One-to-four Family Residential Real Estate. The cornerstone of our lending
program has long been the origination of long-term loans secured by mortgages
on owner-occupied one-to-four family residences. Virtually all of the residential
mortgage loans we originate are secured by properties located in our market
area.
The repayment terms of our mortgage loans are generally up to 30 years for traditional
homes and up to 15 years for manufactured or modular homes. The repayment terms
of non-owner-occupied homes are generally up to 15 years for fixed-rate loans
and up to 30 years for adjustable-rate loans. Due to consumer demand in the
current low market interest rate environment, many of our recent originations
are 15- to 30-year fixed-rate loans secured by one-to-four family residential
real estate. Although we typically retain in our portfolio the loans we originate,
we generally originate our fixed-rate one-to-four family residential loans in
accordance with secondary market standards.
In order to reduce the term to repricing of our loan portfolio, historically,
we also originated one-year adjustable-rate one-to-four family residential mortgage
loans. However, we are no longer offering the one-year adjustable-rate product
as of December 1, 2014. Our current adjustable-rate mortgage loans have fixed
rates for the first 12 months, and then carry interest rates that adjust annually
at a rate based on the change, between closing of the loan and the adjustment
date, of the Federal Housing Finance Agency’s published contract interest
rate, which represents the national average rate for purchases of previously
occupied homes. Such loans carry terms to maturity of up to 30 years. The adjustable-rate
mortgage loans currently offered by us generally provide for a 100 basis point
annual interest rate change cap, a lifetime cap of 500 basis points over the
initial rate and a lifetime floor of 200 basis points under the initial rate.
Multi-family. Multi-family real estate loans generally have a maximum term
of five years with a 30-year amortization period and a final balloon payment
and are secured by properties containing five or more units in the Company’s
market area. These loans are generally made in amounts of up to 75% of the lesser
of the appraised value or the purchase price of the property with an appropriate
projected debt service coverage ratio. The Company’s underwriting analysis
includes considering the borrower’s expertise and requires verification
of the borrower’s credit history, income and financial statements, banking
relationships, independent appraisals, references and income projections for
the property. The Company generally obtains personal guarantees on these loans.
Multi-family real estate loans generally present a higher level of risk than
loans secured by one-to-four family residences. This greater risk is due to
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 residential
real estate is typically dependent upon the successful operation of the related
real estate project.
Nonresidential Real Estate. Nonresidential loans include those secured by real
estate mortgages on churches, owner-occupied and non-owner occupied commercial
buildings of various types, retail and office buildings, hotels, and other business
and industrial properties. The nonresidential real estate loans that we originate
generally have terms of five to 20 years with amortization periods up to 20
years.
Construction and Land. We generally make construction loans to individuals
for the construction of their primary residences and to commercial businesses
for their real estate needs. These loans generally have maximum terms of twelve
months, and upon completion of construction convert to conventional amortizing
mortgage loans. Residential construction loans have rates and terms comparable
to one-to-four family residential mortgage loans that we originate. Commercial
construction loans have rate and terms comparable to commercial loans that we
originate. During the construction phase, the borrower generally pays interest
only. The maximum loan-to-value ratio of our owner-occupied construction loans
is 80%. Residential construction loans are generally underwritten pursuant to
the same guidelines used for originating permanent residential mortgage loans.
Commercial construction loans are generally underwritten pursuant to the same
guidelines used for originating commercial loans.
Home Equity. The Company offers home equity loans and lines of credit secured
by first or second deeds of trust on primary residences in our market area.
The Company’s home equity loans and lines of credit are limited to an
80% loan-to-value ratio (including all prior liens). Standard residential mortgage
underwriting requirements are used to evaluate these loans. The Company offers
adjustable-rate and fixed-rate options for these loans with a maximum term of
10 years. The repayment terms on lines of credit are interest only monthly with
principle due at maturity. Home equity loans have a more traditional repayment
structure with principal and interest due monthly. The maximum term on home
equity loans is 10 years with an amortization schedule not exceed 20 years.
Agricultural. As a result of the Stephens Federal acquisition, the Company
acquired agricultural real estate loans. These loans are secured by farmland
and related improvements in the Company’s market area. These loans generally
have terms of 5 to 20 years with amortization periods up to 20 years. The maximum
loan-to-value ratio of these loans is generally 75%. The Company is managing
a small number of these loans in our portfolio.
Commercial and Industrial. As a result of the Stephens Federal acquisition,
the Company acquired commercial and industrial loans. These loans are offered
to businesses and professionals in the Company’s market area. These loans
generally have short and medium terms on both a collateralized and uncollateralized
basis. The structure of these loans are largely determined by the loan purpose
and collateral. Sources of collateral can include a lien on furniture, fixtures,
equipment, inventory, receivables and other assets of the company. A UCC-1 is
typically filed to perfect our lien on these assets.
Consumer. We offer installment loans for various consumer purposes, including
the purchase of automobiles, boats, and for other legitimate personal purposes.
The maximum terms of consumer loans is 18 months for unsecured loans, 12 months
for loans secured by marketable securities and 18-60 months for loans secured
by a vehicle, depending on the age of the vehicle. The Company generally only
extends consumer loans to existing customers or their immediate family members,
and these loans generally have relatively low balances.