Residential Mortgage Loans A significant portion of the Bank’s lending
consists of origination of conventional loans secured by 1-4 family real estate
located in Franklin, Geauga, Portage, Trumbull, and Ashtabula Counties.
Commercial and Industrial Loans and Commercial Real Estate Loans
The Bank’s commercial loan services include:
accounts receivable, inventory and
short-term notes
working capital loans
selected guaranteed or subsidized loan programs
renewable operating lines of credit
for small businesses
loans to finance capital equipment
loans to professionals
term business loans
commercial real estate loans
Commercial real estate loans include commercial properties occupied by the
proprietor of the business conducted on the premises, and income-producing or
farm properties. Although the Bank makes agricultural loans, it currently does
not have a significant amount of agricultural loans. The primary risks of commercial
real estate loans are loss of income of the owner or occupier of the property
and the inability of the market to sustain rent levels. Although commercial
and commercial real estate loans generally bear more risk than single-family
residential mortgage loans, they tend to be higher yielding, have shorter terms
and provide for interest-rate adjustments. Accordingly, commercial and commercial
real estate loans enhance a lender’s interest rate risk management and,
in management’s opinion, promote more rapid asset and income growth than
a loan portfolio composed strictly of residential real estate mortgage loans.
Real Estate Construction
The Bank originates several different types of loans that it categorizes as
construction loans, including:
• residential construction loans to borrowers who will occupy the premises
upon completion of construction,
• residential construction loans to builders,
• commercial construction loans, and
• real estate acquisition and development loans.
Because of the complex nature of construction lending, these loans are generally
recognized as having a higher degree of risk than other forms of real estate
lending. The Bank’s fixed-rate and adjustable-rate construction loans
do not provide for the same interest rate terms on the construction loan and
on the permanent mortgage loan that follows completion of the construction phase
of the loan. It is the norm for the Bank to make residential construction loans
without an existing written commitment for permanent financing. The Bank’s
Credit Policy provides that the Bank may make construction loans with terms
of up to one year, with a maximum LTV ratio for residential construction of
80%. The Bank also offers residential construction-to-permanent loans that have
a twelve-month construction period followed by 30 years of permanent financing.
Consumer Installment Loans The Bank’s consumer installment loans include
secured and unsecured loans to individual borrowers for a variety of purposes,
including personal, home improvement, revolving credit lines, autos, boats,
and recreational vehicles. The Bank does not currently do any indirect lending.
Unsecured consumer loans carry significantly higher interest rates than secured
loans. The Bank maintains a higher loan loss allowance for consumer loans, while
maintaining strict credit guidelines when considering consumer loan applications.
According to the Bank’s Credit Policy, consumer loans secured by collateral
other than real estate generally may have terms of up to five years, and unsecured
consumer loans may have terms up to three years. Real estate security generally
is required for consumer loans having terms exceeding five years.