One- to Four-Family Residential Real Estate Lending. We primarily originate
fixed-rate one- to four-family residential real estate loans, but depending
on market conditions and borrower preferences, we also offer adjustable-rate
loans.
Commercial Real Estate Lending. Consistent with our strategy to diversify
our loan portfolio and increase our yield, we are focused on increasing our
origination of commercial real estate loans, with a target loan size of $250,000
to $5.0 million.
Our commercial real estate loans generally have initial terms of five to ten
years and amortization terms of 15 to 20 years, with a balloon payment at the
end of the initial term, and may be fixed-rate or adjustable-rate. Our adjustable-rate
commercial real estate loans are generally tied to a margin above the five year
Federal Home Loan Bank of Boston rate. The maximum loan-to-value ratio of our
commercial real estate loans is generally 75% (80% for multi-family) of the
lower of cost or appraised value of the property securing the loan.
Home Equity Loans and Lines of Credit. In addition to traditional one- to
four-family residential mortgage loans, we offer home equity loans and lines
of credit that are secured by the borrower's primary or secondary residence.
Commercial Business Lending. We originate commercial business loans and lines
of credit secured by non-real estate business assets. These loans are generally
originated to small businesses in our primary market area. Our commercial business
loans are generally used for working capital purposes or for acquiring equipment,
inventory or furniture, and are primarily secured by business assets other than
real estate, such as business equipment, inventory and accounts receivable.
Our commercial business loans are generally term loans with terms of three to
seven years and lines of credit with terms of one to two years, with a target
loan size of $250,000 to $5.0 million. Our commercial business lines of credit
are generally priced on an adjustable-rate basis tied to the prime rate. Term
loans are generally priced at a spread over the comparable term Federal Home
Loan Bank of Boston rate. We generally obtain personal guarantees with commercial
business loans.
Commercial Construction Loans. Our commercial construction loans generally
have initial terms of up to 12 months, during which the borrower pays interest
only. Upon completion of construction, these loans convert to permanent loans.
Our commercial construction loans have rates and terms comparable to commercial
real estate loans that we originate. The maximum loan-to-value of our commercial
construction loans is generally 80% of the lesser of the appraised value of
the completed property or the contract price for the land plus the value of
the improvements, and ranges from 50% to 80% depending on the collateral and
the purpose of the improvements upon completion of construction. Commercial
construction loans are generally underwritten pursuant to the same guidelines
used for originating permanent commercial real estate loans. Before making a
commitment to fund a construction loan, Coastway Community Bank requires detailed
cost estimates to complete the project and an appraisal of the property by an
independent licensed appraiser. Coastway Community Bank also reviews and inspects
each property before disbursement of funds during the term of the construction
loan. Loan proceeds are disbursed after inspection based on the percentage of
completion method. All borrowers are required to obtain title insurance, property
and casualty insurance, and, if the property is determined to be located in
a flood zone area, flood insurance.
Consumer Lending. To a much lesser extent, we offer a variety of consumer
loans to individuals who reside or work in our market area, including new and
used automobile loans, boat loans, recreational vehicle loans and loans secured
by certificates of deposit.
Consumer loans generally have shorter terms to maturity, which reduces our
exposure to changes in interest rates. In addition, management believes that
offering consumer loan products helps to expand and create stronger ties to
our existing customer base by increasing the number of customer relationships
and providing cross-marketing opportunities.
Consumer and other loans generally have greater risk compared to longer-term
loans secured by improved, owner-occupied real estate, particularly consumer
loans that are secured by rapidly depreciable assets, such as automobiles. In
these cases, any repossessed collateral for a defaulted loan may not provide
an adequate source of repayment of the outstanding loan balance. As a result,
consumer loan collections are primarily dependent on the borrower's continuing
financial stability and thus are more likely to be adversely affected by job
loss, divorce, illness or personal bankruptcy.