What are Guaranty Bancorp's Business Segments?
Commercial Loans: Our commercial and industrial loan portfolio is comprised of
operating loans secured by business assets. The portfolio is not concentrated
in any particular industry. We classify loans by the borrowers’ intended
purpose for the loan rather than the underlying collateral. Therefore, we include
loans within this portfolio that are collateralized with various assets, including
real estate. Repayment of secured commercial and industrial loans depends substantially
on the borrower’s underlying business, financial condition and cash flows,
as well as the sufficiency of the collateral. Compared to real estate, the collateral
securing these loans may be more difficult to monitor, evaluate and sell. Economic
conditions can significantly affect such risks.
Commercial and Residential Real Estate Loans: This portfolio is mostly comprised
of loans secured by commercial and residential real estate. The commercial real
estate portfolio generally consists of owner-occupied, retail and industrial,
office and multi-family properties. Commercial real estate and multi-family loans
typically involve one or more loans to a single sponsor or groups of related sponsors.
Since payments on these loans are often dependent on the successful operation
or management of the properties securing the loans, as well as the business and
financial condition of the borrower, repayment of such loans may be subject to
adverse conditions in the real estate market, adverse economic conditions or changes
in applicable government regulations. If the borrower is unable to obtain or renew
leases for the underlying premises, causing a decline in cash flow from the property,
the borrower’s ability to repay the loan may be impaired. Residential real
estate is comprised of residential mortgages, primarily jumbo mortgages and home
equity lines of credit to customers in our markets. Home equity lines of credit
are underwritten in a manner such that they result in credit risk that is substantially
similar to that of residential mortgage loans. Nevertheless, home equity lines
have greater credit risk than residential mortgage loans because they can be secured
by mortgages that are subordinated to the existing first mortgage on the property,
which we may or may not hold, and they are not covered by private mortgage insurance.
Construction Loans: Our construction loan portfolio is comprised of investor-developer
and owner-occupied properties and single-family residential development properties.
Investor-developer properties include loans for the construction of commercial
buildings, which are primarily income-producing properties. The repayment of construction
loans is dependent upon the successful and timely completion of the construction
of the subject property, which may additionally include achievement of stabilized
occupancy, as well as the sale of the property to a third party or the availability
of permanent financing upon completion of all improvements. Construction loans
expose us to the risk that improvements will not be completed on time, and in
accordance with specifications and projected costs. Construction delays, the financial
impairment of the builder, interest rate increases or economic downturn may further
impair the borrower’s ability to repay the loan. In addition, the ultimate
sale or rental of the property may not occur as anticipated.
Installment Loans to Individuals and Other Consumer Loans: This category includes
miscellaneous consumer loans including overdraft protection and lines of credit.
Consumer loans may be unsecured or secured by rapidly depreciable assets. Repossessed
collateral for a defaulted consumer loan may not provide an adequate source of
repayment for the outstanding loan, and the remaining deficiency may not warrant
further substantial collection efforts against the borrower. In addition, consumer
loan collections are dependent on the borrower’s continued financial stability,
which can be adversely affected by job loss, divorce, illness or personal bankruptcy.
Furthermore, the application of various federal and state laws, including federal
and state bankruptcy and insolvency laws, may limit the amount that we can recover
on such loans.
Agriculture Loans: Our agriculture land-secured portfolio is comprised primarily
of real estate loans to working farms in counties within our geographic footprint.
Our agriculture operating loan portfolio is comprised of operating loans to working
farms in the same counties. Repayments on agricultural mortgage loans are substantially
dependent on the successful operation or management of the farm property collateralizing
the loan, which is affected by many factors, including weather and changing market
prices, which are outside of the control of the borrower. Payments on agricultural
operating loans are dependent on the successful operation or management of the
farm property for which the operating loan is generally utilized. Such loans are
similarly subject to farming-related risks, including adverse weather conditions
and changing market prices.
Small Business Administration Loans: Our Small Business Administration (“SBA”)
portfolio consists of SBA guaranteed and other SBA-related loans. The guaranteed
loans are for qualifying business purposes with maturity dates ranging from seven
to 25 years. The SBA guarantees up to 90% of the financing for these types of
loans. The SBA-related loans are originated in partnership with the SBA under
the SBA’s 504 loan program primarily on owner-occupied commercial real estate.
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