What are National Commerce's Business Segments?
Commercial and Industrial Loans. We make loans for commercial purposes in various
lines of business. These loans are typically made on terms up to five years at
fixed or variable rates. The loans are secured by various types of collateral,
including accounts receivable, inventory, or, in the case of equipment loans,
the financed equipment. We attempt to reduce our credit risk on commercial loans
by underwriting the loan based on the borrower’s cash flow and ability to
service the debt from earnings, and by limiting the loan-to-value ratio. Historically,
we have typically loaned up to 80% on loans secured by accounts receivable, up
to 50% on loans secured by inventory (which are usually also secured by accounts
receivable), and up to 100% on loans secured by equipment. We also make some unsecured
commercial loans.
Consumer Loans. Consumer lending includes installment lending to individuals in
our market areas and generally consists of loans to purchase automobiles and other
consumer durable goods. Terms generally range from one to five years, depending
on the nature and condition of the collateral. Periodic amortization, generally
monthly, is typically required.
Loan Approval. Certain credit risks are inherent in making loans. These include
repayment risks, risks resulting from uncertainties in the future value of collateral,
risks resulting from changes in economic and industry conditions, and risks inherent
in dealing with individual borrowers. In particular, longer maturities increase
the risk that economic conditions will change and adversely affect collectability.
We attempt to minimize loan losses through various means and the use of standardized
underwriting criteria. We have established a standardized loan policy that may
be modified based on local market conditions. In particular, on larger credits,
we generally rely on the cash flow of a debtor as the source of repayment and
secondarily on the value of the underlying collateral. In addition, we attempt
to utilize shorter loan terms in order to reduce the risk of a decline in the
value of such collateral.
We address repayment risks by adhering to internal credit policies and procedures.
These policies and procedures include officer and customer lending limits, a loan
committee approval process for larger loans, documentation examination, and follow-up
procedures for loan review and any exceptions to credit policies. The point in
the loan approval process at which a loan is approved depends on the size of the
borrower’s credit relationship with the bank and the loan authority of the
lending officer to whom the loan request is made. Each of our lending officers
has the authority to approve loans up to an approved loan authority amount, as
determined by the Bank’s board of directors. Loans in excess of the highest
loan authority amount of a particular lending officer must be approved by either
the Bank’s loan committee or another officer with sufficient loan authority
to approve the request.
Risk Ratings. Loan officers are directly responsible for monitoring the risk in
their respective portfolios. On commercial loans, risk grades are assigned by
the loan officer for the probability of default following an analysis of borrower
characteristics and external economic factors. However, on consumer loans, risk
grades are primarily determined by a borrower’s credit score, personal debt
ratio, repayment history, and liquidity.
Electronic Banking
We offer electronic banking services to our customers, including commercial and
retail online banking, automated bill payment, mobile banking, and remote deposit
capture for certain customers.
Factoring
Since August 29, 2014, NBC has owned a 70% interest in CBI, the holding company
of Corporate Billing. Corporate Billing is a transaction-based finance company
engaged in the purchase of accounts receivable at a discount from businesses throughout
the United States and parts of Canada, a business traditionally known as “factoring.”
In a typical factoring transaction, Corporate Billing purchases all of the rights
associated with the account receivable and assumes the billing and collection
responsibilities. Corporate Billing may purchase a receivable with or without
recourse. If an account is purchased without recourse, Corporate Billing bears
the loss if the account debtor does not pay the invoice amount. If the receivable
is purchased with recourse, however, Corporate Billing has the right to collect
the unpaid invoice amount from the seller of the receivable if the account debtor
does not pay. Corporate Billing engages in both recourse and non-recourse purchases,
with its recourse operations focused primarily in the transportation industry,
and its non-recourse operations focused primarily in the automotive dealer and
distributor industries. As an operating subsidiary of NBC, Corporate Billing is
regulated by the Office of the Comptroller of the Currency (the “OCC”).
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