What are Landmark Bancorp Inc's Business Segments?
One-to-Four Family Residential Real Estate Lending. The Bank originates one-to-four
family residential real estate loans with both fixed and variable rates. One-to-four
family residential real estate loans are priced and originated following global
underwriting standards that are consistent with guidelines established by the
major buyers in the secondary market. Generally, residential real estate loans
retained in the Bank’s loan portfolio have fixed or variable rates with
adjustment periods of five years or less and amortization periods of typically
either 15 or 30 years. A significant portion of these loans prepay prior to maturity.
The Bank has no potential negative amortization loans. While the origination of
fixed-rate, one-to-four family residential loans continues to be a key component
of our business, the majority of these loans are sold in the secondary market.
One-to-four family residential real estate loans that exceed 80% of the appraised
value of the real estate generally are required, by policy, to be supported by
private mortgage insurance, although on occasion the Bank will retain non-conforming
residential loans to known customers at premium pricing. The Bank’s one-to-four
family residential real estate loan portfolio increased primarily as a result
of the acquisition of Citizens Bank during 2013; however, the Bank also retained
some newly originated one-to-four family residential real estate loans that met
internal criteria in addition to secondary market qualifications. These are typically
loans with maturities of 15 years or less. While the Bank does not intend to increase
its one-to-four family residential real estate loan portfolio, the Bank slowed
the runoff of the portfolio by retaining some of the new loan originations to
offset weak commercial loan demand. However, most of the new loan originations
continue to be sold.
Construction and Land Lending. Loans in this category include loans to facilitate
the development of both residential and commercial real estate. Construction and
land loans generally have terms of less than 18 months, and the Bank will retain
a security interest in the borrower’s real estate. Construction loans are
generally limited, by policy, to 80% of the appraised value of the property. Land
loans are generally limited, by policy, to 65% of the appraised value of the property.
The Bank has generally been reducing its exposure to construction and land loans
over the past few years as a strategy to reduce risk. However, recently loan demand
has begun to increase slightly for this type of loan.
Commercial Real Estate Lending. Commercial real estate loans, including multi-family
loans, generally have amortization periods of 15 or 20 years. Commercial real
estate and multi-family loans are generally limited, by policy, to 80% of the
appraised value of the property. Commercial real estate loans are also supported
by an analysis demonstrating the borrower’s ability to repay. The Bank’s
commercial real estate loan portfolio increased primarily as a result of the acquisition
of Citizens Bank during 2013 and the Bank continues to focus on generating additional
commercial real estate loan relationships as well.
Commercial Lending. Loans in this category include loans to service, retail, wholesale
and light manufacturing businesses. Commercial loans are made based on the financial
strength and repayment ability of the borrower, as well as the collateral securing
the loans. The Bank targets owner-operated businesses as its customers and makes
lending decisions based upon a cash flow analysis of the borrower as well as a
collateral analysis. Accounts receivable loans and loans for inventory purchases
are generally on a one-year renewable term and loans for equipment generally have
a term of seven years or less. The Bank generally takes a blanket security interest
in all assets of the borrower. Equipment loans are generally limited to 75% of
the cost or appraised value of the equipment. Inventory loans are generally limited
to 50% of the value of the inventory, and accounts receivable loans are generally
limited to 75% of a predetermined eligible base. The Bank continues to focus its
organic growth on generating additional commercial loan relationships.
Municipal Lending. Loans to municipalities are generally related to equipment
leasing or general fund loans. Terms are generally limited to 5 years. Equipment
leases are generally made for the purchase of municipal assets and are secured
by the leased asset. The Bank is generally not active in the origination of municipal
loans and leases; however, the Bank may originate loans or leases for municipalities
in its market area.
Agriculture Lending. Agricultural real estate loans generally have amortization
periods of 20 years or less, during which time the Bank generally retains a security
interest in the borrower’s real estate. The Bank also provides short-term
credit for operating loans and intermediate-term loans for farm product, livestock
and machinery purchases and other agricultural improvements. Farm product loans
generally have a one-year term, and machinery, equipment and breeding livestock
loans generally have five to seven year terms. Extension of credit is based upon
the borrower’s ability to repay, as well as the existence of federal guarantees
and crop insurance coverage. These loans are generally secured by a blanket lien
on livestock, equipment, feed, hay, grain and growing crops. Equipment and breeding
livestock loans are generally limited to 75% of appraised value. While the 95%
increase in the Bank’s agriculture loan portfolio in 2013 was primarily
a result of the acquisition of Citizens Bank, the Bank continues to focus on generating
additional agriculture loan relationships in each of its market areas.
Consumer and Other Lending. Loans classified as consumer and other loans include
automobile, boat, home improvement and home equity loans. With the exception of
home improvement loans and home equity loans, the Bank generally takes a purchase
money security interest in collateral for which it provides the original financing.
Home improvement loans and home equity loans are principally secured through second
mortgages. The terms of the loans typically range from one to five years, depending
upon the use of the proceeds, and generally range from 75% to 90% of the value
of the collateral. The majority of these loans are installment loans with fixed
interest rates. Home improvement and home equity loans are generally secured by
a second mortgage on the borrower’s personal residence and, when combined
with the first mortgage, limited to 80% of the value of the property unless further
protected by private mortgage insurance. Home improvement loans are generally
made for terms of five to seven years with fixed interest rates. Home equity loans
are generally made for terms of ten years on a revolving basis with adjustable
monthly interest rates tied to the national prime interest rate. While the Bank
primarily provides consumer loans to its existing customers, consumer lending
is not a category the Bank targets for organic growth.
|