PUBLIC DISCLOSURE DECEMBER 27, 2007 COMMUNITY REINVESTMENT ACT PERFORMANCE EVALUATION LANDMARK CREDIT UNION CERT #68050 131 ASHLAND STREET NORTH ADAMS, MA 01247 DIVISION OF BANKS ONE SOUTH STATION BOSTON, MA 02110 NOTE: This evaluation is not, nor should it be construed as, an assessment of the financial condition of this institution. The rating assigned to this institution does not represent an analysis, conclusion or opinion of the Division of Banks concerning the safety and soundness of this financial institution. GENERAL INFORMATION The Community Reinvestment Act (“CRA”) requires the Division of Banks (“Division”) to use its authority when examining financial institutions subject to its supervision, to assess the institution's record of meeting the needs of its entire assessment area, including low- and moderate-income neighborhoods, consistent with safe and sound operation of the institution. Upon conclusion of such examination, the Division must prepare a written evaluation of the institution's record of meeting the credit needs of its assessment area. This document is an evaluation of the CRA performance of LANDMARK CREDIT UNION (or the “Credit Union”) prepared by the Division, the institution's supervisory agency. INSTITUTION'S CRA RATING: This institution is rated “Satisfactory” Landmark Credit Union’s CRA rating is based on five performance criteria of a small institution, which are evaluated within the institution’s performance context. The Credit Union’s satisfactory rating is based on: (1) an average net loan to deposit ratio of 64.8 percent; (2) a substantial majority of mortgage loans was granted within its assessment areas; (3) a more than reasonable lending distribution among borrowers of different income levels for both mortgage and consumer loans; (4) reasonably distributed lending throughout the census tracts; and (5) Fair lending policies and procedures were found to be satisfactory. 1 PERFORMANCE CONTEXT Description of Institution Landmark Credit Union was founded in 1940 to serve the employees of Sprague Electric Company in North Adams, Massachusetts. In the mid-1980s, Sprague Electric began downsizing and finally ceased operations in 1996. The Credit Union over the years expanded its membership to include other Sprague Electric facilities and a diverse group of local employers. The institution’s name officially changed in January 1996 to better reflect its membership. Landmark Credit Union is located at 131 Ashland Street, North Adams. This full-service office provides a drive-up teller window and drive-up 24-hour ATM service. Additionally, the Credit Union operates a walk-up ATM during lobby hours and two freestanding ATMs, one each located at North Adams Regional Hospital and at Allegro Microsystems in Worcester. All the Credit Union’s ATMs are part of the NYCE, CIRRUS, and TX networks. The machines, however, only dispense cash. As of September 30, 2007, total assets were $29.7 million of which loans totaled $18.8 million, or 63.3 percent of total assets. Table 1 depicts the composition of the Credit Union’s loan portfolio. Table 1 Loan Portfolio as of September 30, 2007 Types of Loans $(in Thousands) % of Total Loans Residential Real Estate 1-4 Family Mortgages 11,502 61.2 Home Equity Lines/Loans 2,266 12.1 Consumer Loans Personal Unsecured 1,182 6.3 New Auto Loans 1,905 10.1 Used Auto Loans 1,649 8.8 All Other Loans 283 1.5 Total 18,798 100.0% Source: National Credit Union Administration Quarterly 5300 Call Reports First mortgage loans secured by 1-4 family dwellings represent the majority (61.2%) of the loan portfolio. The second largest segment (18.9%) of the loan portfolio includes new and used auto loans. Unsecured personal, home equity lines/loans, and all other loans comprise the remaining portion of the loan portfolio. The Division last conducted a CRA examination of Landmark Credit Union on January 14, 2002. This examination resulted in a Satisfactory CRA rating. Description of Assessment Area The Division’s CRA regulation requires that each financial institution delineate one or more assessment areas within which the institution’s record of helping to meeting community credit needs is evaluated. The Division’s CRA regulation further states that “a credit union whose membership by-law provisions are not based on residence may delineate its membership as its assessment area.” 2 PERFORMANCE CONTEXT (CONTINUED) Landmark Credit Union’s by-law provisions (revised on February 2003) state that membership shall be limited to: (a) all current and former members; (b) all persons who live, work or attend school in North Berkshire County, including Adams, Cheshire, Clarksburg, Florida, North Adams, Savoy and Williamstown; (c) the immediate family members of the prior groups; and (d) all current and future employees of Allegro Microsystems in Worcester, MA. For the purpose of this evaluation, Landmark Credit Union will be considered to have two assessment areas. The first assessment area (Assessment Area Number One) is defined geographically based on the municipalities of Adams, Cheshire, Clarksburg, Florida, North Adams, Peru, Savoy, Williamstown and Windsor. The CRA regulation requires that a geographically defined assessment area consist only of whole geographies/census tracts. Consequently, the towns of Windsor and Peru were added since they share a census tract with Clarksburg, Florida and Savoy. The second assessment area (Assessment Area Number Two) is defined based on employment in these municipalities and with Allegro Microsystems, Worcester. Demographic and Economic Data for Assessment Area One According to the 2000 U.S. Census, Landmark Credit Union’s Assessment Area Number One consists of fourteen census tracts. The distribution of these fourteen census tract geographies are as follows: moderate-income tracts (5); middle-income tracts (8); and upper-income tracts (1). There are no low-income census tracts located in the assessment area. By definition, the 2000 U.S. Census area median Family Household Income (FHI) within the census tracts is defined as follows: low-income is less than 50% of area median FHI; moderate-income is 50-79% of area median FHI; middle income is 80%-119% of area median FHI; and upper-income is 120% or greater of area median FHI. In contrast to the prior CRA public evaluation where all of the towns were in non-MSAs, the current assessment is situated in the Pittsfield, MA Metropolitan Statistical Area (“MSA”). The Pittsfield MSA area median incomes were $60,450 and $61,200 in 2005 and 2006, respectively. The assessment area’s total population is 40,078 who comprise 16,290 households of which 62.9 percent are family households. The five moderate-income tract geographies include 14,213 residents representing 35.5 percent of the total population and 39.5 percent of total households. The eight middle-income tract geographies include 21,172 residents representing a majority of the area’s total population (52.8%) and households (54.1%). Lastly, the sole upper-income tract geography includes 4,693 residents representing 11.7 percent of the total population and 6.4 percent of the total households. Table 2 provides the assessment area’s distribution of households and housing units by census tract income levels. 3 PERFORMANCE CONTEXT (CONTINUED) Table 2. Housing Characteristics by Census Tract Income Category Geographic Distribution by Percentage Income Census Households Housing Owner- Rental- Vacant Median Category Tracts Units Occupied Occupied Units Home Units Value Moderate 35.7 39.5 39.5 30.9 55.1 40.2 $90,581 Middle 57.1 54.1 53.9 62.2 39.4 51.7 $106,882 Upper 7.2 6.4 6.6 6.9 5.5 8.0 $229,800 Total or 100.0 100.0 100.0 58.2 31.4 10.4 111,209 Median Source: 2000 U.S. Census data Housing stock within the assessment area is primarily 1-4 family residential units. Based on the 2000 U.S. Census data, the median home value of the assessment area is $111,209, while the median rental income is $436. The median age of the housing stock is 51 years. A more recent figure was obtained using figures from the Warren Group, publishers of the Bankers & Tradesman with market statistics through December 2007. According to this publication, the median selling price for a home in the assessment area was $129,900. Prices in the assessment area ranged from a low of $79,500 in the town of Florida to a high of $235,000 in the town of Williamstown. In 2006, the top three mortgage lenders within the Credit Union’s Assessment Area One were: (1) Greylock Federal Credit Union; (2) Adams Co-operative Bank; and (3) Beneficial Mortgage Company. Assessment Area Number Two The second assessment area (Assessment Area Number Two) is defined on a non- geographic basis by the Credit Union’s membership by-laws. Assessment Area two is defined as all eligible members including non-residents employed in the North Berkshire County municipalities and employees of Allegro Microsystems, Worcester, MA. The Worcester MSA area median incomes or Family Household Incomes (FHI) were $70,400 and $71,700 in 2005 and 2006, respectively. 4 PERFORMANCE CRITERIA 1. LOAN-TO-SHARE ANALYSIS This first criterion evaluates the level and trend of the Credit Union’s net loan-to-share ratio. The average net loan-to-share ratio is 64.8 percent from March 31, 2005 through September 30, 2007. Landmark Credit Union’s performance is considered reasonable given the membership’s credit needs and the institution’s lending capacity. Graph 1 depicts the loan-to-share ratios for the quarters reviewed. The dotted line represents the quarterly average ratio. Graph 1 Landmark Credit Union Net Loans-to-Deposits Ratio (%) March 2005 - September 2007 80.0% 71.3% 73.5% 72.5% 69.6% 70.1% 70.0% 62.9% 60.7% 59.0% 60.4% 57.3% Average Net LTD Ratio (%) 60.0% 55.1% Ratio: 64.8% 50.0% 40.0% Ratio 30.0% 20.0% 10.0% 0.0% 05 06 07 7 5 6 '07 '05 '06 05 06 '0 '0 '0 n' n' n' ' ' ar ar ar pt pt pt ec ec Ju Ju Ju Se Se Se M M M D D Time Period (Quarterly) Data Source: National Credit Union Administration Quarterly 5300 Call Reports As Graph 1 depicts, the net loans-to-share ratio fluctuated considerably during the eleven quarters under review. There are no significant patterns or trends; however, there are a few salient data points that are worth mentioning. The minimum ratio of 55.1 percent is observed on June 2005. The maximum ratio of 73.5 percent is recorded on September 2006. In the time period between March 2006 and September 2006, deposits decreased by 18.5 percent, while loan amounts grew by a moderate pace of 4.6 percent. This resulted in a large increase in the net loan-to-share ratio. Graph 2 shows that the fluctuation in the net loan-to-share ratio can be largely attributed to the movement in deposit amounts (the standard deviation of deposits is 3.7 times greater than the standard deviation of net loans). 5 PERFORMANCE CRITERIA (CONTINUED) Graph 2. Landmark Credit Union Net Loans and Deposit Trends March 2005 - September 2007 Net Loans & Deposits ($) 35,000,000 30,000,000 25,000,000 20,000,000 Net Loan Amount 15,000,000 Deposit Amount 10,000,000 5,000,000 0 Jun'07 Jun'06 Jun'05 Sept'07 Sept'06 Mar'07 Sept'05 Mar'06 Dec'06 Mar'05 Dec'05 Time Period (Quarterly) In conclusion, Landmark Credit Union’s average net loan-to-share ratio of 64.8 percent is reasonable and meets the standards for a satisfactory rating given the Credit Union’s capacity to lend, its growth in lending activity and the credit needs of the assessment area. 2. COMPARISON OF CREDIT EXTENDED INSIDE AND OUTSIDE OF THE ASSESSMENT AREA(S) The second performance criterion is based on Landmark Credit Union’s record of lending within Assessment Area One. Landmark Credit Union’s mortgage loan originations for 2005 and 2006 were analyzed to determine the institution’s performance for this criterion. The Credit Union originated 24 mortgage loans in 2005, totaling $2.7 million and 22 mortgage loans in 2006, totaling $2.0 million. Of these, 41 loans totaling $4.2 million dollars were located within the Credit Union’s assessment area. Table 3 details the Credit Union’s lending inside and outside the assessment area. 6 PERFORMANCE CRITERIA (CONTINUED) Table 3 Distribution of Home Mortgage Loans Inside and Outside Assessment Area Year Inside Outside Number of Dollar in Loans Number of Dollars in Loans Loans (000) Loans (000) # % $ % # % $ % 2005 20 83.3% 2,266 85.1% 4 16.7% 396 14.9% 2006 21 95.5% 1,980 97.7% 1 4.5% 47 2.3% Total 41 89.1% 4,246 90.6% 5 10.9% 443 9.4% Source: Landmark Credit Union Mortgage Loan Origination Report Overall, the Credit Union extended a majority of mortgage loans within their assessment area (89.1% by number and 90.6% by dollar volume). In conclusion, the Credit Union’s mortgage lending activity within the assessment area represents a substantial majority. Given the number of loans originated during the assessment period and the nature of the assessment area of the Credit Union this level of penetration would be expected and, consequently, meets the standards for a satisfactory performance. 3. DISTRIBUTION OF CREDIT AMONG DIFFERENT INCOME LEVELS The third performance criterion evaluates the extent to which an institution lends to borrowers of different income levels inside its assessment area(s). The distribution of loans by borrower income levels is based on the area median family income. The borrowers’ income levels are identified as the ratio of the applicant’s income to the area median family income. Table 4 details the Credit Union’s mortgage lending activity by the borrowers’ income levels. Table 4 Distribution of Mortgage Loans by Borrower Income Median Family 2005 2006 Total Family Households # % # % # % Household Income (% of #) Low 22.0 2 10.0 4 19.1 6 14.6 Moderate 21.4 9 45.0 3 14.3 12 29.3 Middle 22.5 4 20.0 7 33.3 11 26.8 Upper 34.1 5 25.0 7 33.3 12 29.3 NA 0.0 0 0.0 0 0.0 0 0.0 Total 100.0 20 100.0 21 100.0 41 100.0 Source: U.S. Census Data, Credit Union Mortgage data 2005-2006 Loans to low income borrowers represented 14.6% of the total number of loans the Credit Union originated during the review period. In addition, loans to borrowers of moderate- income represented 29.3% of the total number of loans. These favorable percentages indicate willingness by the Credit Union to extend credit to borrowers of all income levels. 7 PERFORMANCE CRITERIA (CONTINUED) Consumer loans were also analyzed to determine performance within the assessment area. A sample of 50 consumer loans for each year (2005 and 2006) was randomly selected. Table 5 provides detail on the number of loans by borrower income level. Table 5 Distribution of Consumer Loans by Borrower Income Income 2005 2006 Total Levels # % # % # % Low 14 40.0 14 41.2 28 40.6 Moderate 10 28.5 8 23.5 18 26.1 Middle 8 22.9 9 26.5 17 24.6 Upper 3 8.6 22 8.8 6 8.7 Total 35 100.0 34 100.0 69 100.0 Source: Landmark Credit Union Consumer Loan Sample The consumer loan distribution demonstrates that low- and moderate-income borrowers combined received a majority (66.7%) of the loans extended. Middle-income borrowers received a reasonable portion (24.6%) of loans granted, while loans to upper-income borrowers represented 8.7 percent of the loans analyzed. The consumer loan distribution by borrower income levels depicts a very good distribution given the level of loans granted to low- and moderate-income borrowers. Since these loans are largely extended to individuals, the analysis compares individual incomes to the area median family household income. This comparison skews to some degree the results of the above distribution. However, the above distribution demonstrates that consumer loan originations are representative of the Credit Union’s membership base, particularly low-income and moderate-income borrowers. Based on the above information, Landmark Credit Union’s residential and consumer lending demonstrates a solid distribution of loans granted to all income groups, particularly low and moderate-income borrowers. Consequently, the Credit Union exceeds the standards for satisfactory performance for this criterion. 4. GEOGRAPHIC DISTRIBUTION OF LOANS The fourth performance criterion evaluates the institution’s record of addressing the credit needs of the assessment area. Census tract geographies are defined as either low, moderate, middle, or upper-income. The following table provides details on the distribution of mortgage loans by census tracts. As was previously stated in the performance context, the Credit Union’s assessment area contains no low-income census tracts. 8 PERFORMANCE CRITERIA (CONTINUED) Table 6 Distribution of Mortgage Loans by Census Tract Income Category Census Owner- 2005 2006 Total Tract Occupied Income Housing Level Units (%) # % # % # % Moderate 30.9 5 25.0 9 42.9 14 34.2 Middle 62.2 14 70.0 12 57.1 26 63.4 Upper 6.9 1 5.0 0 0.0 1 2.4 Total 100.0 20 100.0 21 100.0 41 100.0 Source: 2000 U.S. Census Data, Credit Union Mortgage data 2005-2006 As shown in the above table, the Credit Union originated 34.2 percent of its mortgage loans in moderate-income census tracts. This percentage is slightly higher than the 30.9 percent of owner-occupied housing units located there. Overall, the Credit Union’s distribution of mortgage loans remains reasonable, particularly given the assessment area’s housing demographics. The Credit Union’s consumer loan sample was also analyzed to determine the distribution of consumer loans by census tract. The Credit Union originated 42.0 percent of its consumer loans in moderate-income geographies in 2005 and 2006. Please refer to the following table for more information. Table 7 Distribution of Consumer Loans by Census Tract Income Category Census Tract 2005 2006 Total Income Level # % # % # % Moderate 15 42.9 14 41.2 29 42.0 Middle 20 57.1 20 58.8 40 58.0 Upper 0 0.0 0 0.0 0 0.0 Total 35 100.0 34 100.0 69 100.0 Source: Landmark Credit Union’s Consumer Loan Sample Landmark Credit Union’s overall performance for this criterion is reasonable and meets the standards for a satisfactory performance. 5. REVIEW OF COMPLAINTS AND FAIR LENDING POLICIES AND PRACTICES Landmark Credit Union received no CRA related complaints in the period under review. Based upon the review of the Credit Union’s public comment file and its performance relative to fair lending policies and practices, no violations of the anti-discrimination laws and regulations were identified. 9 PERFORMANCE EVALUATION DISCLOSURE GUIDE Massachusetts General Laws Chapter 167, Section 14, as amended, and the Uniform Interagency Community Reinvestment Act (CRA) Guidelines for Disclosure of Written Evaluations, and Part 345 of the Federal Deposit Insurance Corporation’s Rules and Regulations, require all financial institutions to take the following actions within 30 business days of receipt of the CRA evaluation of their institution: 1) Make its most current CRA performance evaluation available to the public; 2) At a minimum, place the evaluation in the institution's CRA public file located at the head office and at a designated office in each assessment area; 3) Add the following language to the institution's required CRA public notice that is posted in each depository facility: "You may obtain the public section of our most recent CRA Performance Evaluation, which was prepared by the Massachusetts Division of Banks at 131 Ashland Street, North Adams, MA 01247." 4) Provide a copy of its current evaluation to the public, upon request. In connection with this, the institution is authorized to charge a fee which does not exceed the cost of reproduction and mailing (if applicable). The format and content of the institution's evaluation, as prepared by its supervisory agencies, may not be altered or abridged in any manner. The institution is encouraged to include its response to the evaluation in its CRA public file.
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