Multi-family Loans. Our policy generally has been to originate multi-family
loans in New York, New Jersey and surrounding states. The multi-family loans
in our portfolio consist of both fixed-rate and adjustable-rate loans, which
were originated at prevailing market rates. Multi-family loans are generally
five to fifteen year term balloon loans amortized over fifteen to thirty years.
The maximum loan-to-value ratio is 75% for multi-family loans.
We consider a number of factors when we originate multi-family loans. During
the underwriting process we evaluate the business qualifications and financial
condition of the borrower, including credit history, profitability of the property
being financed, as well as the value and condition of the mortgaged property
securing the loan. When evaluating the business qualifications of the borrower,
we consider the financial resources of the borrower, the borrower’s experience
in owning or managing similar property and the borrower’s payment history
with us and other financial institutions. In evaluating the property securing
the loan, we consider the net operating income of the mortgaged property before
debt service and depreciation, the ratio of the loan amount to the appraised
value of the mortgaged property and the debt service coverage ratio (the ratio
of net operating income to debt service) to ensure it is at least 120% of the
monthly debt service for apartment buildings. All multi-family loans are appraised
by outside independent appraisers who have been approved by our Board of Directors.
All borrowers are required to obtain title, fire and casualty insurance and,
if warranted, flood insurance.
Multi-family loans are generally lower credit risk than other types of commercial
real estate lending due to the diversification of cash flows from multiple tenants
to service the debt. However, loans secured by multi-family generally are larger
than residential mortgage loans and can involve greater credit risk. Repayment
of these loans depends to a large degree on the results of operations and management
of the properties securing the loans and may be affected to a greater extent
by adverse conditions in the real estate market or the economy in general. Accordingly,
management annually reviews the performance of all multi-family loans in excess
of $2.0 million.
Commercial Real Estate Loans. We originate commercial real estate loans in New
Jersey, New York and surrounding states, which are secured by industrial properties,
retail buildings, office buildings and other commercial properties. Commercial
real estate loans in our portfolio consist of both fixed-rate and adjustable-rate
loans which were originated at prevailing market rates. Commercial real estate
loans are generally five to fifteen year term balloon loans amortized over fifteen
to thirty years.
We consider a number of factors when we originate commercial real estate loans.
During the underwriting process we evaluate the business qualifications and
financial condition of the borrower, including credit history, profitability
of the property being financed, as well as the value and condition of the mortgaged
property securing the loan. When evaluating the business qualifications of the
borrower, we consider the financial resources of the borrower, the borrower’s
experience in owning or managing similar property and the borrower’s payment
history with us and other financial institutions. In evaluating the property
securing the loan, we consider the net operating income of the mortgaged property
before debt service and depreciation, the ratio of the loan amount to the appraised
value of the mortgaged property and the debt service coverage ratio (the ratio
of net operating income to debt service) to ensure it is at least 130% for commercial
income-producing properties. All commercial real estate loans are appraised
by outside independent appraisers who have been approved by our Board of Directors.
Personal guarantees are obtained from commercial real estate borrowers although
we will consider waiving this requirement based upon the loan-to-value ratio
of the proposed loan and other factors. All borrowers are required to obtain
title, fire and casualty insurance and, if warranted, flood insurance.
Loans secured by commercial real estate generally are larger than residential
mortgage loans and can involve greater credit risk than residential and multi-family
loans. Commercial real estate loans often involve large loan balances to single
borrowers or groups of related borrowers. Repayment of these loans depends to
a large degree on the results of operations and management of the properties
securing the loans or the businesses conducted on such property, and may be
affected to a greater extent by adverse conditions in the real estate market
or the economy in general. Accordingly, management annually reviews the performance
of all commercial real estate loans in excess of $1.0 million.
Commercial and Industrial Loans. We offer a wide range of credit facilities
to commercial and industrial clients throughout our geographic footprint. Our
credit offerings are lines of credit, term loans and letters of credit. The
collateral for these types of loans can be comprised of real estate and/or a
lien on the general assets, including inventory and receivables of the business
and in many cases are further supported by a personal guarantee of the owner.
For a real estate backed loan, the maximum loan to value limit is 75% and the
underlying businesses will typically have at least a two year history. Other
C&I loans are collateralized by accounts receivable and inventory.
As the Company and its footprint have grown it has broadened its product offerings
to create certain commercial and industrial lending subspecialties, including
expanded lending to the healthcare industry.
Construction Loans. We offer loans directly to builders and developers on income-producing
properties and residential for-sale housing units. Generally, construction loans
are structured to be repaid over a three-year period and generally are made
in amounts of up to 70% of the appraised value of the completed property, or
the actual cost of the improvements. Funds are disbursed based on inspections
in accordance with a schedule reflecting the completion of portions of the project.
Construction financing for sold units requires an executed sales contract.
Construction loans generally involve a greater degree of credit risk than either
residential mortgage loans or other commercial loans. The risk of loss on a
construction loan depends on the accuracy of the initial estimate of the property’s
value when the construction is completed compared to the estimated cost of construction.
For all loans, we use outside independent appraisers approved by our Board of
Directors. We require all borrowers to obtain title insurance, fire and casualty
insurance and, if warranted, flood insurance. A detailed plan and cost review
by an outside engineering firm is required on loans in excess of $2.5 million.
Residential Mortgage Loans. Residential mortgage loans are originated by our
mortgage subsidiary, Investors Home Mortgage, for our loan portfolio and for
sale to third parties. We also purchase mortgage loans from correspondent entities
including other banks and mortgage bankers. Our agreements call for these correspondent
entities to originate loans that adhere to our underwriting standards. In most
cases, we acquire the loans with servicing rights. In addition, we occasionally
purchase pools of mortgage loans in the secondary market on a “bulk purchase”
basis from several well-established financial institutions after appropriate
due diligence. While some of these financial institutions retain the servicing
rights for loans they sell to us, when presented with the opportunity to purchase
the servicing rights as part of the loan, we may decide to purchase the servicing
rights. This decision is generally based on the price and other relevant factors.
Generally, residential mortgage loans are originated in amounts up to 80% of
the lesser of the appraised value or purchase price of the property to a maximum
loan amount of $1,250,000. Loans over $1,250,000 require a lower loan-to-value
ratio. Loans in excess of 80% of value require private mortgage insurance and
cannot exceed $500,000. We will not make loans with a loan-to-value ratio in
excess of 95% or 97% for programs to low or moderate-income borrowers. Fixed-rate
mortgage loans are originated for terms of up to 30 years. Generally, all fixed-rate
residential mortgage loans are underwritten according to Fannie Mae guidelines,
policies and procedures.