What are Sb Financial Group's Business Segments?
Commercial and Agricultural
Commercial and agricultural loans are primarily based on the identified cash
flows of the borrower and secondarily on the underlying collateral provided
by the borrower. The cash flows of borrowers, however, may not be as expected
and the collateral securing these loans may fluctuate in value. Most commercial
loans are secured by the assets being financed or other business assets, such
as accounts receivable or inventory, and may include a personal guarantee. Short-term
loans may be made on an unsecured basis. In the case of loans secured by accounts
receivable, the availability of funds for the repayment of these loans may be
substantially dependent on the ability of the borrower to collect amounts due
from its customers.
Commercial Real Estate including Construction
Commercial real estate loans are viewed primarily as cash flow loans and secondarily
as loans secured by real estate. Commercial real estate lending typically involves
higher loan principal amounts and the repayment of these loans is generally
dependent on the successful operation of the property securing the loan or the
business conducted on the property securing the loan. Commercial real estate
loans may be more adversely affected by conditions in the real estate markets
or in the general economy. The characteristics of properties securing the Company’s
commercial real estate portfolio are diverse, but with geographic location almost
entirely in the Company’s market area. Management monitors and evaluates
commercial real estate loans based on collateral, geography and risk grade criteria.
In general, the Company avoids financing single purpose projects unless other
underwriting factors are present to help mitigate risk. In addition, management
tracks the level of owner-occupied commercial real estate versus nonowner-occupied
loans.
Construction loans are underwritten utilizing feasibility studies, independent
appraisal reviews and financial analysis of the developers and property owners.
Construction loans are generally based on estimates of costs and value associated
with the completed project. These estimates may be inaccurate. Construction
loans often involve the disbursement of substantial funds with repayment substantially
dependent on the success of the ultimate project. Sources of repayment for these
types of loans may be pre-committed permanent loans from approved long-term
lenders, sales of developed property or an interim loan commitment from the
Company until permanent financing is obtained. These loans are closely monitored
by on-site inspections and are considered to have higher risks than other real
estate loans due to their ultimate repayment being sensitive to interest rate
changes, governmental regulation of real property, general economic conditions
and the availability of long-term financing.
Residential and Consumer
Residential and consumer loans consist of two segments – residential mortgage
loans and personal loans. Residential mortgage loans are secured by 1-4 family
residences and are generally owner-occupied, and the Company generally establishes
a maximum loan-to-value ratio and requires private mortgage insurance if that
ratio is exceeded. Home equity loans are typically secured by a subordinate
interest in 1-4 family residences, and consumer personal loans are secured by
consumer personal assets, such as automobiles or recreational vehicles. Some
consumer personal loans are unsecured, such as small installment loans and certain
lines of credit. Repayment of these loans is primarily dependent on the personal
income of the borrowers, which can be impacted by economic conditions in their
market areas, such as unemployment levels. Repayment can also be impacted by
changes in property values on residential properties. Risk is mitigated by the
fact that these loans are of smaller individual amounts and spread over a large
number of borrowers.
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