Mortgage Loans. The Bank offers residential, commercial and agricultural real
estate loans.
These loans include first and junior liens on 1 to 4 family residences. The
Bank originates 1 to 4 family mortgage loans to individuals and businesses within
its trade area. The Bank sells certain mortgage loans to third parties on the
secondary market. For the loans sold on the secondary market, the Bank does
not retain any percentage of ownership or servicing rights. Interest rates for
residential real estate mortgages are determined by competitive pricing factors
on the secondary market and within the Bank’s trade area. Collateral for
residential real estate mortgages is generally the underlying property. Generally,
repayment of these loans is from monthly principal and interest payments from
the borrower’s personal cash flows and liquidity, and collateral values
are a function of residential real estate values in the markets that the Bank
serves.
Construction Loans. The Bank offers loans both to individuals that are constructing
personal residences and to real estate developers and building contractors for
the acquisition of land for development and the construction of homes and commercial
properties. The Bank makes these loans to established borrowers in the Bank’s
trade area. Construction loans generally have a term of one year or less, with
interest payable at maturity. Interest rate arrangements are variable for construction
projects. Generally, collateral for construction loans is the underlying construction
project.
Commercial and Financial Loans
The Bank’s commercial and financial loans include loans to contractors,
retailers and other businesses. The Bank provides a wide range of business loans,
including lines of credit for working capital and operational purposes and term
loans for the acquisition of equipment. Although most loans are made on a secured
basis, loans may be made on an unsecured basis where warranted by the overall
financial condition of the borrower. Terms of commercial and financial loans
generally range from one to five years. Interest rates for commercial loans
can be fixed or variable.
The Bank’s commercial and financial loans are primarily made based on
the reported cash flow of the borrower and secondarily on the underlying collateral
provided by the borrower. The collateral support provided by the borrower for
most of these loans and the probability of repayment is based on the liquidation
of the pledged collateral and enforcement of personal guarantees, if applicable.
The primary repayment risks of commercial loans are that the cash flows of the
borrower may be unpredictable, and the collateral securing these loans may fluctuate
in value.
Agricultural Loans
Agricultural loans include loans made to finance agricultural production and
other loans to farmers and farming operations. Agricultural loans, most of which
are secured by crops and machinery, are provided to finance capital improvement
and farm operations as well as acquisitions of livestock and machinery. The
ability of the borrower to repay may be affected by many factors outside of
the borrower’s control including adverse weather conditions, loss of livestock
due to disease or other factors, declines in market prices for agricultural
products and the impact of government regulations. The ultimate repayment of
agricultural loans is dependent upon the profitable operation or management
of the agricultural entity. Agricultural loans generally have a term of one
year and may have a fixed or variable rate.
Consumer Lending
The Bank offers consumer loans including personal loans and automobile loans.
These consumer loans typically have shorter terms and lower balances.