What are Republic First Bancorp Inc's Business Segments?
The loans receivable portfolio is segmented into commercial and industrial loans,
commercial real estate loans, owner occupied real estate loans, construction and
land development loans, consumer and other loans, and residential mortgages. Consumer
loans consist of home equity loans and other consumer loans.
Commercial and industrial loans are underwritten after evaluating historical
and projected profitability and cash flow to determine the borrower's ability
to repay their obligation as agreed. Commercial and industrial loans are made
primarily based on the identified cash flow of the borrower and secondarily
on the underlying collateral supporting the loan facility. Accordingly, the
repayment of a commercial and industrial loan depends primarily on the creditworthiness
of the borrower (and any guarantors), while liquidation of collateral is a secondary
and often insufficient source of repayment.
Commercial real estate and owner occupied real estate loans are subject to
the underwriting standards and processes similar to commercial and industrial
loans, in addition to those underwriting standards for real estate loans. These
loans are viewed primarily as cash flow dependent and secondarily as loans secured
by real estate. Repayment of these loans is generally dependent upon the successful
operation of the property securing the loan or the principal business conducted
on the property securing the loan. In addition, the underwriting considers the
amount of the principal advanced relative to the property value. Commercial
real estate and owner occupied real estate loans may be adversely affected by
conditions in the real estate markets or the economy in general. Management
monitors and evaluates commercial real estate and owner occupied real estate
loans based on cash flow estimates, collateral and risk-rating criteria. The
Company also utilizes third-party experts to provide environmental and market
valuations. Substantial effort is required to underwrite, monitor and evaluate
commercial real estate and owner occupied real estate loans.
Construction and land development loans are underwritten based upon a financial
analysis of the developers and property owners and construction cost estimates,
in addition to independent appraisal valuations. These loans will rely on the
value associated with the project upon completion. These cost and valuation
amounts used are estimates and may be inaccurate. Construction loans generally
involve the disbursement of substantial funds over a short period of time with
repayment substantially dependent upon the success of the completed project.
Sources of repayment of these loans would be permanent financing upon completion
or sales of developed property. These loans are closely monitored by onsite
inspections and are considered to be of a higher risk than other real estate
loans due to their ultimate repayment being sensitive to general economic conditions,
availability of long-term financing, interest rate sensitivity, and governmental
regulation of real property.
Consumer and other loans consist of home equity loans and lines of credit and
other loans to individuals originated through the Company's retail network,
which are typically secured by personal property or unsecured. Home equity loans
and lines of credit often carry additional risk as a result of typically being
in a second position or lower in the event collateral is liquidated. Consumer
loans have may also have greater credit risk because of the difference in the
underlying collateral, if any. The application of various federal and state
bankruptcy and insolvency laws may limit the amount that can be recovered on
such loans.
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