One- to Four-Family Residential Mortgage Loans. We offer residential mortgage
loans that conform to Fannie Mae and Freddie Mac underwriting standards (conforming
loans) as well as non-conforming loans. We generally underwrite our one- to
four-family residential mortgage loans based on the applicant’s employment
and credit history and the appraised value of the subject property. We also
offer loans through various agency programs, such as the Mortgage Partnership
Finance Program of the Federal Home Loan Bank of Chicago, which are originated
for sale.
We currently offer fixed-rate conventional mortgage loans with terms of up to
30 years that are fully amortizing with monthly loan payments. We also offer
adjustable-rate mortgage loans that generally provide an initial fixed interest
rate of one to seven years and annual interest rate adjustments thereafter,
that amortize over a period up to 30 years. We offer one- to four-family residential
mortgage loans with loan-to-value ratios up to 102%. Private mortgage insurance
or participation in a government sponsored program is required for all one-
to four-family residential mortgage loans with loan-to-value ratios exceeding
90%. One- to four-family residential mortgage loans with loan-to-value ratios
above 80%, but below 90%, require private mortgage insurance unless waived by
management.
Our one- to four-family residential mortgage loans are generally conforming
loans. We generally originate both fixed- and adjustable-rate mortgage loans
in amounts up to the maximum conforming loan limits as established by the Federal
Housing Finance Agency for Fannie Mae and Freddie Mac, which for our primary
market area is currently $417,000 for single-family homes.
We actively monitor our interest rate risk position to determine the desirable
level of investment in fixed-rate mortgage loans. In recent years there has
been increased demand for long-term fixed-rate loans, as market rates have dropped
and remained near historic lows. As a result, we have sold a substantial majority
of our fixed-rate one- to four-family residential mortgage loans with terms
of 15 years or greater. We sell fixed-rate residential mortgages to the Federal
Home Loan Bank of Chicago, with servicing retained, under its Mortgage Partnership
Finance Program. Since December 2008, we have sold loans to the Federal Home
Loan Bank of Chicago under its Mortgage Partnership Finance Xtra Program. Generally,
however, we retain in our portfolio fixed-rate one- to four-family residential
mortgage loans with terms of less than 15 years, although this has represented
a small percentage of the fixed-rate loans that we have originated in recent
years due to the favorable long-term rates for borrowers.
Commercial Real Estate and Multi-family Real Estate Loans. Our commercial real
estate mortgage loans are primarily secured by office buildings, owner-occupied
businesses, retail rentals, churches, and farm loans secured by real estate.
The rates on our adjustable-rate commercial real estate loans are generally
based on the prime rate of interest plus an applicable margin, and generally
have a specified floor.
We originate multi-family loans with balloon and adjustable rates for terms
of up to seven years with amortization up to 25 years.
In underwriting commercial real estate and multi-family real estate loans, we
consider a number of factors, which include the projected net cash flow to the
loan’s debt service requirement (generally requiring a minimum ratio of
120%), the age and condition of the collateral, the financial resources and
income level of the borrower and the borrower’s experience in owning or
managing similar properties. Commercial real estate and multi-family real estate
loans are originated in amounts up to 80% of the appraised value or the purchase
price of the property securing the loan, whichever is lower. Personal guarantees
are typically obtained from commercial real estate and multi-family real estate
borrowers. In addition, the borrower’s financial information on such loans
is monitored on an ongoing basis by requiring periodic financial statement updates.
Home Equity Lines of Credit. In addition to traditional one- to four-family
residential mortgage loans and home equity loans, we offer home equity lines
of credit that are secured by the borrower’s primary or secondary residence.
Home equity lines of credit are generally underwritten using the same criteria
that we use to underwrite one- to four-family residential mortgage loans. Our
home equity lines of credit are originated with either fixed or adjustable rates
and may be underwritten with a loan-to-value ratio of up to 90% when combined
with the principal balance of an existing first mortgage loan. Fixed-rate lines
of credit are generally based on the prime rate of interest plus an applicable
margin and have monthly payments of 1.5% of the outstanding balance. Adjustable-rate
home equity lines of credit are based on the prime rate of interest plus or
minus an applicable margin and require interest paid monthly. Both fixed and
adjustable rate home equity lines of credit have balloon terms of five years.
Commercial Business Loans. We also originate commercial non-mortgage business
(term) loans and adjustable lines of credit. These loans are generally originated
to small- and medium-sized companies in our primary market area. Our commercial
business loans are generally used for working capital purposes or for acquiring
equipment, inventory or furniture, and are primarily secured by business assets
other than real estate, such as business equipment and inventory, accounts receivable
or stock. We also offer agriculture loans that are not secured by real estate.
Construction Loans. We also originate construction loans for one- to four-family
residential properties and commercial real estate properties, including multi-family
properties.