What are Mercantile Bank's Business Segments?
Commercial Loans. Our commercial lending group originates commercial loans primarily
in our market areas. Our commercial lenders have extensive commercial lending
experience, with most having at least ten years’ experience. Loans are originated
for general business purposes, including working capital, accounts receivable
financing, machinery and equipment acquisition, and commercial real estate financing,
including new construction and land development.
Working capital loans are often structured as a line of credit and are reviewed
periodically in connection with the borrower’s year-end financial reporting.
These loans are generally secured by substantially all of the assets of the borrower
and have a floating interest rate tied to the Wall Street Journal Prime Rate or
30-day Libor Rate. Loans for machinery and equipment purposes typically have a
maturity of three to five years and are fully amortizing, while commercial real
estate loans are usually written with a five-year maturity and amortize over a
10- to 20-year period. Commercial loans typically have an interest rate that is
fixed to maturity or is tied to the Wall Street Journal Prime Rate or 30-day Libor
Rate.
We evaluate many aspects of a commercial loan transaction in order to minimize
credit and interest rate risk. Underwriting includes an assessment of the management,
products, markets, cash flow, capital, income and collateral of the borrowing
entity. This analysis includes a review of the borrower’s historical and
projected financial results. Appraisals are generally required to be performed
by certified independent appraisers where real estate is the primary collateral,
and in some cases, where equipment is the primary collateral. In certain situations,
for creditworthy customers, we may accept title reports instead of requiring lenders’
policies of title insurance.
Commercial real estate lending involves more risk than residential lending because
loan balances are typically greater and repayment is dependent upon the borrower’s
business operations. We attempt to minimize the risks associated with these transactions
by generally limiting our commercial real estate lending to owner-operated properties
and to owners of non-owner occupied properties who have an established profitable
history and satisfactory tenant structure. In many cases, risk is further reduced
by requiring personal guarantees, limiting the amount of credit to any one borrower
to an amount considerably less than our legal lending limit and avoiding certain
types of commercial real estate financings.
We have no material foreign loans, and only limited exposure to companies engaged
in energy producing and agricultural-related activities.
Single-Family Residential Real Estate Loans. We originate single-family residential
real estate loans in our market areas, generally according to secondary market
underwriting standards. Loans not conforming to those standards are made in certain
circumstances. Single-family residential real estate loans provide borrowers with
a fixed or adjustable interest rate with terms up to 30 years and are generally
sold to certain investors.
Our bank has a home equity line of credit program. Home equity lines of credit
are generally secured by either a first or second mortgage on the borrower’s
primary residence. The program provides revolving credit at a rate tied to the
Wall Street Journal Prime Rate.
Consumer Loans. We originate consumer loans for a variety of personal financial
needs, including new and used automobiles, boats, credit cards and overdraft protection
for our checking account customers. Consumer loans generally have shorter terms
and higher interest rates and usually involve more credit risk than single-family
residential real estate loans because of the type and nature of the collateral.
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