One- to Four-Family Mortgage Loans. We offer a first-time homebuyer program
for persons who have not previously owned real estate and are purchasing a one-
to four-family property in our primary lending area for use as a primary residence.
This program is also available outside these areas, but only to persons who
are existing deposit or loan customers of Kearny Bank and/or members of their
immediate families. The financial incentives offered under this program are
a one-eighth of one percentage point rate reduction on all first mortgage loan
types and the refund of the application fee at closing.
The fixed-rate residential mortgage loans that we originate generally meet the
secondary mortgage market standards of the Federal Home Loan Mortgage Corporation
(“Freddie Mac”). However, as our business plan continues to call
for increasing total loans on both a dollar and percentage of assets basis,
we generally do not currently sell such loans into the secondary market. However,
we may consider selling longer-term, fixed-rate loan originations into the secondary
market in the future for balance sheet management purposes and to expand our
sources of non-interest income.
Substantially all of our residential mortgages include “due on sale”
clauses, which give us the right to declare a loan immediately payable if the
borrower sells or otherwise transfers an interest in the property to a third
party. Property appraisals on real estate securing our one- to four-family first
mortgage loans are made by state certified or licensed independent appraisers
approved by Kearny Bank’s Board of Directors. Appraisals are performed
in accordance with applicable regulations and policies. We require title insurance
policies on all first mortgage real estate loans originated. Homeowners, liability
and fire insurance and, if applicable, flood insurance, are also required.
Multi-Family and Nonresidential Real Estate Mortgage Loans. We also originate
commercial mortgage loans on multi-family and nonresidential properties, including
loans on apartment buildings, retail/service properties and land as well as
other income-producing properties, such as mixed-use properties combining residential
and commercial space.
In total, commercial mortgage loan acquisition volume significantly outpaced
loan repayments during fiscal 2015 resulting in the reported net increase in
the outstanding balance of this segment of the loan portfolio. Our business
plan continues to call for maintaining our strategic emphasis on commercial
mortgage lending by increasing this segment of the portfolio on both a dollar
and percentage of assets basis.
We generally require no less than a 25% down payment or equity position for
mortgage loans on multi-family and nonresidential properties. For such loans,
we generally require personal guarantees. However, the Bank may consider multi-family
and nonresidential real estate mortgages for approval on a non-personally guaranteed
(non-recourse) basis when the overall strengths of a proposed loan asset sufficiently
mitigates the risk of exculpating the principal owners from their personal guarantee.
In such cases, the Bank generally requires borrowers to execute an indemnification
agreement which personally obligates those individuals in the circumstances
of fraud, negligence, environmental issues, improper conveyance, condemnation,
bankruptcy or other additional provisions deemed appropriate by the Bank.
Commercial Business Loans. We also originate commercial term loans and lines
of credit to a variety of professionals, sole proprietorships and small businesses
in our market area including loans originated through the SBA in which Kearny
Bank participates as a Preferred Lender. These participations included our pro
rata interest in 17 loans totaling $25.1 million representing the obligations
of 13 separate commercial borrowers that were acquired through Kearny Bank’s
membership in BancAlliance, a cooperative network of lending institutions that
serves as a conduit for institutional investors to participate in middle-market
commercial credits. The BancAlliance network is supported and managed on a day-to-day
basis by Alliance Partners and its wholly-owned subsidiary AP Commercial LLC
which acts as investment advisor and asset manager for loans acquired through
the BancAlliance network while retaining a portion of such loans as an investor.
Construction Lending. Construction borrowers must hold title to the land free
and clear of any liens. Financing for construction loans is limited to 80% of
the anticipated appraised value of the completed property. Disbursements are
made in accordance with inspection reports by our approved appraisal firms.
Terms of financing are generally limited to one year with an interest rate tied
to the prime rate published in the Wall Street Journal and may include a premium
of one or more points. In some cases, we convert a construction loan to a permanent
mortgage loan upon completion of construction.