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.

 

 

 

 

INSTITUTION'S CRA RATING: This institution is rated Satisfactory.

An institution in this group has a satisfactory 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.

Putnam County State Bank's Satisfactory Community Reinvestment Act (CRA) performance under the Lending Test supports the overall rating. Examiners did not identify any evidence of discriminatory or other illegal practices. The following points summarize the bank's Lending Test performance.

• The loan-to-deposit ratio is more than reasonable given the institution's size, financial condition, and the assessment area credit needs.
• A majority of the small farm and small business loans reviewed were originated in the assessment area.
• There are no low- or moderate-income census tracts within the assessment area. Therefore, an analysis of geographic distribution loans was not completed, as it would not be meaningful.
• The overall distribution of borrowers reflects reasonable penetration of loans among farms and businesses of different sizes.
• The institution did not receive any CRA-related complaints since the prior evaluation. Therefore, this factor did not affect the rating.

 

1

Putnam County State Bank is headquartered in Unionville, Missouri. Putnam County Bancshares, Inc., Unionville, Missouri, a one bank holding company, owns 91 percent of the bank. The institution received a Satisfactory rating at its previous FDIC Performance Evaluation, dated August 25, 2014, based on Interagency Small Institution Examination Procedures.

 

Putnam County State Bank's main location is in Unionville, Missouri in a middle-income census tract in Putnam County, Missouri. Additionally, the bank operates another location in Milan, Missouri in a middle-income census tract in Sullivan County, Missouri. There have been no mergers or changes in branch structure since the prior evaluation. The bank engages in traditional deposit and loan products. This includes regular checking, savings, money market, certifications of deposit, and investment retirement accounts. There are two automated teller machines, one at each bank location. Additionally, the bank offers agricultural, commercial, home mortgage, and consumer loans. Further, the bank operates a transactional website and mobile banking.

 

According to the March 31, 2020, Report of Condition, the institution reported total assets of $225,183; total loans of$185,916; and total deposits of$185,452. The following table shows the distribution of the loan portfolio by dollar volume.

 

  
Examiners did not identify any financial, legal, or other impediments, other than legal lending limits, that affect the bank's ability to meet the assessment areas credit needs.

 

2

 

 

The CRA requires each financial institution to define one or more assessment areas within which its CRA performance will be evaluated. Putnam County State Bank designated one assessment area.  The assessment area is comprised of Putnam and Sullivan Counties in the State of Missouri. All five middle-income census tracts have received an underserved designation for being located in a remote rural area. The assessment area is comprised of nonmetropolitan area and remains unchanged since the previous evaluation on August 25, 2014. 

The assessment area includes five census tracts that are all designated as middle-income. Two census tracts are located in Putnam County and three are located in Sullivan County. There were no changes noted in the income designated between the 2010 U.S. Census data and the 2015 American Community Survey (ACS) Census data.

The following table illustrates the demographics for the assessment area.

 

Service industries represent the largest portion of businesses at 29 percent; followed by agriculture (18 percent); and non-classifiable (13 percent).  In addition, 71 percent of area businesses have four or fewer employees, and 88 percent operate from a single location.

 

The U.S. Bureau of Labor Statistics reports provide unemployment rates from April 2019 to April 2020 for the bank's assessment area, The unemployment rate for the State of Missouri indicated a substantial increase from 2.7 to 9.8, a difference of 7.1 percent.  Putnam and Sullivan Counties unemployment rate also indicates an increase over the same timeframe showing a difference of 2.2
percent and 3 .1 percent, respectively,

 

3

 

 

The U.S. Bureau of Labor Statistics Unemployment Situation Report as of May 2020, indicates total nonfarm payroll employment rose by $2.5 million, as unemployment rates started to decline. The improvements in the labor market reflected a limited resumption of economic activity that had been curtailed in March and April due to the coronavirus (COVID-19) pandemic.  In May, employment rose sharply in leisure and hospitality, construction, education and health services, and retail trade. By contrast, employment in government continued to decline sharply.

 

Putnam County State Bank operates in a relatively non-competitive environment. According to the FDIC Deposit Market Share Report for June 30, 2019, there are six FDIC insured banks operating nine offices in the assessment area. The report indicates Putnam County State Bank is ranked lst with 50.1 percent of the market share.

 

As part of the evaluation process, examiners contact third parties active in the assessment areas to assist in identifying the credit needs. This information helps determine whether local financial institutions are responsive to these needs. It also shows what credit opportunities are available.

Examiners used an existing contact from a government funded business development program that serves various counties including Putnam and Sullivan Counties in the State of Missouri. The contact interviewed indicated both the agricultural and commercial markets were stable.  All income levels are represented in the assessment area and the contact indicated that individuals
commute approximately 30 miles to the larger town of Kirksville, Missouri to work and for the retail trade. Further, the contact indicated that current tariff discussions had somewhat affected the agricultural market with farmers that produce row crops of corn and soybean. Although the majority of the area's farmers produce row crops, there are some cattle farmers. Flooding in surrounding
areas has not affected the bank's designated assessment area. The contact mentioned there is a need for residential real estate loans. Landlords are making updates and repairs to the local apartments and many renters were noted as being students from the two universities in Kirksville, Missouri. The contact noted there was an adequate supply of low- and moderate-income housing; however, she mentioned there was.a shortage of housing stock for higher-cost homes, The contact indicated that the area banks are meeting the general banking and credit needs of the assessment area. Overall, the contact indicated that the credit needs of the assessment area are for agricultural, commercial, and home mortgage loans.

 

Considering economic and demographic data and information from the community contact and bank management; examiners determined the primary credit needs of the assessment area include agricultural, commercial, and home mortgage lending.

 

4

 

 

This evaluation covers the period from the prior evaluation dated August 25, 2014, to the current evaluation dated June 15, 2020. Examiners used the Interagency Small Institution Examination Procedures to evaluate Putnam County State Bank's CRA performance. This evaluation does not include any lending activity performed by affiliates.

 

Examiners determined that the bank's major product lines are agricultural and commercial lending. This conclusion considered the bank's business strategy and the number and dollar volume of loans originated during the evaluation period. Home mortgage and consumer loans do not represent a major product line and would provide no material support for conclusions or ratings; therefore,
these products were not reviewed.

Putnam County State Bank's lending focus and product mix remained consistent throughout the evaluation period. The Report of Condition as of March 31, 2020 shows that agricultural and commercial lending represent 71.0 percent and 15.2 percent of the loan portfolio, respectively. Based on the bank's business focus and loan portfolio composition, more weight was placed on small farm lending performance when arriving at overall conclusions.

This evaluation considered small farm and small business loans originated or renewed in 2019 for Assessment Area Concentration and a sample of loans originated within the designated assessment area for Borrower Profile. In 2019, the bank originated the 453 small farm loans totaling $19.2 million and 120 small business loans totaling $7.8 million. D&B data for 2019 provided a standard
of comparison for the small farm and small business loans reviewed.

Examiners evaluated lending activity based upon both the number and dollar volume of loans for Assessment Area Concentration. An analysis of Geographic Distribution was not completed as the assessment area does not include any low- or moderate-income census tracts. The Borrower Profile criteria was evaluated primarily based on the number of loans, as the number of loans is typically a better indicator of the lending performance of the institution. The dollar volume of the loans was reviewed for Borrower Profile criteria; however, the dollar volume of loans will not be discussed in the evaluation unless such an analysis materially affects conclusions.

 

5

 

 

Putnam County State Bank demonstrated Satisfactory performance under the Lending Test in its assessment area. Performance in all of the evaluated criteria supports this conclusion.

 

The average net loan-to-deposit ratio is more than reasonable given the institution's size, financial condition, and credit needs of its assessment area. The bank's loan-to-deposit ratio, calculated from Report of Condition data, averaged 98.81 percent over the past 23 calendar quarters from September 30, 2014, to March 31, 2020. The ratio remained consistent throughout the review period,

 

Lending: Inside and Outside of the Assessment Area
Loan Category	Number of Loans				Total #	Dollar Amount of Loans $(000s)				Total $(000s)
	Inside		Outside			Inside		Outside
	#	%	#	%		#	%	#	%
Small Farm	307	67.8	146	32.2	453	12,689	66.0	6,539	34.0	19,228
Small Business	71	59.2	49	40.8	120	5,013	64.2	2,798	35.8	7,811
Total	378	66.0	195	34.0	573	17,702	65.5	9,337	34.5	27,039
Source: Evaluation Period: 1/1/2019 - 12/31/2019 Bank Data

Distribution of Small Farm Loans by Gross Annual Revenue Category
Gross Revenue Level	% of Farms	#	%	$(000s)	%
<=$1,000,000	98.8	58	100.0	2,198	100.0
>$1,000,000	0.6	0	0.0	0	0.0
Revenue Not Available	0.6	0	0.0	0	0.0
Total	100.0	58	100.0	2,198	100.0
Source: 2019 D&B Data; 1/1/2019 - 12/31/2019 Bank Data

Distribution of Small Business Loans by Gross Annual Revenue Category
Gross Revenue Level	% of Farms	#	%	$(000s)	%
<=$1,000,000	78.5	35	97.2	1,085	99.8
>$1,000,000	3.8	1	2.8	2	0.2
Revenue Not Available	17.7	0	0.0	0	0.0
Total	100.0	36	100.0	1,087	100.0
Source: 2019 D&B Data; 1/1/2019 - 12/31/2019 Bank Data

DISCRIMINATORY OR OTHER ILLEGAL CREDIT PRACTICES REVIEW

APPENDICES

SMALL BANK PERFORMANCE 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 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;
4. The geographic distribution of the bank's loans; 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)

GLOSSARY