PUBLIC DISCLOSURE - Lake ...
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PUBLIC DISCLOSURE
December 7, 2020
COMMUNITY REINVESTMENT ACT
PERFORMANCE EVALUATION
Lake-Osceola State Bank
Certificate Number: 8172
790 North Michigan Avenue
Baldwin, MI 49304
Federal Deposit Insurance Corporation
Division of Depositor and Consumer Protection
Chicago Regional Office
300 South Riverside Plaza, Suite 1700
Chicago, Illinois 60606
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.TABLE OF CONTENTS INSTITUTION RATING ............................................................................................................... 1 DESCRIPTION OF INSTITUTION .............................................................................................. 1 DESCRIPTION OF ASSESSMENT AREA .................................................................................. 3 SCOPE OF EVALUATION ........................................................................................................... 6 CONCLUSIONS ON PERFORMANCE CRITERIA .................................................................... 7 DISCRIMINATORY OR OTHER ILLEGAL CREDIT PRACTICES REVIEW....................... 17 APPENDICES .............................................................................................................................. 18 SMALL BANK PERFORMANCE CRITERIA ....................................................................... 18 GLOSSARY .............................................................................................................................. 19
INSTITUTION RATING
INSTITUTION’S CRA RATING: This institution is rated Outstanding.
An institution in this group has an outstanding record of helping to meet the credit needs of its
assessment area, including low- and moderate-income neighborhoods, in a manner consistent with
its resources and capabilities. The bank’s satisfactory rating under the Lending Test and
supplemental factors including the bank’s qualified community development investments and
services support this rating. Examiners did not identify any evidence of discriminatory or other
illegal credit practices. The following points summarize the bank’s performance.
The loan-to-deposit ratio (LTD) is more than reasonable given the institution’s size,
financial condition, and assessment area (AA) credit needs.
The bank made a majority of its loans in the AA.
The geographic distribution of loans reflects excellent dispersion throughout the AA.
The distribution of borrowers, given the demographics of the AA, reflects reasonable
penetration of borrowers of different income levels and businesses of different sizes.
The institution did not receive any CRA-related complaints since the previous evaluation;
therefore, this factor did not affect the Lending Test rating.
The institution’s qualified investments and record of providing services enhances credit
availability in the AA.
DESCRIPTION OF INSTITUTION
Lake-Osceola State Bank (LOSB) is a $347.4 million bank headquartered in Baldwin, Michigan
(Lake County). The bank is a wholly-owned subsidiary of Lake Financial Corporation (LFC), a
one-bank holding company also headquartered in Baldwin, Michigan. LFC also owns a 50.0
percent interest in The Wenger Insurance Agency. The bank owns a 50.0 percent interest in Lake
County Title & Escrow Agency.
In addition to the main office, the bank operates nine full-service branches. Since the previous
evaluation, the bank opened two new branch offices, in Walkerville (January 1, 2016) and in Leroy,
Michigan (September 19, 2017). The bank has 10 full-service automated teller machines (ATMs),
one at each branch location. The following table provides additional information on the branch
locations.
1Office Locations
Census Tract
Address City County ATM
Income Level
790 N. Michigan Ave. Baldwin Lake Y Moderate
10464 N. Brooks Rd. Big Rapids Mecosta Y Moderate
102 N. Michigan Ave. Irons Lake Y Moderate
120 Mackinaw Trail Leroy Osceola Y Middle
203 State Street Luther Lake Y Moderate
226 Perry Ave. Big Rapids Mecosta Y Upper
217 S. Chestnut St. Reed City Osceola Y Middle
109 E. Church St. Tustin Osceola Y Middle
133 E. Main St. Walkerville Oceana Y Middle
17222 Caberfae Highway Wellston Manistee Y Moderate
Source: Bank Records, 2015 ACS Data
The bank offers a variety of deposit products including checking, savings, and individual retirement
accounts, and certificates of deposit. Loan products include commercial, home mortgage, and
consumer loans. Alternative banking services include online banking with bill pay, mobile banking,
telephone banking, and remote deposit capture. As of the September 30, 2020 Call Report, the
bank’s assets totaled approximately $347.4 million with total loans of $229.5 million and total
deposits of $290.9 million. The following table illustrates the bank’s loan portfolio.
Loan Portfolio Distribution as of 9/30/2020
Loan Category $(000s) %
Construction, Land Development, and Other Land Loans 7,526 3.3
Secured by Farmland 2,305 1.0
Secured by 1-4 Family Residential Properties 57,847 25.1
Secured by Multifamily (5 or more) Residential Properties - -
Secured by Nonfarm Nonresidential Properties 68,733 30.0
Total Real Estate Loans 136,411 59.4
Commercial and Industrial Loans 35,561 15.5
Agricultural Production and Other Loans to Farmers 51 0.0
Consumer Loans 55,668 24.3
Obligations of State and Political Subdivisions in the U.S. 1,792 0.8
Other Loans - -
Lease Financing Receivable (net of unearned income) - -
Less: Unearned Income - -
Total Loans 229,483 100.0
Source: Reports of Condition and Income, Due to rounding, totals may not equal 100.0%
Examiners did not identify any financial constraints or legal impediments that would preclude the
bank from reasonably meeting the credit needs of the AA.
2DESCRIPTION OF ASSESSMENT AREA
The CRA requires each financial institution to designate one or more AAs within which examiners will
evaluate its CRA performance. LOSB maintains a single, contiguous AA that includes all of Lake
County, four tracts in central and eastern Manistee County, two tracts in eastern Mason County, ten
tracts in Mecosta County, one tract in northern Newaygo County, one tract in northern Oceana County,
four tracts in western Osceola County, and four tracts in southern Wexford County. The AA has not
changed since the previous examination.
The AA conforms to the CRA regulatory requirements. It consists of contiguous whole geographies
where the bank has its offices and operates, does not reflect illegal discrimination, and does not
arbitrarily exclude any low- or moderate-income geographies.
Economic and Demographic Data
The bank’s AA consists of 30 census tracts with the following income designations: 1 upper-income
tract, 20 middle-income tracts, 8 moderate-income tracts, and 1 tract with no income designation
(Ferris State University location). In 2018, Manistee County had three tracts in the bank’s AA that
were distressed. In 2018 and 2019, Mecosta County had seven tracts in the bank’s AA that were
distressed. In 2018 and 2019, Oceana County had one tract in the bank’s AA that was distressed
and underserved. In 2018 and 2019, Osceola County had three tracts in the bank’s AA that were
underserved. The following table shows select demographic characteristics of the AA.
Demographic Information of the Assessment Area
Low Moderate Middle Upper NA*
Demographic Characteristics #
% of # % of # % of # % of # % of #
Geographies (Census Tracts) 30 0.0 26.7 66.7 3.3 3.3
Population by Geography 108,135 0.0 21.5 73.1 3.7 1.8
Housing Units by Geography 69,615 0.0 32.2 65.8 2.1 0.0
Owner-Occupied Units by Geography 31,938 0.0 21.1 77.4 1.5 0.0
Occupied Rental Units by Geography 8,811 0.0 26.5 64.5 8.9 0.1
Vacant Units by Geography 28,866 0.0 46.2 53.3 0.5 0.0
Businesses by Geography 5,286 0.0 21.9 71.7 5.8 0.5
Farms by Geography 416 0.0 13.0 86.5 0.5 0.0
Family Distribution by Income Level 26,286 23.0 19.9 22.1 35.0 0.0
Household Distribution by Income 40,749 26.4 17.5 19.2 36.9 0.0
Level
Median Family Income Non-MSAs - MI $53,628 Median Housing Value $98,258
Median Gross Rent $641
Families Below Poverty Level 13.7%
Source: 2015 ACS and 2019 D&B Data
Due to rounding, totals may not equal 100.0%
(*) The NA category consists of geographies that have not been assigned an income classification.
3The geographic distribution criterion compares the bank’s home mortgage lending to the
distribution of owner-occupied housing units in the AA. There are 69,615 housing units in the AA,
of which 45.9 percent are owner-occupied, 12.7 percent are rental units, and 41.5 percent are
vacant.
The analysis of small business loans under Borrower Profile criterion compares the distribution of
lending by the borrower’s gross annual revenue (GAR) level. According to D&B data, the AA
contains 5,286 non-farm businesses with the following GAR levels:
79.2 percent have $1 million or less
5.2 percent have more than $1 million
15.6 percent have unknown revenues
D&B data from 2019 shows that the largest industries in the AA are services (38.2 percent), retail
trade (15.3 percent), construction (8.4 percent), agriculture, forestry & fishing (7.3 percent), and
finance, insurance, and real estate (5.9 percent). In addition, 85.5 percent of businesses operate
from a single location, and 65.1 percent have four or fewer employees. Major employers in the AA
include Lake County, North Lake Correctional Facility, Ferris State University, Spectrum Health,
Wal-Mart, Ventura Manufacturing, and General Mills.
Data obtained from the US Bureau of Labor and Statistics, as illustrated in the following table,
shows that the unemployment rates within the AA declined, but consistently exceed state and
nationwide rates.
Unemployment Rates
Area December 2017 December 2018 December 2019
% % %
Lake County 8.1 6.8 6.4
Manistee County 6.5 5.8 5.5
Mason County 5.7 4.9 4.9
Mecosta County 5.7 5.0 4.7
Newaygo County 4.9 4.4 4.2
Oceana County 7.0 6.2 5.9
Osceola County 5.9 4.4 4.0
Wexford County 5.5 4.7 4.5
State 4.6 4.1 3.9
National 4.4 3.9 3.7
Source: Bureau of Labor Statistics
Examiners use the FFIEC-adjusted Median Family Income to analyze home mortgage loans under
the Borrower Profile criterion. The following table shows the low-, moderate-, middle-, and upper-
income categories for the AA during the evaluation period.
4Median Family Income Ranges
Low Moderate Middle Upper
Median Family IncomesCredit Needs
Considering information from the community contact, bank management, and demographic and
economic data, examiners determined that opportunities exist for affordable housing, home
rehabilitation, and financial literacy.
SCOPE OF EVALUATION
General Information
This evaluation covers the period from the last evaluation as of March 2, 2015, to the current
evaluation dated December 7, 2020. Examiners used the Interagency Small Institution Examination
Procedures to evaluate LOSB’s CRA performance. At management’s request, examiners also
reviewed qualified investments and the bank’s record of providing services within the AA since the
last CRA performance evaluation. Examiners used full-scope procedures to evaluate the bank’s
CRA performance.
Activities Reviewed
Examiners determined that the bank’s main product lines are small business, home mortgage, and
consumer loans. This conclusion considered the bank’s business strategy and the number and dollar
volume of loans originated during the evaluation period.
The loan portfolio is primarily composed of commercial loans (45.5 percent), residential real estate
loans (25.2 percent), and consumer loans (24.3 percent). No other loan types, such as small farm,
represent a major product line. The loan portfolio composition has changed significantly since the
previous evaluation. Commercial loans increased by 4.4 percent, residential real estate loans
decreased by 21.7 percent and consumer loans increased by 16.1 percent.
The bank’s record of originating small business, home mortgage, and consumer loans received
equal weight and consideration in the overall conclusions, based upon the bank’s business strategy
and the number and dollar volume of loans originated. Because of the significant change in the loan
portfolio composition, examiners analyzed and presented both 2018 and 2019 data in the
Geographic Distribution and Borrower Profile analyses.
Examiners used the bank’s records to identify all small business, residential real estate, and
consumer loans originated in 2018 and 2019. In 2018, the bank originated 103 small business loans
totaling approximately $13.5 million, 156 residential real estate loans totaling approximately $12.7
million, and 956 consumer loans totaling approximately $15.8 million. Of these loans, examiners
sampled 47 small business loans totaling $6.1 million, 51 residential real estate loans totaling $3.9
million, and 63 consumer loans totaling $938,037.
In 2019, the bank originated 147 small business loans totaling approximately $20.9 million, 144
residential real estate loans totaling approximately $11.7 million, and 1,371 consumer loans totaling
approximately $20.9 million. Of these loans, examiners sampled 47 small business loans totaling
6$7.8 million, 47 residential real estate loans totaling 3.7 million, and 67 consumer loans totaling
$975,787.
CONCLUSIONS ON PERFORMANCE CRITERIA
LENDING TEST
Overall, LOSB demonstrated satisfactory performance under the Lending Test. The Geographic
Distribution and Borrower Profile performance primarily support this conclusion.
Loan-to-Deposit Ratio
The LTD ratio is more than reasonable (considering seasonal variations and taking into account
lending related activities) given the institution’s size, financial condition, and AA credit needs.
LOSB’s LTD ratio, calculated from Call Report data, averaged 94.2 percent over the previous 23
quarters from March 31, 2015, through September 30, 2020. As shown in the following table, the ratio
compares favorably to two, similarly-situated institutions chosen based on their asset size, product
lines, and geographic locations. The average LTD ratio increased from the previous evaluation, when
it was 90.8 percent.
The LTD ratio fluctuated, ranging from a high of 105.7 percent at June 30, 2019 to a low of 78.0
percent at September 30, 2020. Increased sales of home mortgage loans on the secondary market as
well as a significant increase in deposits resulting from Paycheck Protection Program (PPP) loans,
stimulus checks, and unemployment benefits had an impact on the LTD ratio in 2020.
Loan-to-Deposit (LTD) Ratio Comparison
Total Assets as of Average Net
Bank 9/30/2020 LTD Ratio
($000s) (%)
Lake-Osceola State Bank 347,424 94.2
Similarly-Situated Institution #1 306,749 90.6
Similarly-Situated Institution #2 331,443 70.1
Source: Reports of Condition and Income 3/31/2015 – 9/30/2020
Assessment Area Concentration
As shown in the following table, overall, a majority of loans and other lending related activities are
in the bank’s AA. The bank made a substantial majority of its home mortgage and a majority of
small business loans by number and dollar volume within the AA. A majority of consumer loans
are outside the bank’s AA.
7Lending Inside and Outside of the Assessment Area
Number of Loans Dollars Amount of Loans $(000s)
Total Total
Loan Category Inside Outside Inside Outside
# $(000s)
# % # % $ % $ %
Home Mortgage
2018 49 96.1 2 3.9 51 3,688 94.0 236 6.0 3,924
2019 40 85.1 7 14.9 47 3,154 84.4 583 15.6 3,737
Subtotal 89 90.8 9 9.2 98 6,842 89.3 819 10.7 7,661
Small Business
2018 38 80.9 9 19.1 47 5,011 82.0 1,098 18.0 6,109
2019 38 80.9 9 19.1 47 3,942 50.8 3,820 49.2 7,762
Subtotal 76 80.9 18 19.1 94 8,953 64.5 4,918 35.5 13,871
Consumer
2018 22 34.9 41 65.1 63 256 27.3 682 72.7 938
2019 18 26.9 49 73.1 67 283 29.0 693 71.0 976
Subtotal 40 30.8 90 69.2 130 539 28.2 1,375 71.8 1,914
Total 205 63.7 117 36.3 322 16,334 69.7 7,112 30.3 23,446
Source: 2018 and 2019 Bank Data
Geographic Distribution
The geographic distribution of loans reflects excellent dispersion throughout the AA.
Home Mortgage Loans
The geographic distribution of home mortgage loans reflects excellent dispersion throughout the
AA. As illustrated in the following table, the bank’s lending in moderate-income areas consistently
exceeded the percentage of owner-occupied housing units within these tracts.
8Geographic Distribution of Home Mortgage Loans
% of Owner-
Tract Income Level Occupied # % $(000s) %
Housing Units
Moderate
2018 21.1 32 65.3 2,101 57.0
2019 21.1 26 65.0 1,557 49.4
Middle
2018 77.4 17 34.7 1,587 43.0
2019 77.4 13 32.5 1,571 49.8
Upper
2018 1.6 -- -- -- --
2019 1.6 1 2.5 26 0.8
Totals
2018 100.0 49 100.0 3,688 100.0
2019 100.0 40 100.0 3,154 100.0
Source: 2015 ACS; Bank Data, "--" data not available.
Due to rounding, totals may not equal 100.0%
Small Business Loans
The geographic distribution of small business loans reflects excellent dispersion throughout the AA.
As shown in the following table, the bank’s lending in moderate-income tracts was significantly
higher than the percentage of businesses in both years reviewed.
Geographic Distribution of Small Business Loans
% of
Tract Income Level # % $(000s) %
Businesses
Moderate
2018 22.3 22 57.9 2,452 48.9
2019 21.9 18 47.4 1,962 49.8
Middle
2018 71.1 15 39.5 2,220 44.3
2019 71.7 18 47.4 1,893 48.0
Upper
2018 6.0 1 2.6 340 6.8
2019 5.8 2 5.3 87 2.2
Totals
2018 100.0 38 100.0 5,011 100.0
2019 100.0 38 100.0 3,942 100.0
Source: 2018 & 2019 D&B Data; Bank Data; "--" data not available.
Due to rounding, totals may not equal 100.0%
9Consumer Loans
The geographic distribution of consumer loans reflects excellent dispersion throughout the AA. As
shown in the following table, the bank’s lending in moderate-income tracts was significantly higher
than the percentage of households in these tracts in both years and increased in 2019 from 2018.
Geographic Distribution of Consumer Loans
% of
Tract Income Level # % $(000s) %
Households
Moderate
2018 22.2 8 36.4 92 35.8
2019 22.2 9 50.0 118 41.7
Middle
2018 74.6 13 59.1 160 62.5
2019 74.6 9 50.0 165 58.4
Upper
2018 3.1 1 4.6 4 1.7
2019 3.1 0 0.0 0 0.0
Totals
2018 100.0 22 100.0 256 100.0
2019 100.0 18 100.0 283 100.0
Source: 2015 ACS; Bank Data.
Due to rounding, totals may not equal 100.0%
Borrower Profile
The distribution of loans reflects reasonable penetration among borrowers of different income levels
and business of different sizes. Examiners focused on the percentages by number of home
mortgage and consumer loans to low- and moderate-income borrowers and small business loans to
businesses with GARs of $1.0 million or less.
Home Mortgage Loans
The distribution of home mortgage loans reflects reasonable penetration among borrowers of
different income levels. The following table shows the distribution of home mortgage loans by
borrower income level.
10Distribution of Home Mortgage Loans by Borrower Income Level
Borrower Income Level % of Families # % $(000s) %
Low
2018 23.0 12 24.5 590 16.0
2019 23.0 6 15.0 165 5.2
Moderate
2018 19.9 10 20.4 384 10.4
2019 19.9 9 22.5 479 15.2
Middle
2018 22.1 11 22.4 826 22.4
2019 22.1 14 35.0 850 26.9
Upper
2018 35.0 16 32.7 1,888 51.2
2019 35.0 11 27.5 1,660 52.6
Totals
2018 100.0 49 100.0 3,688 100.0
2019 100.0 40 100.0 3,154 100.0
Source: 2015 ACS; Bank Data, "--" data not available.
Due to rounding, totals may not equal 100.0%
While 2019 lending to low-income borrowers was lower than the percentage of low-income
families within the AA, it is reasonable considering the AA’s poverty level of 13.7 percent.
Families with incomes below the poverty likely face difficulty obtaining and/or servicing loans in
the amounts needed to purchase a home. LOSB’s lending to moderate-income borrowers exceeded
the percentage of moderate-income families in the AA in both years reviewed.
Small Business Loans
The distribution of small business loans reflects reasonable penetration among businesses of
different sizes. The bank’s lending to businesses with GARs of $1.0 million or less exceeds the
percentage of businesses with GARs of $1.0 million or less in the AA in both years reviewed.
11Distribution of Small Business Loans by Gross Annual Revenue Category
% of
Gross Revenue Level # % $(000s) %
Businesses
1,000,000
2018 5.5 5 13.2 811 16.2
2019 5.2 6 15.8 831 21.1
Revenue Not Available
2018 16.7 1 2.6 368 7.3
2019 15.7 -- -- -- --
Totals
2018 100.0 38 100.0 5,011 100.0
2019 100.0 38 100.0 3,942 100.0
Source: 2018 & 2019 D&B Data; Bank Data; "--" data not available.
Due to rounding, totals may not equal 100.0%
Consumer Loans
Overall, the distribution of consumer loans reflects reasonable penetration among individuals of
different income levels. The following table shows the bank’s performance by income category and
includes the percentage of households within each income level.
12Distribution of Consumer Loans by Borrower Income Level
% of
Borrower Income Level # % $(000s) %
Households
Low
2018 26.4 5 22.7 43 16.8
2019 26.4 4 22.2 50 17.7
Moderate
2018 17.5 3 13.6 39 15.2
2019 17.5 0 0.0 0 0.0
Middle
2018 19.2 4 18.2 48 18.8
2019 19.2 6 33.3 87 30.7
Upper
2018 36.9 10 45.5 126 49.2
2019 36.9 8 44.4 146 51.6
Totals
2018 100.0 22 100.0 256 100.0
2019 100.0 18 100.0 283 100.0
Source: 2015 ACS; Bank Data.
Due to rounding, totals may not equal 100.0%
The bank’s level of lending to low-income borrowers slightly trails the percentage of households in
the AA. The level of lending to low-income borrowers is impacted by the 18.8 percent household
poverty rate. Lending to moderate-income borrowers also slightly trails the percentage of
households in the AA in 2018. In 2019, there were no loans to moderate-income individuals.
Overall, the bank’s performance is reasonable.
Response to Complaints
The bank did not receive any CRA-related complaints during the evaluation period; therefore, this
criterion did not affect the rating
Other Activities
LOSB also originated 220 community development loans totaling $35.0 million during the
evaluation period. This level of activity represents 10.1 percent of total assets and 15.4 percent of
net loans as of September 30, 2020, and includes loans originated through the Small Business
Administration (SBA), PPP, and other community development loans originated by the bank.
The PPP business loan program, established by the 2020 US Federal Government Coronavirus Aid,
Relief, and Economic Security Act (CARES Act), aids businesses, self-employed workers, sole
proprietors, nonprofit organizations, and tribal businesses so they could continue paying their
workers during the COVID-19 pandemic. LOSB participated in this program to provide support to
13area businesses. Since the program’s inception in April 2020, LOSB originated 206 PPP loans
totaling $20.1 million, which promoted job retention for low- and moderate-income persons and/or
in low- and moderate-income census tracts. This total includes 61 PPP loans totaling $6.1 million
originated outside the AA. These loans qualified as community development loans and were
included in the performance evaluation since the bank met the needs of its immediate AA.
Excluding PPP loans, the bank extended 14 community development loans totaling $14.8 million,
which represents 4.3 percent of total assets and 6.6 percent of net loans. This performance
represents an increase by number and dollar volume since the previous evaluation when it granted
three community development loans totaling $4.7 million. These community development loans
consist of one SBA guaranteed loan and 13 tax anticipation notes for the cash flow needs of local
school systems where the majority of students receive free or reduced lunches. The SBA guarantee
program provides flexible underwriting to qualify more borrowers.
Community Development Lending
Affordable Community Economic Revitalize or
Totals
Activity Year Housing Services Development Stabilize
# $(000s) # $(000s) # $(000s) # $(000s) # $(000s)
2015* 0 0 2 3,100 0 0 0 0 2 3,100
2016 0 0 1 450 0 0 0 0 1 450
2017 0 0 2 1,447 0 0 0 0 2 1,447
2018 0 0 3 2,925 0 0 0 0 3 2,925
2019 0 0 2 1,925 0 0 0 0 2 1,925
YTD 2020** 0 0 3 3,875 1 1,172 0 0 4 5,047
Subtotal Non-PPP 0 0 13 13,722 1 1,172 0 0 14 14,894
2020 PPP Loans*** 0 0 0 0 206 20,105 0 0 206 20,105
Total 0 0 13 13,722 207 21,277 0 0 220 34,999
Source: Bank Data *03/02/2015-12/31/2015; **01/01/2020-12/07/2020; ***Total includes 61 PPP loans outside the AA totaling $6.1 million
In addition to the community development loans, LOSB developed a loan program in response to
needs created by two, category-1 tornados in August 2018. The Storm Relief loans assisted
borrowers with repairs, clean up, and replacement costs from the damage to homes and businesses
and are payable in installments over three years. The bank originated five such loans totaling
$11,569.
LOSB operates in a competitive environment and serves the needs of its communities with flexible
underwriting through local and federal programs. Although the following programs are included
with the Lending Test, they demonstrate the bank’s commitment to assist small businesses and low-
and moderate-income borrowers. During the review period, LOSB participated in the following
programs:
Michigan Capital Access Program (CAP) – allow for loans to specialized small business
borrowers with limited collateral. The bank originated 21 loans totaling $640,900 during the
evaluation period
The Michigan Homeowner Assistance Nonprofit Housing Program (MHA) through the
14Michigan State Housing Development Authority developed a comprehensive statewide
strategy aimed at helping borrowers who are at high risk of default or foreclosure. LOSB
participates in the MHA’s Help for the Hardest Hit Programs (H4HH). Under the programs,
borrowers may be eligible to receive assistance to retain their primary residences. The bank
assisted five borrowers in obtaining $25,013 under H4HH programs.
Federal Home Loan Bank of Indianapolis - Home Ownership Program (HOP) and
Neighborhood Improvement Program (NIP):
o HOP allows eligible families to use the program for down payments and closing
costs and improve their eligibility for mortgage financing. The program is open to
households with annual incomes of 80.0 percent or less of the area’s median income
and adjusted for the size of the households. LOSB assisted eight borrowers in
obtaining $76,000 in HOP funds.
o NIP provides up to $7,500 to eligible borrowers with incomes at or below 80.0
percent of area median income to rehabilitate/repair their homes. The bank assisted
13 borrowers in obtaining $95,526 in NIP funds.
Business Resource Network (BRN) Program – the program offers job success personalized
coaching to troubleshoot outside problems that affect work performance. The bank provides
the loan program as a tool to remove barriers to employment. These are small dollar loans
for items such as car repairs, rent, day care, closing costs, small appliance, or anything else
impeding employment. LOSB provided two BRN loans totaling $2,000.
QUALIFIED INVESTMENTS AND SERVICES
At management’s request, examiners reviewed qualified investments and the bank’s record of
providing services within the AA. The institution’s qualified investments and record of providing
services enhances credit availability in the AA as discussed below, and contributed to the
Outstanding rating.
Qualified Investments
As shown in the following table, LOSB made 60 qualified investments and donations totaling $6.1
million during the review period. This level of activity amounts to 1.7 percent of the bank’s total
assets and 23.6 percent of its total investments as of September 30, 2020. During the evaluation
period, the bank purchased seven school district bonds totaling $4.4 million from 14 schools located
in its AA. Twelve of the 14 schools in these school districts provide free and reduced lunches for a
majority of the students. The bank’s qualified investments include two prior period investments
totaling $981,354 in two Michigan Limited Partnership funds formed to invest in low-income
housing properties located in Michigan. During the review period, the bank invested in two
additional Michigan Limited Partnership funds for low-income housing properties located in
Michigan, one in 2019 and one in 2020.
Additionally, LOSB provided 49 community development donations totaling $157,703 to
organizations that assist low- and moderate-income individuals and families for a number of
purposes including affordable housing, medical care, financial education, food, and shelter.
15The overall number and dollar volume increased since the prior evaluation where the bank had 29
investments and donations totaling $4.1 million. The following table provides details on the
qualified investments and donations.
Qualified Investments
Affordable Community Economic Revitalize or
Totals
Activity Year Housing Services Development Stabilize
# $(000s) # $(000s) # $(000s) # $(000s) # $(000s)
Prior Period 2 981 0 0 0 0 0 0 2 981
2015* 0 0 4 1,256 0 0 0 0 4 1,256
2016 1 469 1 1,335 0 0 0 0 2 1,804
2017 0 0 2 1,800 0 0 0 0 2 1,800
2018 0 0 0 0 0 0 0 0 0 0
2019 0 0 0 0 0 0 0 0 0 0
YTD 2020** 1 59 0 0 0 0 0 0 1 59
Subtotal 4 1,509 7 4,391 0 0 0 0 11 5,900
Qualified Grants &
11 19 29 112 9 27 0 0 49 158
Donations
Total 15 1,528 36 4,503 9 27 0 0 60 6,058
Source: Bank Data *03/02/2015-12/31/2015; **01/01/2020-12/07/2020
Community Development Services
LOSB is a leader in providing community development services through director and officer
involvement in community development organizations that provide community development and
other services. Bank officers and directors provided numerous community development services
during the evaluation period including serving as board members and providing technical assistance
to various community organizations within the AA. The majority of community development
services occur on a regular basis, and bank directors and officers frequently serve in leadership
positions in multiple organizations. As shown in the following table, during the evaluation period,
16 bank directors and officers provided financial expertise or technical assistance to 24 different
community development related organizations throughout the AA.
16Community Development Services
Affordable Community Economic Revitalize
Totals
Activity Year Housing Services Development or Stabilize
# # # # #
2015* 2 10 1 3 16
2016 2 11 2 4 19
2017 2 11 2 5 20
2018 2 13 2 5 22
2019 2 15 2 5 24
YTD 2020** 0 14 2 5 21
Total 10 74 11 27 122
Source: Bank Data, *03/02/2015 – 12/31/2015, **01/01/2020 – 12/07/2020
Notable examples of community development services include:
Three bank officers serve on an organization that raises funds for grants to non-profit
agencies that benefit small business development, entrepreneurship development, and
workforce development.
An executive officer of the bank serves on the Board of an organization that provides
affordable housing and housing support to low- and moderate-income individuals in Lake
County.
A bank officer serves on the Board of an organization that provides affordable housing and
housing support to low- and moderate-income individuals in Osceola County.
A bank director serves as the Chairman of the Board of an organization that provides
scholarships to graduates of local high schools where over 50 percent of the students receive
free or reduced lunches.
An executive officer of the bank serves as the Chairman of an organization that provides
health care services for uninsured and insured patients.
The bank provides additional services to its communities:
The bank’s main office and four of the nine branches are located in moderate-income tracts,
thus providing ready access to financial services.
LOSB participates in the local initiative to provide electronic benefits transfer payments to
assistance recipients in the AA.
The bank pays for network membership fees and all transaction fees so that assistance
recipients can use their Michigan Bridge Cards at all of the bank’s ATMs without cost.
Additionally, LOSB does not charge a fee to non-bank customers to cash Social Security,
unemployment, or public assistance checks. The bank also offers use of a Community Room
in its main office at no charge to local community development organizations for meetings.
DISCRIMINATORY OR OTHER ILLEGAL CREDIT PRACTICES REVIEW
Examiners did not identify any evidence of discriminatory or other illegal credit practices; therefore,
this consideration did not affect the institution’s overall CRA rating.
17APPENDICES
SMALL BANK PERFORMANCE CRITERIA
Lending Test
The Lending Test evaluates the bank’s record of helping to meet the credit needs of its assessment
area(s) by considering the following criteria:
1) The bank’s loan-to-deposit ratio, adjusted for seasonal variation, and, as appropriate, other
lending-related activities, such as loan originations for sale to the secondary markets,
community development loans, or qualified investments;
2) The percentage of loans, and as appropriate, other lending-related activities located in the
bank’s assessment area(s);
3) The geographic distribution of the bank’s loans;
4) The bank’s record of lending to and, as appropriate, engaging in other lending-related
activities for borrowers of different income levels and businesses and farms of different
sizes; and
5) The bank’s record of taking action, if warranted, in response to written complaints about its
performance in helping to meet credit needs in its assessment area(s).
18GLOSSARY
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.
American Community Survey (ACS): A nationwide United States Census survey that produces
demographic, social, housing, and economic estimates in the form of five year estimates based on
population thresholds.
Area Median Income: The median family income for the MSA, if a person or geography is
located in an MSA; or the statewide nonmetropolitan median family income, if a person or
geography is located outside an MSA.
Assessment Area: A geographic area delineated by the bank under the requirements of the
Community Reinvestment Act.
Census Tract: A small, relatively permanent statistical subdivision of a county or equivalent
entity. The primary purpose of census tracts is to provide a stable set of geographic units for the
presentation of statistical data. Census tracts generally have a population size between 1,200 and
8,000 people, with an optimum size of 4,000 people. Census tract boundaries generally follow
visible and identifiable features, but they may follow nonvisible legal boundaries in some
instances. State and county boundaries always are census tract boundaries.
Combined Statistical Area (CSA): A combination of several adjacent metropolitan statistical
areas or micropolitan statistical areas or a mix of the two, which are linked by economic ties.
Consumer Loan(s): A loan(s) to one or more individuals for household, family, or other personal
expenditures. A consumer loan does not include a home mortgage, small business, or small farm
loan. This definition includes the following categories: motor vehicle loans, credit card loans, home
equity loans, other secured consumer loans, and other unsecured consumer loans.
Core Based Statistical Area (CBSA): The county or counties or equivalent entities associated
with at least one core (urbanized area or urban cluster) of at least 10,000 population, plus adjacent
counties having a high degree of social and economic integration with the core as measured through
commuting ties with the counties associated with the core. Metropolitan and Micropolitan
Statistical Areas are the two categories of CBSAs.
Family: Includes a householder and one or more other persons living in the same household who
are related to the householder by birth, marriage, or adoption. The number of family households
always equals the number of families; however, a family household may also include non-relatives
living with the family. Families are classified by type as either a married-couple family or other
family. Other family is further classified into “male householder” (a family with a male
householder and no wife present) or “female householder” (a family with a female householder and
no husband present).
19FFIEC-Estimated Income Data: The Federal Financial Institutions Examination Council (FFIEC)
issues annual estimates which update median family income from the metropolitan and
nonmetropolitan areas. The FFIEC uses American Community Survey data and factors in
information from other sources to arrive at an annual estimate that more closely reflects current
economic conditions.
Full-Scope Review: A full-scope review is accomplished when examiners complete all applicable
interagency examination procedures for an assessment area. Performance under applicable tests is
analyzed considering performance context, quantitative factors (e.g., geographic distribution,
borrower profile, 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 applicants; the amount of loan requested; and the disposition of the application
(approved, denied, and withdrawn).
Home Mortgage Loans: Includes closed-end mortgage loans or open-end line of credits as defined
in the HMDA regulation that are not an excluded transaction per the HMDA regulation.
Housing Unit: Includes a house, an apartment, a mobile home, a group of rooms, or a single room
that is occupied as separate living quarters.
Limited-Scope Review: A limited scope review is accomplished when examiners do not complete
all applicable interagency examination procedures for an assessment area.
Performance under applicable tests is often analyzed using only quantitative factors (e.g.,
geographic distribution, borrower profile, total number and dollar amount of investments, and
branch distribution).
Low-Income: Individual income that is less than 50 percent of the area median income, or a
median family income that is less than 50 percent in the case of a geography.
Market Share: The number of loans originated and purchased by the institution as a percentage of
the aggregate number of loans originated and purchased by all reporting lenders in the metropolitan
area/assessment area.
Median Income: The median income divides the income distribution into two equal parts, one
having incomes above the median and other having incomes below the median.
Metropolitan Division (MD): A county or group of counties within a CBSA that contain(s) an
urbanized area with a population of at least 2.5 million. A MD is one or more main/secondary
20counties representing an employment center or centers, plus adjacent counties associated with the
main/secondary county or counties through commuting ties.
Metropolitan Statistical Area (MSA): CBSA associated with at least one urbanized area having a
population of at least 50,000. The MSA comprises the central county or counties or equivalent
entities containing the core, plus adjacent outlying counties having a high degree of social and
economic integration with the central county or counties 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 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 and less than 80 percent in the
case of a geography.
Multi-family: Refers to a residential structure that contains five or more units.
Nonmetropolitan Area (also known as non-MSA): All areas outside of metropolitan areas. The
definition of nonmetropolitan area is not consistent with the definition of rural areas. Urban and
rural classifications cut across the other hierarchies. For example, there is generally urban and rural
territory within metropolitan and nonmetropolitan areas.
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.
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.
Rural Area: Territories, populations, and housing units that are not classified as urban.
Small Business Loan: A loan included in “loans to small businesses” as defined in the
Consolidated Report of Condition and Income (Call Report). These loans have original amounts of
$1 million or less and are either secured by nonfarm nonresidential properties or are classified as
commercial and industrial loans.
Small Farm Loan: A loan included in “loans to small farms” as defined in the instructions for
preparation of the Consolidated Report of Condition and Income (Call Report). These loans have
original amounts of $500,000 or less and are either secured by farmland, including farm residential
and other improvements, or are classified as loans to finance agricultural production and other loans
to farmers.
21Upper-Income: Individual income that is 120 percent or more of the area median income, or a
median family income that is 120 percent or more in the case of a geography.
Urban Area: All territories, populations, and housing units in urbanized areas and in places of
2,500 or more persons outside urbanized areas. More specifically, “urban” consists of territory,
persons, and housing units in places of 2,500 or more persons incorporated as cities, villages,
boroughs (except in Alaska and New York), and towns (except in the New England states, New
York, and Wisconsin).
“Urban” excludes the rural portions of “extended cities”; census designated place of 2,500 or more
persons; and other territory, incorporated or unincorporated, including in urbanized areas.
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