What are Mw Bancorp's Business Segments?
Residential Real Estate including Construction
Residential mortgage loans are secured by 1-4 family residences and are comprised
of owner-occupied and non-owner-occupied loans. Construction real estate loans
are usually based upon estimates of costs and estimated value of the completed
project and include independent appraisal reviews and a financial analysis of
the developers and property owners. Sources of repayment of these loans may include
permanent loans, sales of developed property or an interim loan commitment from
the Company until permanent financing is obtained. The Company generally establishes
a maximum loan-to-value ratio and requires private mortgage insurance if that
ratio is exceeded. Repayment of these loans is primarily dependent on the personal
income of the borrowers, which can be impacted by economic conditions in their
market areas, such as unemployment levels. Repayment can also be impacted by changes
in property values or residential properties. Risk is mitigated by the fact that
loans are of smaller individual amounts and spread over a large number of borrowers.
Multi-family Residential Real Estate
Multi-family real estate loans generally involve a greater degree of credit risk
than one- to four-family residential mortgage loans and carry larger loan balances.
This increased credit risk is a result of several factors, including the concentration
of principal in a limited number of loans and borrowers, the effects of general
economic conditions on income-producing properties, and the increased difficulty
of evaluating and monitoring these types of loans. Furthermore, the repayment
of loans secured by multi-family real estate is typically dependent upon the successful
operation of the related real estate property. If the cash flow from the project
is reduced, the borrower’s ability to repay the loan may be impaired.
Commercial Real Estate
Commercial real estate loans are viewed primarily as cash flow loans and secondarily
as loans secured by real estate. Commercial real estate lending typically involves
higher loan principal amounts, and the repayment of these loans is generally dependent
on the successful operation of the property securing the loan or the business
conducted on the property securing the loan. Commercial real estate loans may
be more adversely affected by conditions in the real estate markets or in the
general economy. The characteristics of properties securing the Company’s
real estate portfolio are diverse, but with geographic location almost entirely
in the Company’s market area. Management monitors and evaluates commercial
real estate loans based on collateral, geography and risk grade criteria. In general,
the Company avoids financing single purpose projects unless other underwriting
factors are present to help mitigate risk.
Consumer Loans
Consumer loans entail greater credit risk than residential mortgage loans, particularly
in the case of consumer loans that are unsecured or secured by assets that depreciate
rapidly, such as automobiles. In such cases, repossessed collateral for a defaulted
consumer loan may not provide an adequate source of repayment for the outstanding
loan and the remaining deficiency often does not warrant further substantial collection
efforts against the borrower. In particular, amounts realizable on the sale of
repossessed automobiles may be significantly reduced based upon the condition
of the automobiles and the lack of demand for used automobiles.
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