Commercial and Industrial Loans—We originate commercial and industrial loans
and leases, including working capital loans, equipment loans, structured and asset-based
loans, government and non-profit loans, energy loans and other commercial loans
and leases. The terms of these loans vary by purpose and by type of underlying
collateral, if any.
Working capital loans generally have terms of up to one year, are usually secured
by accounts receivable and inventory and carry the personal guarantees of the
principals of the business. Equipment loans are generally secured by the financed
equipment at advance rates that we believe are appropriate for the equipment type.
As of December 31, 2015, substantially all of our commercial and industrial loans
were secured.
Real Estate Loans—Our real estate loans consist of commercial real estate
loans and residential real estate loans. Commercial real estate loans, or CRE
loans, consist of loans to finance the purchase of commercial real estate, loans
to support working capital needs of businesses that are secured by commercial
real estate and construction and development loans. Our CRE loans include loans
on 1-4 family construction properties, commercial properties such as office
buildings, retail centers, or free-standing commercial properties, multi-family
and investor properties and raw land development loans.
CRE loans are typically secured by a first lien mortgage on multi-family, office,
warehouse, hotel or retail property plus assignments of all leases related to
the properties. These loans are generally divided into two categories: loans
to commercial entities that will occupy most or all of the property (described
as “owner-occupied”) and non-owner occupied loans. In the case of
owner-occupied loans, we are usually the primary provider of financial services
for the company and/or the principals. Underwriting guidelines generally require
borrowers to contribute cash equity that results in an 80% or less loan-to-value
ratio on owner-occupied properties and a 75% or less loan-to-value ratio on
non-owner occupied properties.
We seek to reduce the risks associated with commercial mortgage lending by focusing
our lending in our primary markets. Outside of owner-occupied CRE loans that
are repaid through the cash flows generated by the borrowers’ business
operations, commercial real estate is not a primary focus in our lending strategy.
Although non-owner occupied commercial real estate is not a primary focus of
our lending strategy, we have developed teams in each our markets of dedicated
CRE bankers who possess the depth and breadth of both market knowledge and industry
expertise, which serves to further mitigate risk of this product type.
Residential real estate loans consist of loans secured by the primary or secondary
residence of the borrower. These loans consist of closed loans, which are typically
amortizing over a 10 to 30 year term. We also offer open-ended home equity loans,
which are loans secured by secondary financing on residential real estate. Our
loan-to-value benchmark for these loans is below 80% at inception along with
satisfactory debt-to-income ratios. We do not originate or purchase negatively
amortizing or sub-prime residential loans.
Agricultural Loans—Agricultural loans consist of loans to farmers and
other agricultural businesses to finance agricultural production. The principal
source of repayment on these loans is the crops sold at the end of the harvest
season. Agricultural loans include term loans to finance agricultural land and
equipment, as well as short-term lines to support crop production. Loans to
finance agricultural land are amortized over 15 to 25 years, typically with
three to five year maturities. Loans to finance agricultural equipment are amortized
over five to ten years, typically with three to five year maturities. Crop production
loans are typically revolving lines of credit generally with maturities of one
year. Pricing may be fixed rate or variable rate priced over LIBOR or the prime
rate as published in the Wall Street Journal.
Consumer Loans—We offer a variety of consumer loans, including loans to
banking center clients for consumer and business purposes, to meet client demand
and to increase the yield on our loan portfolio. All of our newly originated
loans are on a direct to consumer basis. Consumer loans are structured as small
personal lines of credit and term loans, with the latter generally bearing interest
at a higher rate and having a shorter term than residential mortgage loans.
Consumer loans are both secured (for example by deposit accounts, brokerage
accounts or automobiles) and unsecured and carry either a fixed rate or variable
rate. Examples of our consumer loans include home improvement loans not secured
by real estate, new and used automobile loans and personal lines of credit.