«SMALL BANK Comptroller of the Currency Administrator of National Banks Washington, DC 20219 PUBLIC DISCLOSURE October 29, 2012 COMMUNITY REINVESTMENT ACT ...»
Comptroller of the Currency
Administrator of National Banks
Washington, DC 20219
October 29, 2012
COMMUNITY REINVESTMENT ACT
Share Plus Federal Bank Charter Number 717972 5224 West Plano Parkway Plano, TX 75093-5005 Office of the Comptroller of the Currency Dallas Field Office 225 E. John Carpenter Freeway, Suite 500 Irving, TX 75062-2326 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.
Charter Number 717972 INSTITUTION'S CRA RATING: This institution is rated Satisfactory.
State Name: Texas Rating: Satisfactory State Name: Kentucky Rating: Needs to Improve State Name: California Rating: Needs to Improve Share Plus Federal Bank, Plano, Texas (Bank or Share Plus) has a satisfactory record
of meeting community credit needs. The major factors that support this rating include:
The Bank has a more than reasonable loan-to-deposit ratio that averaged 97 percent during the review period, an increase from the September 4, 2007 CRA Performance Evaluation’s average quarterly ratio of 91 percent. This reflects the Bank’s operation as a residential mortgage warehouse lender.
Lending volumes in the assessment areas (AAs) are satisfactory for a financial institution the size and resources of Share Plus. Although only 44.55 percent of the number of residential mortgage loans and 54.44 percent of the dollar volume of residential mortgage loans were to borrowers inside the three AAs, these are increases from the previous CRA examination’s ratios of 31.2 percent and 42.9 percent, respectively, at which a Satisfactory rating was assigned.
The Bank’s deposit and lending services are concentrated in the Texas AA, and this area most accurately reflects the Bank’sCRA efforts.
The Bank has a unique background as a non-traditional thrift institution (former national employer-sponsored credit union) with a significant majority of its customer base continuing to emanate from the former sponsor companies who reside not only in the AAs but across the United States. After adding residential mortgage loans made in low-to-moderate income (LMI) census tracts (CTs) that are outside the three AAs plus residential mortgage loans to LMI borrowers who reside outside the AAs, the inside AA lending ratios increase to 50.97 percent for the number of residential mortgage loans and 57.01 percent for the dollar amount.
Scope of Examination This Performance Evaluation (PE) assessed the Bank’s record of meeting the credit needs of the communities in which it operates. We evaluated Share Plus under the small bank performance criteria: the loan-to-deposit ratio, lending within the AAs, lending to borrowers of different incomes, geographic distribution of loans, and responses to CRA-related complaints. Due to the small amount of loans originated in the Kentucky and California AAs, primary emphasis was placed on the Texas AA which most accurately reflects the Bank’s CRA efforts.
Owing to the unique nature of the Bank’s previous operation as an employer-sponsored credit union that operated on a national level, we also evaluated its CRA record beyond the traditional AA approach taking into account loans to LMI persons as well as loans made in LMI CTs, both outside the three delineated AAs. Although Share Plus continues its transition to becoming a community lender focusing exclusively in its
Texas AA due to the secured campus office locations in Kentucky and California, the significant majority of its customer relationships remain with current and former employees of its former sponsor companies.
Residential real estate loans were identified as the bank’s primary loan product. Home Mortgage Disclosure Act (HMDA) data, which we tested for accuracy in July 2012, was used to evaluate lending performance. We identified no significant discrepancies relative to the HMDA data during our review.
The scope of the CRA examination covered a period from January 1, 2008 to December 31, 2011, the dates through which we considered the HMDA data. Year 2008 was the first full calendar year after the previous September 4, 2007 CRA PE. We ended our review in 2011 as 2012 data could not be combined with earlier years since it is compared to 2010 census data and prior years utilize the 2000 census information. As the first two quarters of 2012 reflected no significant change in the volume or location of residential loan originations, our approach did not yield a different conclusion than that derived from an expanded review period. For more recent comparative and illustrative purposes, dates of June 30, 2012 and September 30, 2012 have been used throughout the PE.
As no affiliates exist, their activities were not considered in this evaluation.
Description of Institution Share Plus was formed in 1958 as a credit union to serve the employees and family members of Frito-Lay, Inc., YUM! Brands, Inc., A&W Restaurants, Inc., KFC Corporation, Long John Silver’s, Inc., Pizza Hut, Inc., Taco Bell Corporation, and various PepsiCo Divisions, as well as employees of dozens of other related companies.
These companies are collectively known as sponsor companies. The sponsor companies list Share Plus on their websites as a preferred lender for employees that need to relocate or for any banking need. This accounts for many of the Bank’s residential purchase loans falling outside of the AAs because many of the personnel transfers are to various locations across the United States.
With the goal of becoming a community bank, Share Plus converted to a thrift in October 2004. In October 2010, the members voted in favor of a mutual-to-stock ownership conversion. On November 1, 2010 SP Bancorp, Inc. was traded for the first time.
Dating back to its existence as a credit union, the Bank’s branches were located primarily in the secured campuses of its sponsor companies. Six of the seven branch locations still operate on these campuses.
The Bank currently has eight offices offering financial services in three states. The Texas region includes the Main Office (Plano) and Oak Lawn Branch (Dallas), along with three sponsor company branches all located in Plano: Frito-Lay Branch, Pizza Hut Concierge Office and PepsiCo Concierge Office. There are two offices in Louisville, Kentucky operating from the YUM! Brands Office facilities. There is one office in the
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Taco Bell headquarters located in Irvine, California. The Main Office and the Oak Lawn Branch are standalone offices that provide services to both the public and sponsor company employees. The other six branches are located on secured sponsor company campuses. Their customer base consists exclusively of sponsor company employees.
The physical arrangement of the branches is not conducive to doing business with the general public. Customers must drive to and park at the sponsor company facility, walk into the building from a large parking lot, and obtain a security/visitor badge from the facility’s security personnel in the lobby before entering that branch office. Each of the six branch offices are on the ground floor. There are no separate outside entrances to these offices and no Bank signage exists on any of the buildings.
A significant majority of the Bank’s relationships come from current/former employees of its sponsor companies. From August 1, 2008 to September 30, 2012, 89 percent of the number of consumer and residential loans and 71 percent of the dollar amount of these loans came from the sponsor companies relationships. For the same time period, 91 percent of the number of deposits and 85 percent of the dollar volume of deposits came from sponsor companies employees. Of the deposit accounts emanating from the
sponsor companies employees, the breakdown by AA was as follows:
The Service Center category consists of sponsor company employees who have relocated away from the branch locations or who opened their accounts electronically through the Share Plus web site while residing in a non-branch location.
The Bank offers residential, consumer, and, since 2007, commercial and commercial real estate loans. The primary loan product is residential mortgage loans consisting of purchase loans (FHA, VA and conventional), refinance loans, and improvement loans.
The Bank operates a residential mortgage warehouse lending operation that sells the vast majority of the purchase and refinance loans it originates. Loan sales increased from $16 million in 2008 to $69 million during 2011, totaling $160 million for the fouryear period. Loan sales for the nine months ended September 30, 2012 totaled $55 million.
As of June 30, 2012, net loans were 84 percent of the Bank’s total assets of $271 million. The following table reflects the Bank’s loan portfolio summary.
Share Plus has no legal or financial circumstances that could impede its ability to help meet the credit needs in its AAs.
Conclusions with Respect to Performance Criteria Share Plus demonstrated satisfactory performance in meeting the credit needs of its AAs. Our review focused on the primary lending products originated since the previous CRA examination: residential purchase loans, residential refinance loans, and home improvement loans. The HMDA data was used to assess these loans by determining the extent of lending within the AAs. The Bank’s CRA performance was also evaluated in light of its performance context as a non-traditional thrift institution: its historical affiliations and business strategies, an existing customer base residing not only in the three delineated AAs but across the United States that is responsible for the significant majority of the Bank’s deposits and consumer and residential loans, and the Bank’s lending in LMI CTs and to LMI borrowers that fall outside the AAs.
The Bank’s loan-to-deposit ratio (LTD) is more than reasonable given the credit needs of the AAs and the Bank’s size, financial condition and location. This determination is based on the quarterly LTD ratios from September 30, 2007 to June 30, 2012 that average 96.96 percent. We expanded the aforementioned 2008-2011 review period in order to capture the full time period since the previous CRA examination. During this evaluation period, the Bank’s LTD ratio ranged from a low of 86.92 percent to a high of
Due to the unique nature of the Bank’s operations, no similarly situated institutions (SSIs) within the AAs are known to exist. Management considers the seven banks shown in the following table to be its competitors for SSI purposes as all are of comparable size, actively offer residential loan products and have at least one branch location within the same boundaries of the Dallas-Plano-Irving Metropolitan Statistical Area (MSA) that comprise the Bank’s Texas AA. As the Texas AA accounts for almost all of the Bank’s combined AA residential loan originations, an LTD comparison to these Texas SSIs is appropriate. The average LTD ratio of these SSIs for the same time period was 74.41 percent.
The comparatively high level of the Bank’s average LTD not only reflects its operation as a mortgage warehouse lender but its commitment to continue expanding its Texas community lending through its Main Office and its Oak Lawn Avenue branch office (located in a Low Income census tract per 2010 census data).
Lending in Assessment Area
The Bank delineates three AAs that are located in Texas, Kentucky and California. See the State sections for specific information and circumstances relative to the AA boundaries, CTs, demographics, and lending environment. The following table depicts the number and dollar volume of residential loans made within each AA from 2008 to 2011.
Residential lending within the combined AAs centers almost exclusively in the Texas AA due to the secured campus office locations in Kentucky and California that are not conducive to doing business with the public and management’s efforts in Texas to become a community lender discussed in that State’s section.
The Bank’s residential mortgage loans that were generated during the review period are broken down by loan category in the following table. Based on the reportable HMDA data, Share Plus generated 44.55 percent of the number of its residential loans and
54.44 percent of the dollar amount within its AAs.
As depicted below, these figures represent increases from the previous CRA examination’s ratios of 31.22 percent and 42.91 percent, respectively, at which a Satisfactory rating was assigned. Please note the upward trend between the two evaluation dates.
At the time of the previous CRA examination, a fourth AA delineated for the Orlando, Florida branch office existed. With the closing of this branch in February 2009, management no longer identifies this geographic area as an AA. If the Florida AA lending is not included in the previous CRA examination’s results, the base percentages decrease to 30.09 percent (number of loans) and 40.70 percent (dollar amount of loans). This results in a more pronounced increase in AA lending during the 2008-2011 review period.
Beginning with its conversion to a mutual savings bank in 2004, management started the transition of offering products and services to the general public in the Texas AA, with few changes to its operations in the other states. As previously discussed in the Description of Institution section, the Texas AA receives the majority of loans and deposits. As this is the AA that most accurately reflects the Bank’s CRA efforts, it was given the most weight when determining the overall rating.
The most notable performance context for Share Plus is its ongoing relationship with several nationwide corporations. These corporations are identified in the Description of Institution section of this PE and are collectively known as sponsor companies. The significant majority of the Bank’s customer base comes from sponsor company employees with limited contact with the general public except in the two Texas standalone offices.
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Despite the progress Share Plus has demonstrated in increasing its AA lending in Texas, the Bank still continues to have an ongoing reliance on the sponsor company employees as its customer base and, as a result, has less than a substantial portion or majority of loans within its AAs. Evaluating a CRA record based solely on AAs pegged to branches fails to capture this non-traditional financial institution’s full performance.
The examiner obtained additional information regarding the Bank’s HMDA activity as it relates to two situations: low- and moderate-income borrowers outside the AAs and loans located in low- and moderate-income geographies also outside the AAs. During 2008-2011, the Bank originated/purchased 66 loans to low- and moderate-income borrowers outside of the AAs that totaled $5,040,000. The Bank also originated/purchased an additional 47 residential mortgage loans totaling $5,322,000 located in low- and moderate-income CTs that are not in any of the three existing AAs.