Agricultural Lending. Our agricultural banking team consists of bankers, most
of whom grew up on farms in Wisconsin, which provides a solid understanding
of the nuances of the industry. As of the date of this filing, we have 11 agricultural
banking officers driving the relationships with our customers, as well as three
crop insurance sales representatives. Our philosophy is to bring the Bank to
the customer, and most contacts are made on the farm. The deep relationships
our team has with our agricultural customers, and the value each team member
provides given his or her strong agricultural roots, creates a barrier to entry
for our competitors. We believe this regular personal contact with our customers
provides a high level of service and allows our bankers to monitor our credits
more effectively.
Our relationships with our agricultural customers typically involve their entire
primary banking needs. We lend money to our customers for short term needs,
such as planting crops or buying feed, as needed. We also provide intermediate-term
loans to fund cattle or equipment needs, as well as longer-term real estate
loans to provide funds to purchase real estate or improve existing real estate.
Collateral for these loans will typically involve cross collateralization of
all of a farm’s assets, and the Bank will be in a primary lien position.
We apply a consistent credit philosophy when underwriting agricultural loans,
which focuses on repayment of credit facilities from current and historical
cash flow analysis, both cash and accrual. Other factors considered in granting
credit are management capability, collateral quality and adequacy, and balance
sheet leverage.
Commercial Lending. Our commercial and industrial loans (“commercial loans”)
are offered to established businesses by business bankers who have extensive
experience in making commercial loans. Our commercial loan portfolio is comprised
of conventional term loans, lines of credit and government guaranteed loans,
primarily Small Business Administration (“SBA”) loans. These loans
have either adjustable or fixed rates typically with terms of five years or
less, although terms are generally longer with SBA guarantees. Commercial loans
are underwritten on the basis of the borrower’s ability to make repayment
for the cash flow of its business and generally are collateralized by business
assets, such as accounts receivable, equipment and inventory, as well as personal
guarantees of the principals. The availability of funds for the repayment of
commercial loans is substantially dependent on the success of the business itself,
which is subject to adverse economic conditions. Commercial loans often involve
larger loan balances to single borrowers or a related group of borrowers, resulting
in a more concentrated loan portfolio.
Commercial real estate mortgage loans (“CRE loans”) in our portfolio
consist of fixed and adjustable interest rate loans that were originated at
prevailing market interest rates. Our policy has been to originate CRE loans
predominantly in our primary market area. CRE loans consist primarily of multi-family
investment properties and investment retail, office, mini-storage and warehouse
loans. These loans are generally underwritten to a maximum loan-to-value of
75% of the lower of appraised value or purchase price of the property securing
the loan. In making CRE loans, we primarily consider the net operating income
generated by the real estate to support the debt service, the financial resources
and income level and managerial expertise of the borrower, the marketability
of the collateral and our lending experience with the borrower. CRE loans entail
significant additional risks compared to residential mortgage loans. The collateral
underlying CRE loans may depreciate over time, cannot be appraised with as much
precision as residential real estate, and may fluctuate in value based on the
success of the tenants.
Consumer Lending. While not a primary focus of ours, we do provide consumer
and personal loans on a collateralized and non-collateralized basis. These loans
are most often collateralized by primary residences, secondary residences, automobiles
and recreational vehicles. Consumer loans are priced at prevailing market rates
and are made to the individuals responsible for making the scheduled payments.
Consumer and personal loans generally have a term of five years or less, with
amortizations that match the useful life of the asset(s) being financed. Consumer
loans represents less than 0.1% of our overall loan portfolio.
Concentrations. Loan concentrations are defined as amounts loaned to multiple
borrowers engaged in similar activities that could cause them to be similarly
impacted by economic or other conditions. We, on a routine basis, monitor these
concentrations in order to consider adjustments in our lending practices to
reflect economic conditions, loan to deposit ratios, and industry trends.