Community Reinvestment Act Performance Evaluation
Public Disclosure

May 26, 2015

Plumas Bank Certificate Number: 23275

336 West Main Street
Quincy, California 95971
Federal Deposit Insurance Corporation
25 Jessie Street at Ecker Square, Suite 2300
San Francisco, California 94105

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.

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  • Institution rating

    Institution rating

    Institution's community reinvestment act (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 (AA), including low and moderate-income (LMI) neighborhoods, in a manner consistent with its resources and capabilities.

    Plumas Bank (PB) is an intermediate small bank (ISB) for the purposes of CRA Performance Evaluation (PE), and therefore, was reviewed according to the evaluation procedures for such an institution. The bank’s overall rating is a function of its performance under the lending test and community development (CD) test, within the context of its operations and the needs of its defined (AA). The bank’s performance under each test is summarized below:

    Lending Test: Outstanding

    • The average net loan-to-deposit (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
    • A majority of the small business loans are within the institution’s AAs
    • The geographic distribution of loans reflects reasonable dispersion throughout the AAs
    • The distribution of borrowers reflects, given the demographics of the AAs, excellent penetration among businesses of different revenue sizes
    • There have been no CRA-related complaints

    Community Development Test: Outstanding

    The institution’s CD performance demonstrates excellent responsiveness to CD needs in its AAs through CD loans (CDLs), qualified CD investments (CDIs), and qualified CD services (CDSs), considering the institution’s capacity and availability of such opportunities for CD within the institution’s AAs.

    During the concurrent Compliance Examination, examiners review of the bank’s indirect automobile consumer loan program discovered substantive violations of Regulation B, which implements the Equal Credit Opportunity Act. The serious nature of the discriminatory and illegal credit practices had an adverse impact on the evaluation of the bank’s performance. As a result, the overall CRA performance was downgraded from an “Outstanding” to a “Satisfactory” rating.

  • Scope of evaluation

    Scope of evaluation

    Examiners performed the current CRA PE at PB’s main administration office located in Quincy, California. They relied on records provided by the bank; public loan and financial information; demographic data from the 2010 U.S. Census and D&B; and information provided by community contacts.

    General Information

    PB’s CRA PE follows the Federal Financial Institutions Examination Council’s ISB Evaluation Procedures. An ISB is defined as having total assets of at least $305 million, as of December 31 of both of the prior 2 calendar years, and less than $1.221 billion, as of December 31st of either of the prior 2 calendar years. PB has total assets of $553.3 million, according to the most recent Consolidated Report of Condition and Income (Call Report) as of March 31, 2015. The bank had total assets of $514.6 million and $538.0 million for the 2 years ending 2013 and 2014, respectively. The ISB procedures involve two tests: (1) the Lending Test and (2) the CD Test.

    This CRA PE covers the period from the prior evaluation as of January 23, 2012 to the current evaluation as of May 26, 2015. Throughout this period, examiners evaluate PB’s CRA performance in the context of the following:

    • The current economic environment
    • Demographic characteristics of its AAs
    • Information derived from community contacts
    • The institution’s financial resources and constraints
    • The institution’s product offerings and business strategy
    • Lending, investment, and service opportunities within its AAs

    Refer to the section entitled Description of the Institution for a detailed analysis of the performance context factors. Moreover, refer to the section entitled Conclusions with Respect to Performance Tests, in the Combined Assessment Area (CAA), for a full description of the bank’s performance under the lending and CD tests.

    Loan Products Reviewed

    A majority of PB’s loan products are commercial and commercial real estate loans. As of the March 31, 2015 Call Report, PB’s commercial and commercial real estate loans represented 52.4 percent of total loans; 1 to 4 family residential loans represented 17.5 percent; consumer loans represented 13.1 percent; farm loans represented 9.0 percent; and the remaining loans represented 7.9 percent of total loans. The lending test exclusively includes small business loans. Examiners assess the small business activity, because this activity represents a substantial number and dollar volume of the bank’s loan originations. The bank originated 129 small business loans totaling $27.8 million in 2013, and 141 small business loans totaling $31.6 million in 2014. Of the universe of small business loans stated above, the bank originated 74 small business loans totaling $9.7 million in 2013, and 88 small business loans totaling $10 million in 2014 within its AAs. Examiners validated the accuracy of the small business data and used the entire universe of loan originations for 2013 and 2014. Examiners considered the bank’s lending performance in light of the performance context in the AAs. Examiners compared the bank’s small business lending performance to the 2013 and 2014 businesses demographics, as reported by D&B and the demographic data from the 2010 U.S. Census.

    The D&B business survey data regularly indicates that a majority of businesses in a given area are small businesses. Moreover, the D&B data is only used as an indicator of business demographics in the AAs and is considered as a benchmark for performance under the Geographic Distribution and the Borrower Profile criteria of the lending test, and therefore, should not be construed as an absolute indicator of loan demand. Since PB is not a CRA reporter, the 2013 aggregate data is presented in the PE only to understand loan demand and competition in the bank’s AAs and was not used as a direct comparison for the Geographic Distribution and the Borrower Profile analysis in this CRA PE. The 2014 aggregate small business data was not available as of the date of this PE.

    Although the bank is subject to the reporting requirements of the Home Mortgage Disclosure (HMDA), the level of HMDA loans reported since the previous evaluation is too nominal for a meaningful analysis. In 2013 and 2014, PB only received 28 and 15 HMDA-related applications, representing $4.8 million and $4.2 million, respectively, in dollar amount. PB has curtailed HMDA lending since the previous evaluation, and as of December 2014, the bank discontinued its residential mortgage lending activity.

    Examiners also excluded small farm loans in the analysis of the bank’s lending activity, because the level of small farm loans has declined since the previous evaluation and no meaningful analysis could be conducted. In 2013, PB only originated 19 farm loans, totaling $2.2 million, in which 13 loans, totaling $1.3 million, were considered and given credit as CD loans.

    Conversely, in 2014, PB originated 17 farm loans, totaling $2.9 million, in which 8 loans, totaling $1.4 million, were considered and given credit as CD loans.

    The lending test does not include an analysis of consumer or other loan products, because the bank does not consider these loans products to be an integral part of its business strategy.

    Throughout this evaluation, the distribution of PB’s lending performance focuses on the number of loans originated within the bank’s AAs. Tables showing the distribution of lending by dollar volume although reviewed by examiners are not included in this PE, except in the AA concentration criterion of the lending test. The bank’s performance by dollar volume is not substantially different from performance by number for the Geographic Distribution and Borrower Profile performance criteria of the lending test.

    Community Development Loans, Investments, and Services Reviewed

    The CD test includes a quantitative and qualitative analysis of the bank’s CDLs; CDIs, which includes donations and grants; and CDSs activities from the last PE dated January 23, 2012 to the current evaluation date of May 26, 2015. Examiners reviewed and validated the accuracy of all CD-related data for inclusion in this CRA PE.

    Multiple Assessment Areas

    PB’s CRA Rating is derived from its performance within the different AAs. Similar to the previous PE, the bank continues to designate three AAs: Non-Metropolitan Statistical Area (Non-MSA) AA, Redding MSA AA, and the Sacramento AA. These AAs are comprised of seven distinct counties in which five of the seven counties are within the bank’s Non-MSA AA. This PE uses full-scope evaluation procedures to analyze the bank’s performance in the CAA, as well as the Non-MSA AA. Please refer to the Description of the AA for further details regarding the bank’s AAs.

    The Non-MSA AA represents 31.3 percent of the total population within the CAA (compared to 62.7 percent in the Redding MSA AA) and it is sparsely populated. The Non-MSA AA represents mountain communities, compared to the Redding and Sacramento AAs that are urban communities and densely populated. During the review period, the bank originated 71.0 and 61.3 percent by number and dollar volume, respectively, of its small business loans in the Non-MSA AA. According to the June 30, 2014 FDIC Summary of Deposits Report, the bank received 86.1 percent of its total deposits from the Non-MSA AA and ranked 2nd in loan and deposit market share. Examiners used full-scope evaluation procedures and weighed heavily the bank’s activities in the Non-MSA AA, because the area contains a high percentage of PB’s banking offices, Automated Teller Machines (ATM), lending, and CD activities.

    Examiners, however, used limited-scope evaluation procedures for both the Redding and Sacramento AAs and assigned less weight in arriving at the overall conclusion. During the review period, the bank originated 29.0 and 38.7 percent by number and dollar volume, respectively, of its small business loans in the Redding and Sacramento AAs. According to the June 30, 2014 FDIC Summary of Deposits Report, the bank received only 7.0 and 6.9 percent of its total deposits from the Redding and Sacramento AAs, respectively.

    Table 1 illustrates the volume of small business loans originated within each respective AA:

    Table 1 – Loans by Assessment Area
      2013 2014 Total
    Assessment Area # $(000) # $(000) # $(000)
    Small Business Loans
    Non-MSA AA 53 6,005 62 6,277 115 12,282
    Redding MSA AA 14 2,238 17 3,348 31 5,586
    Sacramento AA 7 1,415 9 748 16 2,163
    Total 74 9,658 88 10,373 162 20,031
    Source: Bank Records

    Finally, the overall conclusions derived in this analysis are based on a variety of performance context issues that affect the individual conclusions within the bank’s AAs.

    Please refer to the sections in this evaluation that describe the bank’s performance in specific AAs.

    Description of institution

    PB was established in 1980 as an independent, state-chartered community bank headquartered in Quincy, California. Quincy is mountain community, located in Plumas County, in northeastern California, which is about 150 miles northeast of Sacramento and about 80 miles west of Reno, Nevada. PB is a wholly owned subsidiary of Plumas Bancorp, a single, bank holding company. Shares in the holding company are publicly traded on the over-the-counter market under the stock symbol PLBC. As of the date of this evaluation, the bank has no other affiliates or subsidiaries. At the last CRA PE on January 23, 2012, the bank received a “Satisfactory” rating based on ISB evaluation procedures. PB conducts its operations primarily within a span of seven counties: Lassen, Modoc, Plumas, Sierra, and Nevada Counties are located in mountainous, sparsely populated area, while Placer and Shasta Counties are located in densely populated urban areas.

    The bank currently operates a network of 11 full-service branches, each with an ATM, which is either a drive-up or a walk-up ATM. Seven of the 11 branch offices are located in moderate- income census tracts (CTs). PB also operates four stand-alone, deposit-taking ATMs that are considered remote service facilities. Moreover, PB generates loans outside its AAs via Loan Production Offices located in Chico and Auburn, California; Beaverton, Oregon; and Reno, Nevada. The hours of operation and availability of products and services are tailored to the convenience and needs of bank customers. No branch has opened, closed, or relocated since the previous PE.

    The following table illustrates the distribution of PB’s branches among its respective CTs:

    Table 2 – Distribution of Branches by Assessment Area & Census Tract Income Category
    Assessment Area Total Branch Distribution Low-Income CTs Moderate- Income CTs Middle-Income CTs Upper-Income CT
      # % of # # % of Row Total # % of Row Total # % of Row Total # % of Row Total
    Non-MSA AA 7 63.6 0 0.0 3 42.9 4 100.0 0 0.0
    Redding MSA AA 2 18.2 0 0.0 2 28.6 0 0.0 0 0.0
    Sacramento AA 2 18.2 0 0.0 2 28.6 0 0.0 0 0.0
    Total 11 100.0 0 0.0 7 100.0 4 100.0 0 0.0
    Source: Bank Records and 2010 U.S. Census Data. Percentages may not add up to 100.0 percent due to rounding.

    PB is a Small business Administration (SBA) “Preferred Lender” offering SBA 7(a) and SBA 504 loans. The bank sells the SBA-guaranteed portion of its SBA loans to the secondary market, thereby releasing funds to reinvest in additional small business loans within the communities it serves. Since the previous PE, PB originated and sold 195 SBA loans, totaling approximately $66.3 million. In addition to SBA-guaranteed loans, PB offers “Business Express Loans,” which could either be a revolving line of credit or a term loan, and are exclusively available to sole proprietors, partnerships, limited-liability companies, as well as corporations. Loans are originated up to $250,000, and under certain conditions, financial statements may not be required for loans up to $50,000 to streamline the application approval process. This small business loan product has an average approval time period of one week, from application to funding. Since the previous evaluation, PB has originated 60 of this loan product, totaling $2.6 million.

    The bank also offers a broad range of other lending products that include real estate, commercial, agriculture, and consumer loans, as well as a full array of FDIC insured deposit and savings products, and non-FDIC insured investment brokerage products/services. Alternative delivery systems of products and services include 24-hour Internet banking, which is accessible through the bank’s web site at www.plumasbank.com and includes services such as bill pay, mobile banking, person-to-person transfer, external funds transfer, 24-hour telephone banking services, and night depository.

    According to the recent Call Report, as of March 31, 2015, PB had total assets of $553.3 million, total deposits of $497.6 million, total loans of $384.9 million, and total equity capital of $55.6 million. Total loans represent 69.6 percent of the bank’s total assets.

    Table 3 illustrates the distribution of the bank’s loan portfolio as of March 31, 2015:

    Less: Any Unearned Income on Loans00.0
    Table 3 - Loan Portfolio Distribution as of March 31, 2015
    Loan Type Dollar Volume (000) Percentage of Total Loans
    Construction and Land Development 24,926 6.5
    Secured by Farmland 18,117 4.7
    Revolving Open-end 1 to 4 Family Residential 39,499 10.3
    Closed-end 1 to 4 Family Residential First Lien 26,559 6.9
    Closed-end 1 to 4 Family Residential Junior Lien 1,471 0.4
    Multi-family Residential 5,070 1.3
    Commercial Real Estate 169,071 43.9
    Total Real Estate Secured 284,713 74.0
    Loans to Finance Agricultural Production 16,725 4.3
    Commercial and Industrial Loans 32,679 8.5
    Consumer Credit Cards 0 0.0
    Other Consumer Revolving Loans 429 0.1
    Closed-end Consumer Loans 49,853 13.0
    Obligations of States and Political Subdivisions 226 0.0
    Other Loans 329 0.0
    Lease financing receivables (net of unearned income) 0 0.0
    Total Loans 384,954 100.0
    Source: Call Report dated March 31, 2014; Percentages may not add up to 100.0 percent due to rounding.

    As demonstrated in Table 3, a majority of PB’s loans are commercial loans, which make up 52.4 percent of the bank’s total loan portfolio, followed by 1 to 4 family residential loans at 17.6 percent, consumer loans at 13.1 percent, agriculture-related loans at 9 percent, construction and land development loans at 6.5 percent, and multi-family loans at 1.3 percent.

    There are no legal or financial impediments that prevent PB from helping to meet AA credit needs.

  • Description of assessment area

    Description of assessment area

    The bank has designated the following AAs:

    • Non-MSA AA – comprised of four contiguous counties (Modoc, Lassen, Plumas, and Sierra) and five CTs of Nevada County, which is contiguous to Sierra and Placer Counties.
    • Redding MSA AA – comprised of all of Shasta County, within the Redding-Red Bluff, CA MSA #39820, and is west of and contiguous to Lassen and Plumas Counties.
    • Sacramento AA – comprised of 10 CTs in Placer County, which is south of and contiguous to Nevada County. The complete Sacramento-Roseville-Arden-Arcade, CA MSA #40900 is actually comprised of four counties: Sacramento, Yolo, El Dorado, and Placer Counties. PB designated only 10 of the 84 CTs in Placer County as part of its Sacramento AA.

    PB’s AAs have not changed since the previous evaluation, conform to the requirements of the CRA regulation, and do not arbitrarily exclude LMI geographies or individuals.

    Demographic Profile

    The CAA comprises 84 CTs: 17 moderate-income, 44 middle-income, and 23 upper-income CTs. No low-income CTs are located within the CAA. A majority of the CTs or 57.1 percent of total CTs, within the CAA, are located in the Redding MSA AA. Moreover, a majority of the bank’s moderate-income CTs or 12 of the 17 moderate-income CTs are also located in the Redding MSA AA. According to the 2010 U.S. Census data, the population of the CAA was 282,589, of which a majority or 62.7 percent (177,223) was located in the Redding MSA AA.

    Table 4 illustrates the distribution of CTs by income level within the respective AA:

    Table 4 – Distribution of CTs within the CAA
    CT Income Level Non-MSA AA Redding MSA AA Sacramento AA Totals
    #%
    Low-Income 0 0 0 0 0.0
    Moderate-Income 3 12 2 17 20.2
    Middle-Income 14 24 6 44 52.4
    Upper-Income 9 12 2 23 27.4
    Total 26 48 10 84 100.0
    Source: 2010 U.S. Census Data

    To understand the demographic characteristics of the bank’s CAA, Table 5 illustrates selected demographic information of the CAA:

    Table 5 – Select Demographic Characteristics of the CAA
    Demographic Characteristics # Low % of # Moderate % of # Middle % of # Upper % of # NA % of #
    CTs 84 0.0 20.2 52.4 27.4 0.0
    Population by CT Income Level 282,589 0.0 22.1 53.1 24.8 0.0
    Owner-Occupied Housing Units by CT Income Level 72,091 0.0 17.9 52.4 29.7 0.0
    Businesses by CT Income Level 22,164 0.0 27.5 51.9 20.6 0.0
    Families by Income Level 71,041 21.3 17.4 19.6 41.7 0.0
    Families by CT Income Level 71,041 0.0 21.7 50.5 27.8 0.0
    Median Family Income (MFI) $58,900 Median Housing Value $336,939
    HUD* Adjusted MFI for 2014 $54,455  
    Households Below Poverty Level 14.6%  
    Source: 2010 U.S. Census Data, 2014 D&B Data, *U.S. Department of Housing and Urban Development (HUD), Percentages may not add up to 100.0 percent due to rounding.

    Table 6 illustrates the distribution of PB’s full-service branch offices and ATMs within the AAs:

    Table 6 – AA Composition, Branches, and ATMs
    Assessment Area MSA or MD MSA # Counties Branches ATMs
    Non-MSA AA Non-MSA, CA 99999 Lassen, Modoc, Nevada, Plumas, and Sierra 7 11
    Redding MSA AA Redding-Red Bluff, CA 39820 Shasta 2 2
    Sacramento AA Sacramento-Roseville-Arden- Arcade, CA 40900 Placer 2 2
    Total Branches/ATMs 11 15
    Source: Bank Records

    The following section describes the economic profile of the CAA. The economic and demographic information are specific to the Redding and Sacramento AAs; however, they are presented under the descriptions of each individual AA.

    State-Designated Economically Distressed Areas

    The California Enterprise Zone (EZ) Program targets economically distressed areas throughout California by providing tax, utility, capital expenditure, and credit incentives. It also provides employee recruitment and training assistance, business development and permit assistance, and access to specialized SBA loan programs, loan pools, and industrial development bonds. The goal is to create jobs and to stimulate business growth in regions of low employment and economic distress. PB has taken the opportunity to participate in the EZ Program by providing several CDLs that promote economic development through the creation and retention of jobs.

    Examiners identified one EZ within the bank’s AA that is the Shasta Metro EZ. This EZ provides tax incentives to businesses to allow private sector forces to revive the local economy. It was designated as an EZ on November 6, 2006, and was scheduled to end on November 5, 2021. The EZ program, however, has been repealed as of January 1, 2014.

    The bank has 11 designated distressed and/or underserved middle-income CTs in the bank’s Non- MSA AA. A middle-income, non-MSA CT is regarded as underserved if it meets the criteria for population size, density, and dispersion that indicates the area’s population is sufficiently small, thin, and distant from a population center so that the CT is likely to have difficulty financing the fixed costs of meeting essential community needs. Distressed non-MSA, middle-income CTs are those located in counties that meet one or more triggers that generally reflect the “distressed criteria” used by the CD Financial Institutions Fund.

    Comparable Financial Institutions

    No comparable financial institutions operate in the area given PB’s asset size, branch network, area of service, and loan portfolio product mix.

    Competition and Market Share Profile

    Except for the Non-MSA AA, competition within the other AAs is robust. As of June 30, 2014, within the Redding and Sacramento AAs, PB competed for loans and deposits against 30 national, regional, and other community banks that operate 153 branches. According the June 30, 2014 FDIC’s Summary of Deposits Report, PB’s market share of deposits within the Redding and Sacramento AAs was less than 1 percent. The competition is much more predominant in the Redding and Sacramento AAs, as these AAs contain more urban areas that are more densely populated when compared to the Non-MSA AA.

    Community Contact

    During the course of this CRA PE, examiners used two community contacts in developing the bank’s performance context, as well as the evaluation of the bank’s CRA performance.

    The first contact was a new contact within the bank’s Non-MSA AA. The contact is a non-profit organization based in Quincy, California that provides information to local-area businesses which includes start-up businesses, as well as assistance in handling local state and county regulations. It gives information on what incentives are available for operating a business in Plumas County, particularly in Quincy. The contact indicated that the local economy has improved, home prices have increased, and unemployment has gone down. According to the contact, there are three banks within the Quincy area that provide the credit needs of the community. However, PB far exceeds other banks in providing credit and deposit products and services to local businesses and residents.

    The second contact is an existing contact that is a community-based, economic development organization serving the bank’s Redding MSA AA or Shasta County. The organization provides information and facilitation for companies looking to expand or relocate to Shasta County.

    Specific information provided is the availability of incentives to operate within the county. The organization also facilitates financing by referring banks to locally established businesses in the community. This contact indicated a need for working capital loans across the business community, as most business in the area are looking for funding to finance growth. Overall, the contact indicated that local area banks are doing well in addressing the needs of small businesses; however, he stated that there is a continued need for credit by micro and start-up enterprises. The contact believes that local banks are competing for lending opportunities within Shasta County, particularly for local businesses, but are continuously hampered by regulation.

  • Conclusions on Performance Criteria for the Combined Assessment Area

    Conclusions with respect to performance tests for the combined AA

    Lending test

    PB is rated “Outstanding” under the lending test.

    The lending test evaluates PB’s record of helping to meet the credit needs of its AAs. The institution’s lending performance is evaluated using the following five criteria:

    • LTD ratio
    • AA concentration
    • Geographic distribution of loans
    • Borrower profile
    • Response to CRA-related complaints

    The LTD ratio is a performance measure that gauges the extent in which an institution invests depositors’ funds back into the community through its lending activity. A high LTD ratio is a proxy for active lending. The Borrower Profile refers to the record of lending to borrowers of different income levels and businesses of different revenue sizes, while the Geographic Distribution refers to the record of lending to different CTs income levels within the bank’s AA.

    The evaluation for each criterion of the lending test is not equal. The Borrower Profile is weighted heavily followed by geographic distribution in the analysis due to the nature of the institution’s AA. The bank’s AA has no low-income CTs. The moderate-income CTs within the bank’s AA are primarily located in urban regions. Within these urban regions, the bank has substantial competition from other banks and non-bank lenders. The elevated competition results in fewer opportunities for PB to make loans within the moderate-income CTs. Outside of the urban locations, the CTs are primarily comprised of middle- and upper-income areas.

    Loan-to-Deposit Ratio

    PB’s 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.

    Table 7 illustrates the bank’s average LTD ratio for the last 13 calendar quarters from March 31, 2012 to March 31, 2015 as well as the bank’s LTD ratio over the prior 4 quarters:

    Table 7 – LTD Ratio Comparison
    Institution Ratio Since 03/31/2012 Ratio Over Prior 4 Quarters
    Plumas Bank 74.8 77.4
    Source: March 31, 2012 through March 31, 2015 Call Reports

    The average LTD ratio for the 13 quarters is 74.8 percent and for the most recent 4 quarters is 77.4 percent. During the review period, the bank’s quarterly LTD ratios have varied from a high of 78.3 percent on March 31, 2015 to a low of 69.5 percent on September 30, 2013. As mentioned earlier under the “Description of Intuition” section of this report, PB originated and sold the guaranteed portion of 195 SBA loans, totaling approximately $66.3 million since the last CRA Evaluation. Considering these loans may not have been included in the Call Reports used to calculate the LTD ratio, PB’s performance under this criterion is considered more than reasonable.

    Assessment Area Concentration

    The bank originates a majority of its loans within its CAA. The AA concentration analyzes the extent of lending inside and outside of the CAA.

    Table 8 shows that a majority of the bank’s small business loans by number are made inside the bank’s CAA and by dollar volume are made outside of the bank’s CAA.

    Table 8 - Distribution of Loans Inside and Outside of the CAA
      Number of Loans Dollar Amount of Loans (000s)
      Inside AA Outside AA   Inside AA Outside AA  
    Loan Type # % # % Total $(000) % $(000) % Total $(000)
    Small Business
    2013 74 57.4 55 42.6 129 9,658 34.7 18,183 65.3 27,841
    2014 88 62.4 53 37.6 141 10,373 32.8 21,221 67.2 31,594
    Total 162 60.0 108 40.0 270 20,031 33.7 39,404 66.3 59,435
    Source: Bank Records

    Although the majority of the loans by dollar volume are outside of the bank’s CAA, the number of loans carries more weight because it has more impact on the number of small businesses served in the CAA. The performance represents a reasonable level of responsiveness by the bank in meeting the credit needs of its CAA. The bank’s reasonable AA concentration is consistent with the performance at the prior CRA PE.

    Geographic Distribution

    The bank’s Geographic Distribution of small business loans reflects reasonable dispersion throughout the CAA, including moderate-income CTs. The bank does not have any conspicuous gaps in the geographic distribution of lending within the CAA.

    Table 9 illustrates the bank’s lending performance by number and by income level of the CTs, and for comparison purposes, the analysis includes the percentage of total businesses, as reported by D&B for 2013 and 2014:

    Table 9 – Small Business Loan Geographic Distribution in the CAA
      2013 D&B 2014 D&B 2013 Bank 2014 Bank
    Census Tract Income Level % % # % # %
    Moderate 26.8 27.5 12 16.2 23 26.1
    Middle 52.9 51.9 36 48.7 40 45.5
    Upper 20.3 20.6 26 35.1 25 28.4
    N/A 0.0 0.0 0.0 0.0 0.0 0.0
    Total 100.0 100.0 74 100.0 88 100.0
    Source: 2013 and 2014 D&B, Bank Records

    The bank’s small business loans percentage in moderate-income CTs is below the D&B data in 2013 and is slightly below D&B data in 2014. PB’s performance in 2014 shows an upward trend, which is considered positive performance when comparing the 16.2 percent performance in 2013. While the bank’s performance in moderate-income CTs is below the percentage of businesses, it should be noted that D&B data includes all businesses in a given area that voluntarily respond to a survey request, including a large number of very small businesses that have limited or no credit needs. As such, the D&B data is only used as an indicator of business demographics in the CAA and is not considered an absolute distribution of credit needs or commercial lending opportunities. In addition, the strong level of competition within the Redding and Sacramento AAs that have a much larger presence of national and regional banks with significant funding resources and branch locations than PB, has been taken into consideration as part of the rating.

    Borrower Profile

    The bank’s distribution of borrowers reflects excellent penetration among businesses of different revenue sizes, given the demographics of the CAA, and the level of competition for such loans in the CAA.

    Table 10 illustrates the distribution of small business loans by GAR levels, and for comparison purposes, the table also includes the percentage of total businesses by GAR levels, as reported by D&B in the CAA for 2013 and 2014.

    Table 10 – Small Business Loan Borrower Profile in the CAA
      2013 D&B 2014 D&B 2013 Bank 2014 Bank
    Gross Annual Revenues % % # % # %
    <=$1 Million 75.8 75.3 74 100.0 88 100.0
    > $1 Million 3.6 4.0 0 0.0 0 0.0
    Not Applicable 20.5 20.7 0 0.0 0 0.0
    Total 100.0 100.0 74 100.0 88 100.0
    Source: 2013 and 2014 D&B, Bank Records, Percentages may not add up to 100.0 percent due to rounding.

    As depicted in the table above, PB provided 100 percent of its loans to small businesses with Gross Annual Revenues (GAR) of $1 million or less for both 2013 and 2014, exceeding D&B’s percentages in both years. Although not a direct comparison, the bank’s 2013 performance also exceeded the 2013 aggregate data reported by large banks that made 52.0 percent of their small business loans to businesses with GARs of $1 million or less in the CAA.

    Response to CRA-Related Complaints

    A review of FDIC records, as well as the bank’s CRA public file, did not reveal any complaints relating to the bank’s CRA performance since the previous evaluation; therefore, this criterion was not rated.

    Community development test

    PB is rated “Outstanding” under the CD test.

    PB’s CD test performance demonstrates excellent responsiveness to the CD needs in the CAA through CDLs, CDIs, and CDSs considering the institution’s capacity and the need and availability of such opportunities for CD in the CAA. The outstanding CD rating is primarily the result of the excellent level, as well as continued growth of CDLs, CDIs, and CDSs.

    Community Development Lending

    During the review period, the bank granted a total of 143 qualified CD loans, totaling approximately $32.6 million. Although the number and dollar volume of CDLs in affordable housing is minimal, the bank made an extensive amount of CDLs addressing the needs of economic development followed by revitalization or stabilization, as well as community services.

    Table 11 details the number and dollar volume of CDLs originated by type:

    Table 11 – Community Development Lending
      Total Affordable Housing Economic Development Community Services Revitalization or Stabilization
    AA # $(000) # $(000) # $(000) # $(000) # $(000)
    2012
    Non-MSA AA 46 7,967 - - 35 4,654 7 523 4 2,790
    Redding MSA AA 7 1,298 - - 3 422 - - 4 876
    Total 53 9,265 - - 38 5,076 7 523 8 3,666
    2013
    Non-MSA AA 39 4,930 - - 31 3,711 4 300 4 919
    Redding MSA AA 4 1,006 - - 2 540 1 21 1 445
    Sacramento AA 2 1,070 1 240 1 830 - - - -
    Total 45 7,006 1 240 34 5,081 5 321 5 1,364
    2014
    Non-MSA AA 27 8,903 - - 18 2,353 7 250 2 6,300
    Redding MSA AA 2 170 - - 2 170 - - - -
    Sacramento AA 3 3,364 - - 3 3,364 - - - -
    Total 32 12,437 - - 23 5,887 7 250 2 6,300
    YTD 2015
    Non-MSA AA 12 3,335 1 216 9 2,920 2 199 - -
    Redding MSA AA 1 605 - - 1 605 - - - -
    Total 13 3,940 1 216 10 3,525 2 199 - -
    Grand Total 143 32,648 2 456 105 19,569 21 1,293 15 11,330
    Source: Bank Records

    As shown in Table 11, the majority by number and dollar volume or 86.7 and 77.0 percent, respectively, of CDLs were originated in the Non-MSA AA. The total number and dollar volume of CDLs significantly increased since the previous PE, where the bank originated 34 CDLs, totaling approximately $15.9 million.

    PB’s qualified CDLs by dollar volume represent 5.9 percent of total assets ($553.3 million), 8.5 percent of total net loans ($384.9 million), and 58.6 percent of total equity capital ($55.6 million), as of the March 31, 2015 Call Report.

    The following are notable examples of PB’s CD lending activity:

    • PB originated a $585,000 commercial real estate loan to an industrial park in a distressed (high rate of unemployment) and underserved community. The industrial park includes commercial shop space and a storage facility in Plumas County, and employs residents of the community.
    • PB originated a $655,000 commercial real estate loan to a fuel and general store business located in a distressed (high rate of poverty) community. The company employs 10 full- time employees from the community in Lassen County.
    • PB originated a $605,000 commercial & industrial term loan to an underground pump rental and service company in Shasta County. The company is in a moderate-income geography and employs moderate-income individuals.

    Community Development Investments

    The scarceness of qualified investments within the bank’s CAA, has led PB to seek investments outside of its CAA but remained within the statewide area. A significant majority of these investments or 82.8 and 78.6 percent by number and dollar volume, respectively, are mortgage- backed securities. The remaining investments are collateralized mortgage obligations, representing 10 by number and $2.6 million by dollar volume. At the current examination, PB did not have any outstanding prior period investments.

    In aggregate, the total dollar volume of CDIs during the review period is $12.2 million, which represents 2.2 percent of total assets ($553.3 million), 21.9 percent of total equity capital ($55.6 million), and 13.5 percent of total investments ($90.1 million), as of the March 31, 2015 Call Report.

    Table 12 below illustrates the number and dollar volume of CDIs originated since the previous evaluation:

    Table 12 – Community Development Investments
      Total Affordable Housing Economic Development Community Services Revitalization or Stabilization
    Assessment Area # $(000) # $(000) # $(000) # $(000) # $(000)
    2012
    Non-MSA AA - - - - - - - - - -
    Redding MSA AA - - - - - - - - - -
    Sacramento AA - - - - - - - - - -
    Statewide 22 3,787 22 3,787 - - - - - -
    Total – 2012 22 3,787 22 3,787 - - - - - -
    2013
    Non-MSA AA - - - - - - - - - -
    Redding MSA AA - - - - - - - - - -
    Sacramento AA - - - - - - - - - -
    Statewide 17 3,783 17 3,783 - - - - - -
    Total – 2013 17 3,783 17 3,783 - - - - - -
    2014
    Non-MSA AA - - - - - - - - - -
    Redding MSA AA - - - - - - - - - -
    Sacramento AA - - - - - - - - - -
    Statewide 16 3,466 16 3,466 - - - - - -
    Total – 2014 16 3,466 16 3,466 - - - - - -
    2015
    Non-MSA AA - - - - - - - - - -
    Redding MSA AA - - - - - - - - - -
    Sacramento AA - - - - - - - - - -
    Statewide 3 1,158 3 1,158 - - - - - -
    Total – 2015 3 1,158 3 1,158 - - - - - -
    Grand Total 58 12,194 58 12,194 - - - - - -
    Source: Bank Records

    Since the prior evaluation, PB granted 110 qualified CD donations totaling about $65,000. These figures represent a significant increase from the previous PE, where PB made only 60 donations totaling $19,000. PB’s donations exclusively focused in providing funds to community service activities.

    Table 13 details the number and dollar volume of qualified grants and donations made within the AA:

    Table 13 – Community Development Donations
      Total Affordable Housing Economic Development Community Services Revitalization or Stabilization
    Assessment Area # $ # $ # $ # $ # $
    2012
    Non-MSA AA 13 7,548 - - - - 13 7,548 - -
    Redding MSA AA 5 1,560 - - - - 5 1,560 - -
    Sacramento AA - - - - - - - - - -
    Total – 2012 18 9,108 - - - - 18 9,108 - -
    2013
    Non-MSA AA 30 11,822 - - - - 30 11,822 - -
    Redding MSA AA 5 2,100 - - - - 5 2,100 - -
    Sacramento AA 2 130 - - - - 2 130 - -
    Total – 2013 37 14,052 - - - - 37 14,052 - -
    2014
    Non-MSA AA 39 29,758 - - - - 39 29,758 - -
    Redding MSA AA 2 2,000 - - - - 2 2,000 - -
    Sacramento AA 4 1,620 - - - - 4 1,620 - -
    Total – 2014 45 33,378 - - - - 45 33,378 - -
    2015
    Non-MSA AA 7 7,715 - - - - 7 7,715 - -
    Redding MSA AA 2 500 - - - - 2 500 - -
    Sacramento AA 1 100 - - - - 1 100 - -
    Total – 2015 10 8,315 - - - - 10 8,315 - -
    Grand Total 110 64,853 - - - - 110 64,853 - -
    Source: Bank Records

    The following are notable examples of the bank’s qualified donations and grants:

    • PB provided $5,000 donation to a town council within Nevada County that provides grants to foster economic development. In January 2014, the town council granted $2.5 million in funds to a local chamber of commerce for 2 economic development programs to help nurture a healthy, year-round local economy by provided financial assistance for specific projects.
    • PB provided $12,000 in total donations to a local health care foundation in Plumas County to promote the hospital in the community and enhance the financial resources required to sustain quality health care of local residents.
    • PB provided $2,500 in total donations to local, non-profit health system (hospital) within the Nevada County to foster health care, particularly for cancer patients.
    • PB provided $2,400 in total donations to a 4-H youth development program in Lassen County to promote educational activities for its members.

    Community Development Services

    Since the previous PE, PB has provided a total of 2,862 CDS hours, focusing on economic development and community services needs of the CAA. No comparison could be made from the previous PE, because the bank’s CDS hours were not tracked at the last PE. During the evaluation period, a total of 39 bank employees, including officers and a Director, provided financial expertise or technical assistance to 107 different qualified CD organizations or programs. These organizations are committed to CD activities that benefit small businesses or moderate-income individuals and geographies in the bank’s CAA. These CDSs are centered primarily in the Non-MSA AA, where a majority of the bank’s lending and branches are located.

    Table 14 details PB’s CDSs by number of individual services, number of hours, and the type of CD activities served within the different AAs:

    Table 14 - Community Development Services
      Total Affordable Housing Economic Development Community Services Revitalization or Stabilization
    Assessment Area # Hours # Hours # Hours # Hours # Hours
    2012
    Non-MSA AA 31 150 - - 10 50 21 100 - -
    Redding MSA AA - - - - - - - - - -
    Sacramento AA - - - - - - - - - -
    Total – 2012 31 150 - - 10 50 21 100 - -
    2013
    Non-MSA AA 19 649 - - 8 461 11 188 - -
    Redding MSA AA - - - - - - - - - -
    Sacramento AA - - - - - - - - - -
    Total – 2013 19 649 - - 8 461 11 188 - -
    2014
    Non-MSA AA 33 1 133 - - 23 687 10 446 - -
    Redding MSA AA 1 7 - - - - 1 7 - -
    Sacramento AA - - - - - - - - - -
    Total – 2014 34 1,140 - - 23 687 11 453 - -
    2015
    Non-MSA AA 22 875 - - 6 246 16 629 - -
    Redding MSA AA - - - - - - - - - -
    Sacramento AA 1 48 - - 1 48 - - - -
    Total – 2015 23 923 - - 7 294 16 629 - -
    Grand Total 107 2,862 - - 48 1,492 59 1,370 - -
    Source: Bank Records

    The following are notable examples of PB’s CDS activities:

    • Bank officers are involved with a community service organization program that provides financial education classes to students in Placer County.
    • A bank officer served as a board member of a non-profit economic development corporation that provides financing and technical assistance to small businesses and start- up businesses in Modoc County.
    • A bank officer served as a board member of a non-profit organization that provides needed training to prepare applicants residing in Modoc, Lassen, Plumas, Shasta, and Nevada counties to become energy efficient construction workers. The program is targeted to the unemployed, dislocated construction workers, underemployed, new entrants and special needs groups such as veterans, and people with education and language barriers located in these counties.
    • A bank Director served as a counselor for a non-profit organization and provided technical and business counseling to start-up businesses and entrepreneurs that serves a broader statewide area, including the bank’s AAs.
  • Discriminatory or other illegal credit practices review

    Discriminatory or other illegal credit practices review

    During the concurrent Compliance Examination, examiners review of the bank’s indirect automobile consumer loan program discovered substantive violations of Regulation B, which implements the Equal Credit Opportunity Act. The serious nature of the discriminatory and illegal credit practices had an adverse impact on the evaluation of the bank’s performance. As a result, the overall CRA performance was downgraded from an “Outstanding” to a “Satisfactory” rating.

  • Individual Assessment Area Evaluations

    Metropolitan area evaluated using full-scope evaluation procedures

    Descr iption of institution's operations in the Non-MSA AA

    PB operates 7 branches and 11 ATMs in the Non-MSA AA. The bank’s operations within the Non-MSA AA are discussed above in the sections labeled Scope of the Evaluation and Description of the Institution.

    The bank originates a majority of its small business loans within the Non-MSA AA. During the evaluation period, the small business lending activities originated in the Non-MSA AA accounted for 71.0 and 61.3 percent by number and dollar volume, respectively. As of the June 30, 2014 Summary of Deposits Report, the Non-MSA AA deposits totaled $393.8 million or about 68.1 percent of the bank’s total deposits. PB competes with 10 other national, regional, and other community banks, which operate 36 branch offices in the Non-MSA AA. The bank’s deposit market share within the Non-MSA AA is 17.7 percent, representing 2nd place in ranking. The following describes other information as it pertains to the Non-MSA AA:

    • Twenty-six of the 84 CTs or 31.0 percent;
    • Three of the 17 moderate-income CTs or 17.6 percent;
    • Approximately 86.7 and 77.0 percent by number and dollar volume, respectively, of qualified CDLs;
    • Approximately 80.9 and 87.6 percent by number and dollar volume, respectively, of qualified donations and grants; and
    • Approximately 98.1 percent by number of qualified CD organizations and hours spent of CDSs are within the Non-MSA AA.

    Description of the Non-MSA assessment area

    Demographic and Economic Profile

    The Non-MSA AA comprises five counties: Lassen, Modoc, Nevada, Plumas, and Sierra Counties. The section at the beginning of this PE, titled Description of the Assessment Area, provides detail in regards to observations from a community contact, as well as discussion on the substantial loan competition from bank and non-bank lenders within the Non-MSA AA.

    The discussion below highlights additional details that are relevant to the Non-MSA AA, full- scope evaluation.

    Table 15 depicts selected demographic, housing, and business data with respect to the Non-MSA AA:

    Table 15 – Select Demographic Characteristics of the Non-MSA AA
    Demographic Characteristics # Low % of # Moderate % of # Middle % of # Upper % of # NA % of #
    CTs 26 0.0 11.5 53.9 34.6 0.0
    Population by CT Income Level 88,562 0.0 11.5 55.6 32.9 0.0
    Owner-Occupied Housing Units by CT Income Level 22,571 0.0 12.7 47.0 40.3 0.0
    Businesses by CT Income Level 6,510 0.0 15.0 57.7 27.3 0.0
    Families by Income Level 21,534 18.7 16.3 20.4 44.6 0.0
    Families by CT Income Level 21,534 0.0 15.0 46.1 38.9 0.0
    Median Family Income (MFI) $61,233 Median Housing Value $337,197
    MFI HUD Adjusted MFI for 2014 $54,700  
    Households Below Poverty Level 13.5%  
    Source: 2010 U.S. Census Data, 2014 D&B Data, HUD, Percentages may not add up to 100.0 percent due to rounding.

    The Non-MSA AA includes 3 moderate-income CTs, which represent 3.6 percent of the total CTs. There are no low-income CTs in the Non-MSA AA. The 2014 D&B data reports that 85.0 percent of businesses are located outside of the moderate-income CTs. According to the 2010 U.S. Census, there were 50,534 total housing units in the Non-MSA AA. Owner-occupied units represent 44.6 percent, renter-occupied units represent 21.7 percent, and vacant housing unit represent 33.5 percent.

    According to the December 2014 Moody’s Analytics report, California’s above average growth is supported by its buoyant technology industry. Tech havens such as the Bay Area are at the forefront of California’s expansion. This obviously has no effect within the counties and communities PB serves, as they are far removed from any tech-related industry that are more predominant in the Bay Area of California.

    Modoc County is the northeastern-most county of California. Alturas is the county seat. Modoc is bordered by the State of Oregon to the north, Siskiyou County to the west, Shasta and Lassen Counties to the south, and the State of Nevada to the east. Approximately 90 percent of the county consists of national forest, wilderness preserve, wildlife refuges, and state and federal lands. According to the California Employment Development Department (CEDD), the unemployment rate for Modoc County has gone down from 14.4 (in 2012) to 10.2 percent (in 2014), but remains higher than that of the State of California and the national unemployment rates of 7.6 and 6.2 percent (in 2014), respectively. The largest employment sector in the county is government, which accounts for approximately half of all wage and salary jobs.

    Lassen County is located in the mountains of Northeast California, in the eastern slopes of the Sierra Nevada Mountains. It is south of Modoc County and borders Shasta to the West, Plumas and a small portion of Sierra to the South, and the State of Nevada to the East. Susanville is the county seat. According to the CEDD, the unemployment rate for Lassen County has gone down from 12.5 (in 2012) to 9.1 percent (in 2014), but remains higher than the State of California and the national unemployment rates. Within the last 3 years, employment growth is dominated by the public sector, which accounts for 51 percent of the expected growth. The leisure services, retail trade, and construction sectors account for an additional 29 percent of net job creation during this time.

    Home to more than 100 lakes, Plumas County is located in Northeast California in a primarily mountainous region. Plumas County is bordered by Sierra and Yuba Counties to the South, Butte and Tehama Counties to the West, Shasta and Lassen Counties to the North, and the panhandle of Lassen County to the East. According to the CEDD, the unemployment rate for Plumas County has gone down from 16.2 (in 2012) to 11.5 percent (in 2014), but remains higher than the State of California and the national unemployment rates. Government and service providing sectors presently dominate the job market in the county.

    Sierra County is divided east to west by the crest of the Sierra Nevada. This creates two very different regions. The west side is mountainous and heavily forested. The Sierra Valley, east of the crest, is home to most of the county’s residents and farms. Sierra County is bordered by Plumas and Lassen Counties to the North, Yuba County to the West, Nevada County to the South, and the State of Nevada to the East. The county seat is Downieville. According to the CEDD, the unemployment rate for the county has gone down from 14.3 (in 2012) to 10.1 percent (in 2014), but remains higher than the State of California and the national unemployment rates. Government and service providing sectors presently dominate the job market in the county.

    Nevada County is located in California’s Mother Lode Country. Nevada County stretches from the Eastern Sacramento Valley, across the Sierra Nevada Mountains, to the State of Nevada. Nevada City is the county seat. According to the CEDD, the unemployment rate has gone down from 9.8 (in 2012) to 6.5 percent (in 2014), which is lower than the State of California’s unemployment rate, but slightly higher than the national unemployment rate. Employment remains flat in the financial activities, transportation, information, and manufacturing sectors. The professional services, health and education, leisure services, retail trade, and construction sectors account for 80 percent of all job creation during this time.

    Conclusions with respect to performance tests in the Non-MSA AA

    Examiners performed a full-scope evaluation of the institution’s performance in the Non-MSA AA. The evaluation included the lending and CD tests. The lending test exclusively analyzed small business loans as the primary product type for PB. The CD test analyzed the CDLs, CDIs, and CDSs.

    Lending test

    Overall, PB’s lending performance in the Non-MSA AA is consistent with its performance in the CAA. A more detailed analysis of the Geographic Distribution and the Borrower Profile performance follows.

    Geographic Distribution

    The bank’s geographic distribution of small business loans reflects reasonable dispersion throughout the Non-MSA AA, including moderate-income CTs.Table 16 illustrates the bank’s small business lending performance by number and by income level of the CTs, and for comparison purposes, the analysis includes the percentage of total businesses as reported by D&B for 2013 and 2014:

    Table 16 – Small Business Loan Geographic Distribution in the Non-MSA AA
      2013 D&B 2014 D&B 2013 Bank 2014 Bank
    Census Tract Income Level % % # % # %
    Moderate 14.3 15.0 7 13.2 10 16.1
    Middle 58.6 57.7 28 52.8 33 53.2
    Upper 27.1 27.3 18 34.0 19 30.7
    Total 100.0 100.0 53 100.0 62 100.0
    Source: 2013 and 2014 D&B, Bank Records

    As shown on the above table, the bank’s 2013 lending performance in moderate-income CTs of 13.2 percent is slightly below the D&B data of 14.3 percent. In 2014, PB’s lending performance in moderate-income CTs at 16.1 percent reflects an upward trend and slightly exceeds the D&B’s data of 15.0 percent. Although aggregate data is not used as direct comparison, it is presented in the PE to show competition and loan demand within the AA. The 2013 aggregate data showed that 12.7 percent of the large bank reporters originated their small business loans in moderate-income CTs, which is slightly below PB’s 2013 performance in moderate-income CTs. As of the date of this PE, no aggregate lending data was available for 2014.

    Borrower Profile

    The bank’s distribution of small business borrowers reflects excellent penetration among businesses of different revenue sizes, given the demographics of the AA and the level of competition for such loans in the AA.

    Table 17 illustrates the distribution of small business loans by number and GAR of the businesses, and for comparison purposes, the analysis also includes the percentage of businesses by GAR levels as reported by D&B for 2013 and 2014:

    Table 17 – Small Business Loan Borrower Profile in the Non-MSA AA
      2013 D&B 2014 D&B 2013 Bank 2014 Bank
    Gross Annual Revenues % % # % # %
    <$1 Million 74.0 74.0 53 100.0 62 100.0
    >$1 Million 3.1 3.5 0 0.0 0 0.0
    Not Applicable 22.9 22.5 0 0.0 0 0.0
    Total 100.0 100.0 53 100.0 62 100.0
    Source: 2013 and 2014 D&B, Bank Records

    As depicted above, PB’s 100.0 percent of small business loans were made to businesses with GAR of $1 million or less for both 2013 and 2014, exceeding D&B’s percentages in both years.

    Community development test

    Community Development Activity

    PB’s CD test performance demonstrates excellent responsiveness to the CD needs in the Non- MSA AA through CDLs, CDIs, and CDSs, considering the institution’s capacity and the need and availability of such opportunities in the AA. The bank’s CD test performance in the Non- MSA AA is consistent with the CAA CD test conclusions.

    Community Development Loans

    PB originated 124 of the 143 or 86.7 percent of total number of CDLs in the Non-MSA AA, totaling approximately $25.1 million. The qualified CDLs were targeted to organizations which provided a broad array of CD activities, including economic development, community services, as well as revitalization and stabilization. PB’s CDLs significantly increased since the previous evaluation from 22 to 124 CDLs by number and from $6.7 to $25.1 million by dollar volume.

    Community Development Investments

    During the review period, PB originated only statewide mortgage-back securities and collateralized mortgage obligations. Donations and grants, nonetheless, have significantly increased since the previous PE, from 18 to 89 by number and $18,000 to about $57,000 by dollar volume as of this PE. PB focused its donations to organizations that provide community services within its Non-MSA AA.

    Community Development Services

    PB completed 105 CDSs in the Non-MSA AA totaling 2,807 hours. The 105 completed CDSs in the Non-MSA AA far exceed that of the 20 identified during the previous PE. The bank’s qualified CDSs primarily targeted economic development and community services within the Non-MSA AA. No records of CDS hours were tracked by the bank during the previous PE to compare its performance. Nonetheless, the total hours spent by bank employees is commendable, given the bank’s asset size and location of the different areas served within the Non-MSA AA.

    Metropolitan area evaluated using limited-scope evaluation procedures

    Description of institution's operations in the Redding MSA AA

    The Redding MSA AA contains 2 of the bank’s 11 full-service branch offices. According to the June 30, 2014 Summary of Deposits report, PB ranks 14th out of the 15 FDIC-insured institutions that operate 46 branch offices within the AA, with 1.2 percent of the deposit market share. The Redding MSA AA deposits totaled $31.8 million, or approximately 7.0 percent, of the bank’s total deposits. The lending activities originated in the Redding MSA AA accounted for 19.1 percent by number of total small business loans.

    Description of the assessment area

    Demographic and Economic Profile

    The Redding MSA AA consists of Shasta County, which individually constitutes the Redding, CA MSA (#39820), and comprises 48 CTs, based on the 2010 U.S. Census: 12 are moderate-, 24 are middle-, and 12 are upper-income CTs. Table 18 depicts selected demographic, housing, and business data on the Redding MSA AA:

    Table 18 – Select Demographic Characteristics of the Redding MSA AA
    Demographic Characteristics # Low % of # Moderate % of # Middle % of # Upper % of # NA % of #
    CTs 48 0.0 25.0 50.0 25.0 0.0
    Population by CT Income Level 177,223 0.0 26.9 51.4 21.7 0.0
    Owner-Occupied Housing Units by CT Income Level 45.574 0.0 20.8 53.8 25.4 0.0
    Businesses by CT Income Level 14,080 0.0 33.8 48.1 18.1 0.0
    Families by Income Level 45,805 22.7 18.0 19.1 40.2 0.0
    Families by CT Income Level 45,805 0.0 24.7 51.7 23.6 0.0
    MFI $56,494    
    HUD Adjusted MFI for 2014 $51,500    
    Households Below Poverty Level 15.6% Median Housing Value $267,273
    Source: 2010 U.S. Census Data, 2014 D&B Data, HUD, Percentages may not add up to 100.0 percent due to rounding.

    As shown above, a majority of the population and businesses are located in middle- and upper- income CTs. There are no low-income CTs in the Redding MSA AA. The Bureau of Labor Statistics (BLS) reports the unemployment rate for the AA at 8.0 percent, as of the 4th quarter of 2014, which is higher than the state’s unemployment rate of 6.9 percent, and the national unemployment rate of 5.5 percent. In addition, the 2010 U.S. Census data reveals that 15.6 percent of households within the Redding MSA AA have incomes below the poverty level. The percentage of households with incomes below the poverty level can be an indicator of a reduced capacity to borrow, which can effectively limit a financial institution’s ability to lend.

    According to the December 2014 Moody’s Analytics report, Redding’s economic recovery is trailing that of California’s other metropolitan areas, with unemployment only halfway back to its 2006 peak. The logging and manufacturing industries have diminished in the area. However, the services industry is now the key industry to further the recovery. The surrounding rural counties rely heavily on Redding for retail, healthcare, and recreational services. Redding’s top employers are Mercy Medical Center, J&A Food Services, and Holiday Markets with 1,400, 1,300, and 1,050 employees, respectively. A large retiree population also drives demand for local services and will support the above-average growth in Redding’s healthcare industry.

    Conclusions with respect to performance tests in the Redding MSA AA

    Lending test

    PB’s lending performance in the Redding MSA AA is consistent with the performance in the Non-MSA AA. The bank originated 19.1 percent of total small business loans within the Redding MSA AA during the review period. PB originated 14 small business loans in 2013 totaling $2.2 million, and 17 small business loans in 2014 totaling $3.3 million. Examiners did not conduct a full-scope analysis because of the relatively minimal number of loans originated in this AA.

    Community development test

    The bank’s CD performance in the Redding MSA AA is consistent with the performance in the Non-MSA AA with respect to CDLs and CDIs and inconsistent with respect to CDSs.

    Community Development Loans

    During the review period, the institution originated 14 qualified CDLs totaling approximately $3.1 million in the Redding MSA AA.

    Community Development Investments

    During the review period, PB granted 14 qualified CD donations totaling approximately $6,000 in the Redding MSA AA.

    Community Development Services

    During the review period PB participated in only one qualified CDS activity in the Redding MSA AA. This performance is inconsistent with the performance of the Non-MSA AA, but did not impact the overall rating due to less weight being assigned for the limited activities that occurred in this AA.

    Refer to the CD Test section of the CAA for notable examples of CDLs, CDIs, and CDSs.

    Description of institution's operations in the Sacramento AA

    The Sacramento AA contains 2 of the bank’s 11 full-service branch offices. According to the June 30, 2014 Summary of Deposits report, PB ranks 25th out of the 29 FDIC-insured institutions that operate 111 branch offices within the AA, with 0.3 percent of the deposit market share. The Sacramento AA deposits totaled $31.5 million, or approximately 6.9 percent, of the bank’s total deposits. The lending activities originated in the Sacramento AA accounted for 9.9 percent by number of total small business loans.

    Description of the assessment area

    Demographic and Economic Profile

    The Sacramento-Roseville-Arden-Arcade, CA MSA (#40900) consists of El Dorado, Placer, Sacramento, and Yolo counties. PB designated portions of Placer County for its AA (Sacramento AA), which includes only 10 of the 84 CTs in Placer County. Of the 10 CTs in the AA, 2 are moderate-, 6 are middle-, and 2 are upper-income CTs. Table 19 depicts selected demographic, housing, and business data in the Sacramento AA:

    Table 19 – Select Demographic Characteristics of the Sacramento AA
    Demographic Characteristics # Low % of # Moderate % of # Middle % of # Upper % of # NA % of #
    CTs 10 0.0 20.0 60.0 20.0 0.0
    Population by CT Income Level 16,804 0.0 26.3 58.0 15.7 0.0
    Owner-Occupied Housing Units by CT Income Level 3,946 0.0 14.0 68.1 17.9 0.0
    Businesses by CT Income Level 1,574 0.0 22.8 61.6 15.6 0.0
    Families by Income Level 3,702 18.8 16.0 22.4 42.8 0.0
    Families by CT Income Level 3,702 0.0 23.7 60.3 16.0 0.0
    MFI $75,089    
    HUD Adjusted MFI for 2014 $68,000    
    Households Below Poverty Level 8.1% Median Housing Value $626,788
    Source: 2010 U.S. Census Data, 2014 D&B Data, HUD, Percentages may not add up to 100.0 percent due to rounding.

    As shown above, a majority of the population and businesses are located in middle- and upper- income CTs. There are no low-income CTs in the Sacramento AA. According to the BLS report, the unemployment rate for Placer County is 5.6 percent, as of the 4th quarter of 2014, which is lower than the state’s unemployment rate of 6.9 percent, and in line with the national unemployment rate of 5.5 percent.

    According to the December 2014 Moody’s Analytics report, Sacramento’s economic recovery has progressed modestly in early 2015. The unemployment rate is trending sharply downward, the labor force has stabilized, and housing has appreciated in line with those of the state rate. California is on track to record a budget surplus, the bulk of which will be distributed to public schools and community colleges. A 4 percent increase in university spending for 2016 has been proposed, contingent on the University of California (UC) system’s capping resident tuition. These factors have caused applications for admission at UC system universities to rise to an all- time high for fall 2015, including the top employer UC Davis, which will not only ensure campus expansion and hiring, but also bolster consumer-driven industries, facilitate expansion at high-tech industries, and incentivize businesses to invest in the metro area. Sacramento’s top employers are UC Davis (12,639 employees), Sutter Health Sacramento Sierra Region (11,242 employees), UC Davis Health System (9,905 employees), and Kaiser Permanente (9,247 employees).

    Conclusions with respect to performance tests in the Sacramento AA

    Lending test

    PB’s lending performance in the Sacramento AA is consistent with the performance in the Non- MSA AA. The bank originated 9.9 percent of total small business loans in the Sacramento AA during the review period. PB originated 7 small business loans totaling $1.4 million in 2013 and 9 small business loans totaling $748,000 in 2014. Examiners did not conduct a full-scope analysis because of the relatively low number of loans originated in this AA.

    Community development test

    The bank’s CD performance in the Sacramento AA is consistent with the performance in the Non-MSA AA with respect to CDLs and CDIs, and inconsistent with respect to CDSs.

    Community Development Loans

    During the review period, the institution originated 5 qualified CDLs totaling approximately $4.4 million in the Sacramento AA.

    Community Development Investments

    During the review period, PB made 7 qualified CD donations totaling about $2,000 in the Sacramento AA.

    nto AA.

    Community Development Services

    During the review period, the bank had only one CDSs activity, which a bank officer served on an organization that provides financial education to students in Placer County. This performance is inconsistent with the performance of the Non-MSA AA, but did not impact the overall rating due to less weight being assigned for the limited activities that occurred in this AA.

    Refer to the CD Test section of the CAA for notable examples of CDLs, CDIs, and CDSs.

  • Glossary

    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.

    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.

    Community Development

    For loans, investments, and services to qualify as community development activities, their primary purpose must:

    1. Support affordable housing for low- and moderate-income individuals;
    2. Target community services toward low- and moderate-income individuals;
    3. Promote economic development by financing small businesses or farms;
    4. Provide activities that revitalize or stabilize low- and moderate-income geographies, designated disaster areas, or distressed or underserved nonmetropolitan middle-income geographies; or
    5. Enable or facilitate projects or activities that address needs regarding foreclosed or abandoned residential properties in designated target areas.

    Community Development Corporation (CDC)

    A CDC allows banks and holding companies to make equity type of investments in community development projects. Bank CDCs can develop innovative debt instruments or provide near-equity investments tailored to the development needs of the community. Bank CDCs are also tailored to their financial and marketing needs. A CDC may purchase, own, rehabilitate, construct, manage, and sell real property. Also, it may make equity or debt investments in development projects and in local businesses. The CDC activities are expected to directly benefit low- and moderate-income groups, and the investment dollars should not represent an undue risk on the banking organization.

    Community Development Financial Institutions (CDFIs)

    CDFIs are private intermediaries (either for profit or nonprofit) with community development as their primary mission. A CDFI facilitates the flow of lending and investment capital into distressed communities and to individuals who have been unable to take advantage of the services offered by traditional financial institutions. Some basic types of CDFIs include community development banks, community development loan funds, community development credit unions, micro enterprise funds, and community development venture capital funds.

    A certified CDFI must meet eligibility requirements. These requirements include the following:

    • Having a primary mission of promoting community development;
    • Serving an investment area or target population;
    • Providing development services;
    • Maintaining accountability to residents of its investment area or targeted population through representation on its governing board of directors, or by other means;
    • Not constituting an agency or instrumentality of the United States, of any state or political subdivision of a state.

    Community Development Loan

    A loan that:

    1. Has as its primary purpose community development; and
    2. Except in the case of a wholesale or limited purpose bank:
      1. Has not been reported or collected by the bank or an affiliate for consideration in the bank’s assessment area as a home mortgage, small business, small farm, or consumer loan, unless it is a multifamily dwelling loan (as described in Appendix A to Part 203 of this title); and
      2. Benefits the bank’s assessment area(s) or a broader statewide or regional area including the bank’s assessment area(s).

    Community Development Service

    A service that:

    1. Has as its primary purpose community development;
    2. Is related to the provision of financial services; and
    3. Has not been considered in the evaluation of the bank’s retail banking services under § 345.24(d).

    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.

    Distressed Middle-Income Nonmetropolitan Geographies

    A nonmetropolitan middle- income geography will be 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 percent or more; or a population loss of 10 percent or more between the previous and most recent decennial census or a net migration loss of 5 percent or more over the 5-year period preceding the most recent census.

    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).

    Family Income

    Includes the income of all members of a family that are age 15 and older.

    FFIEC-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 (for example, geographic distribution, borrower profile, and total number and dollar amount of investments), and qualitative factors (for example, 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 Disclosure Loan Application Register (HMDA LAR)

    The HMDA LARs record all applications received for residential purchase, refinance, home improvement, and temporary-to-permanent construction loans.

    Home Mortgage Loans

    Includes home purchase and home improvement loans as defined in the HMDA regulation. This definition also includes multi-family (five or more families) dwelling loans, loans to purchase manufactured homes, and refinancing of home improvement and home purchase loans.

    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.

    Household Income

    Includes the income of the householder and all other persons that are age 15 and older in the household, whether related to the householder or not. Because many households are only one person, median household income is usually less than median family income.

    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 (for example, 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.

    Low Income Housing Tax Credit

    The Low-Income Housing Tax Credit Program is a housing program contained within the Internal Revenue Code of 1986, as amended. It is administered by the U.S. Department of the Treasury and the Internal Revenue Service. The U.S. Treasury Department distributes low-income housing tax credits to housing credit agencies through the Internal Revenue Service. The housing agencies allocate tax credits on a competitive basis.

    Developers who acquire, rehabilitate, or construct low-income rental housing may keep their tax credits. Or, they may sell them to corporations or investor groups, who, as owners of these properties, will be able to reduce their own federal tax payments. The credit can be claimed annually for ten consecutive years. For a project to be eligible, the developer must set aside a specific percentage of units for occupancy by low-income residents. The set-aside requirement remains throughout the compliance period, usually 30 years.

    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 counties 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.

    Micropolitan Statistical Area: CBSA associated with at least one urbanized area having a population of at least 10,000, but less than 50,000.

    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

    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.

    Qualified Investment: A 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.

    Rural Area

    Territories, populations, and housing units that are not classified as urban.

    Small Business Investment Company (SBIC)

    SBICs are privately-owned investment companies which are licensed and regulated by the Small Business Administration (SBA). SBICs provide long-term loans and/or venture capital to small firms. Because money for venture or risk investments is difficult for small firms to obtain, SBA provides assistance to SBICs to stimulate and supplement the flow of private equity and long-term loan funds to small companies. Venture capitalists participate in the SBIC program to supplement their own private capital with funds borrowed at favorable rates through SBA’s guarantee of SBIC debentures.

    These SBIC debentures are then sold to private investors. An SBIC’s success is linked to the growth and profitability of the companies that it finances. Therefore, some SBICs primarily assist businesses with significant growth potential, such as new firms in innovative industries. SBICs finance small firms by providing straight loans and/or equity-type investments. This kind of financing gives them partial ownership of those businesses and the possibility of sharing in the companies’ profits as they grow and prosper.

    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.

    Underserved Middle-Income Nonmetropolitan Geographies

    A nonmetropolitan middle- income geography will be designated as underserved if it meets criteria for population size, density, and dispersion indicating the area’s population is sufficiently small, thin, and distant from a population center that the tract is likely to have difficulty financing the fixed costs of meeting essential community needs.

    Upper-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.