What are National Bankshares Inc's Business Segments?
The commercial real estate segment includes loans secured by multifamily residential
real estate, commercial real estate occupied by the owner/borrower, and commercial
real estate leased to non-owners. Loans in the commercial real estate segment
are impacted by economic risks from changing commercial real estate markets,
rental markets for multi-family housing and commercial buildings, business bankruptcy
rates, local unemployment rates and interest rate trends that would impact the
businesses housed by the commercial real estate.
Commercial non real estate loans are secured by collateral other than real estate,
or are unsecured. Credit risk for commercial non real estate loans is subject
to economic conditions, generally monitored by local business bankruptcy trends,
interest rates, and borrower repayment ability and collateral value (if secured).
Public sector and IDA loans are extended to municipalities and related entities.
Credit risk is based upon the entity’s ability to repay through either
a direct obligation or assignment of specific revenues from an enterprise or
other economic activity, and interest rate trends.
Consumer non real estate includes credit cards, automobile and other consumer
loans. Credit cards and certain other consumer loans are unsecured, while collateral
is obtained for automobile loans and other consumer loans. Credit risk stems
primarily from the borrower’s ability to repay. If the loan is secured,
the company analyzes loan-to-value ratios. All consumer non real estate loans
are analyzed for debt-to-income ratios and previous credit history, as well
as for general risks for the portfolio, including local unemployment rates,
personal bankruptcy rates and interest rates.
Risks from delinquency trends and characteristics such as second-lien position
and interest-only status, as well as historical charge-off rates, are analyzed
for all segments.
Loans that management has the intent and ability to hold for the foreseeable
future, or until maturity or payoff, generally are reported at their outstanding
unpaid principal balances adjusted for the allowance for loan losses and any
deferred fees or costs on originated loans. Interest income is accrued on the
unpaid principal balance. Loan origination fees, net of certain direct origination
costs, are deferred and recognized as an adjustment of the related loan yield
using the interest method.
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