What are Northeast Bancorp's Business Segments?
Residential real estate: All loans in this segment are collateralized by
residential real estate and repayment is primarily dependent on the credit quality
of the individual borrower. The overall health of the economy, particularly
unemployment rates and housing prices, has a significant effect on the credit
quality in this segment. For purposes of the Company's allowance for loan loss
calculation, home equity loans and lines of credit are included in residential
real estate.
Commercial real estate: Loans in this segment are primarily income-producing
properties. For owner-occupied properties, the cash flows are derived from an
operating business, and the underlying cash flows may be adversely affected
by deterioration in the financial condition of the operating business. The underlying
cash flows generated by non-owner occupied properties may be adversely affected
by increased vacancy rates. Management periodically obtains rent rolls, with
which it monitors the cash flows of these loans. Adverse developments in either
of these areas will have an adverse effect on the credit quality of this segment.
For purposes of the allowance for loan losses, this segment also includes construction
loans.
Commercial business: Loans in this segment are made to businesses and are generally
secured by the assets of the business. Repayment is expected from the cash flows
of the business. Continued weakness in national or regional economic conditions,
and a corresponding weakness in consumer or business spending, will have an
adverse effect on the credit quality of this segment.
Consumer: Loans in this segment are generally secured, and repayment is dependent
on the credit quality of the individual borrower. Repayment of consumer loans
is generally based on the earnings of individual borrowers, which may be adversely
impacted by regional labor market conditions.
Purchased: Loans in this segment are typically secured by commercial real estate,
multi-family residential real estate, or business assets and have been acquired
by the LASG. Loans acquired by the LASG are, with limited exceptions, performing
loans at the date of purchase. Loans in this segment acquired with specific
material credit deterioration since origination are identified as purchased
credit-impaired. Repayment of loans in this segment is largely dependent on
cash flow from the successful operation of the property, in the case of non-owner
occupied property, or operating business, in the case of owner-occupied property.
Loan performance may be adversely affected by factors affecting the general
economy or conditions specific to the real estate market, such as geographic
location or property type.
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