What are Congaree Bancshares Inc's Business Segments?
Real Estate - Mortgage. Loans secured by real estate mortgages are the
principal component of our loan portfolio. These loans generally fall into one
of three categories: residential real estate loans, residential home equity lines
of credit, and commercial real estate loans.
Residential Real Estate Loans.These loans generally have longer terms of up to
20 years. We offer fixed and adjustable rate mortgages, and we intend to sell
most, if not all, of the residential real estate loans that we generate in the
secondary market soon after we originate them. We do not intend to retain servicing
rights for these loans. Inherent in residential real estate loans’ credit
risk is the risk that the primary source of repayment, the residential borrower,
will be unable to service the debt. If a real estate loan is in default, we also
run the risk that the value of a residential real estate loan’s secured
real estate will decrease, and thereby be insufficient to satisfy the loan. To
mitigate these risks, we will evaluate each borrower on an individual basis and
attempt to determine their credit profile. By selling these loans in the secondary
market, we can significantly reduce our exposure to credit risk because the loans
will be underwritten through a third party agent without any recourse against
the Bank.
Residential Home Equity Lines of Credit. These loans generally have longer terms
of up to 20 years. We offer fixed and adjustable rate home equity lines of credit.
These loans are generally secured by a first or second mortgage on the borrower’s
primary residence. Inherent in residential real estate loans’ credit risk
is the risk that the primary source of repayment, the residential borrower, will
be unable to service the debt. If a real estate loan is in default, we also run
the risk that the value of a residential real estate loan’s secured real
estate will decrease, and thereby be insufficient to satisfy the loan. To mitigate
these risks, we will evaluate each borrower on an individual basis and attempt
to determine their credit profile. The Bank has obtained private mortgage insurance
on second mortgage loans that exceeded supervisory guidelines at the inception
of the loan.
Commercial Real Estate Loans. Commercial real estate loans generally have terms
of five years or less, although payments may be structured on a longer amortization
basis. Inherent in commercial real estate loans’ credit risk is the risk
that the primary source of repayment, the operating commercial real estate company,
will be insufficient to service the debt. If a real estate loan is in default,
we also run the risk that the value of a commercial real estate loan’s secured
real estate will decrease and thereby be unable to satisfy the loan. To mitigate
these risks, we evaluate each borrower on an individual basis and attempt to determine
its business risks and credit profile. We attempt to reduce credit risk in the
commercial real estate portfolio by emphasizing loans on owner-occupied office
and retail buildings where the loan-to-value ratio is established by independent
appraisals. We typically review the personal financial statements of the principal
owners and require their personal guarantees. These reviews often reveal secondary
sources of payment and liquidity to support a loan request.
Real Estate – Construction, Land Development & Other Land.
We offer adjustable and fixed rate land acquisition loans to consumers and commercial
borrowers who wish to obtain land for their own use. We also offer adjustable
and fixed rate residential and commercial construction loans to builders and developers
and to consumers who wish to build their own home. The term of construction and
development loans will generally be limited to 18 months, although payments may
be structured on a longer amortization basis. Most loans will mature and require
payment in full upon the sale of the property. Construction and development loans
generally carry a higher degree of risk than long term financing of existing properties.
Repayment usually depends on the ultimate completion of the project within cost
estimates and on the sale of the property. Specific risks include:
cost overruns;
mismanaged construction;
inferior or improper construction techniques;
economic changes or downturns during construction;
a downturn in the real estate market;
rising interest rates which may prevent sale of the property; and
failure to sell completed projects in a timely manner.
We attempt to reduce risk by obtaining personal guarantees where possible, and
by keeping the loan-to-value ratio of the completed project below specified percentages.
Commercial Loans. The Bank makes loans for commercial purposes in various lines
of businesses. We focus our efforts on commercial loans of less than $1,000,000.
Equipment loans will typically be made for a term of five years or less at fixed
or variable rates, with the loan fully amortized over the term and secured by
the financed equipment. Working capital loans typically have terms not exceeding
one year and are usually secured by accounts receivable, inventory, or personal
guarantees of the principals of the business. For loans secured by accounts receivable
or inventory, principal is typically repaid as the assets securing the loan are
converted into cash, and in other cases principal is typically due at maturity.
Trade letters of credit, standby letters of credit, and foreign exchange are handled
through a correspondent bank as agent for the Bank. Commercial loans primarily
have risk that the primary source of repayment, the borrowing business, will be
unable to service the debt. Often this occurs as the result of changes in local
economic conditions or in the industry in which the borrower operates which impact
cash flow or collateral value.
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