. 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. 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. 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 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 nonmortgage, commercial loans. Small loan(s) to farm(s): A loan included in ‘loans to small farms’ as defined in the instructions for preparation of the 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.
