What are Eagle Financial Services Inc's Business Segments?
One-to-Four-Family Residential Real Estate Lending
Residential mortgage loans generally are made on the basis of the borrower’s
ability to make repayment from employment and other income and are secured by
real estate whose value tends to be readily ascertainable. As part of the application
process, information is gathered concerning income, employment and credit history
of the applicant. The valuation of residential collateral is provided by independent
fee appraisers who have been approved by the Bank’s Directors Loan Committee.
Commercial Real Estate Lending
Commercial real estate lending entails significant additional risk as compared
with residential mortgage lending. Commercial real estate loans typically involve
larger loan balances concentrated with single borrowers or groups of related
borrowers. Additionally, the repayment of loans secured by income producing
properties is typically dependent on the successful operation of a business
or a real estate project and thus may be subject, to a greater extent, to adverse
conditions in the real estate market or the economy, in general.
Construction and Land Development Lending
There are two characteristics of construction lending which impact its overall
risk as compared to residential mortgage lending. First, there is more concentration
risk due to the extension of a large loan balance through several lines of credit
to a single developer or contractor. Second, there is more collateral risk due
to the fact that loan funds are provided to the borrower based upon the estimated
value of the collateral after completion. This could cause an inaccurate estimate
of the amount needed to complete construction or an excessive loan-to-value
ratio. To mitigate the risks associated with construction lending, the Bank
generally limits loan amounts to 80% of the estimated appraised value of the
finished home.
Commercial and Industrial Lending
Commercial business loans generally have more risk than residential mortgage
loans, but have higher yields. To manage these risks, the Bank generally obtains
appropriate collateral and personal guarantees from the borrower’s principal
owners and monitors the financial condition of the borrower. Commercial business
loans typically are made on the basis of the borrower’s ability to make
repayment from cash flow from its business and are secured by business assets,
such as commercial real estate, accounts receivable, equipment and inventory.
As a result, the availability of funds for the repayment of commercial business
loans is substantially dependent on the success of the business itself. Furthermore,
the collateral for commercial business loans may depreciate over time and generally
cannot be appraised with as much precision as residential real estate.
Consumer Lending
Consumer loans generally entail greater risk than residential mortgage loans,
particularly in the case of consumer loans which are unsecured or secured by
rapidly depreciable assets such as automobiles. In such cases, any repossessed
collateral on a defaulted consumer loan may not provide an adequate source of
repayment of the outstanding loan balance as a result of the greater likelihood
of damage, loss or depreciation.
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