Commercial and Industrial Loans. LCNB’s commercial and industrial loan portfolio
consists of loans for various purposes, including loans to fund working capital
requirements (such as inventory and receivables financing) and purchases of machinery
and equipment. LCNB offers a variety of commercial and industrial loan arrangements,
including term loans, balloon loans, and lines of credit. Most commercial and
industrial loans have a variable rate, with adjustment periods ranging from one
month to five years. Adjustments are generally based on a publicly available index
rate plus a margin. The margin varies based on the terms and collateral securing
the loan. Commercial and industrial loans are offered to businesses and professionals
for short and medium terms on both a collateralized and uncollateralized basis.
Commercial and industrial loans typically are underwritten on the basis of the
borrower’s ability to make repayment from the cash flow of the business.
Collateral, when obtained, may include liens on furniture, fixtures, equipment,
inventory, receivables, or other assets. As a result, such loans involve complexities,
variables, and risks that require thorough underwriting and more robust servicing
than other types of loans.
Commercial, Secured by Real Estate Loans. Commercial real estate loans include
loans secured by a variety of commercial, retail, and office buildings, religious
facilities, multifamily (more than two-family) residential properties, construction
and land development loans, and other land loans. Commercial real estate loan
products generally amortize over five to twenty-five years and are payable in
monthly principal and interest installments. Some have balloon payments due
within one to ten years after the origination date. Many have adjustable interest
rates with adjustment periods ranging from one to ten years, some of which are
subject to established “floor” interest rates.
Commercial real estate loans are underwritten based on the ability of the property,
in the case of income producing property, or the borrower’s business to
generate sufficient cash flow to amortize the debt. Secondary emphasis is placed
upon global debt service, collateral value, financial strength of any guarantors,
and other factors. Commercial real estate loans are generally originated with
a 75% maximum loan to appraised value ratio.
Residential Real Estate Loans. Residential real estate loans include loans
secured by first or second mortgage liens on one to two-family residential property.
Home equity lines of credit and mortgage loans secured by owner-occupied agricultural
property are included in this category. First and second mortgage loans are
generally amortized over five to thirty years with monthly principal and interest
payments. Home equity lines of credit generally have a five year draw period
with interest only payments followed by a repayment period with monthly payments
based on the amount outstanding. LCNB offers both fixed and adjustable rate
mortgage loans. Adjustable rate loans are available with adjustment periods
ranging between one to ten years and adjust according to an established index
plus a margin, subject to certain floor and ceiling rates. Home equity lines
of credit have a variable rate based on the Wall Street Journal prime rate plus
a margin.