Real Estate Loans
Our real estate lending activities focus primarily on loans to professional
developers and real estate investors for the acquisition, refinancing and construction
of commercial real estate. Our real estate loans generally are collateralized
by first deeds of trust on specific commercial properties. The most prevalent
types of properties securing our real estate loans are various healthcare properties
such as skilled nursing facilities and assisted living facilities, multi-family
properties, office properties, hotels, industrial properties, and retail properties.
This includes loans provided to owners of commercial real estate properties
that use such premises to conduct their operations. The properties are located
across the United States, primarily in central business districts, but a substantial
percentage of our real estate collateral is in California. Our real estate loans
generally have an initial interest-only period followed by an amortization schedule
with a lump sum balloon payment due in one to ten years or may, more immediately,
have interest and principal payments due on an amortization schedule ranging
from 15 to 30 years with a lump sum balloon payment due in one to ten years.
Construction loans typically finance from 50% to 70% of the costs to construct
commercial or multi-family residential properties. The terms are generally two
to four years.
C&I Loans and Leases
Our C&I loan and lease offerings are diverse and generally include various
cash flow loans (leveraged loans) to finance business acquisitions and recapitalizations,
asset-based loans, equipment-secured loans and leases, and venture-backed loans
to support the operations of entrepreneurial companies during the various phases
of their start-up operations.
Our C&I loans include the following specific lending products:
Cash flow loans. These loans include senior secured loans provided to entities
in conjunction with equity contributions from private equity groups to finance
the acquisition or recapitalization of a business, SBA 7(a) loans, loans to
professionals and other specialty finance products, and leveraged loans (defined
below). Our cash flow lending focuses on borrowers with a high degree of contractual
recurring revenues operating primarily in the technology, healthcare and security
monitoring sectors. The primary source of repayment is cash flow from operations,
the refinancing of the loan, and/or the proceeds from the sale of the company.
The loan terms are three to six years with some amortization during the term.
According to regulatory guidance, the majority of cash flow loans are considered
leveraged loans. Leveraged loans are typically loans where the proceeds are
used for buyouts or acquisitions and where the resulting total debt levels are
four or more times the in-place historical adjusted earnings of the borrower.
Leveraged loans are supported by underwriting that indicates the debt levels
relative to earnings will decline meaningfully over the terms of the loans and
for which the enterprise value provides sufficient coverage for our debt. The
SBA 7(a) loans are secured by the value of a business and its equipment and
are fully-amortizing term loans generally over a 10-year period.
Asset-based loans. These loans are used for working capital and are secured
by trade accounts receivable and/or inventory. In conjunction with our healthcare
real estate loans, we may provide healthcare operators with asset-based loans
secured by healthcare accounts receivable to support working capital needs.
This loan segment also includes lender finance loans or loans to finance companies
and timeshare operators. These loans are used to purchase finance receivables
or extend finance receivables to the underlying obligors and are secured primarily
by the finance receivables owed to our borrowers. The primary sources of repayment
are the operating income of the borrower, the collection of the receivables
securing the loan, and/or the sale of the inventory securing the loan. The loans
are typically revolving lines of credit with terms of one to three years. Also
included in this segment are loans used to finance annual life insurance premiums
and are fully secured by the corresponding cash surrender value of life insurance
contracts and other liquid collateral with one-year terms that generally renew
annually.
Equipment-secured loans and leases. These loans and leases are used to purchase
equipment essential to the operations of our borrower or lessee and are secured
by the specific equipment financed. The primary source of repayment is the operating
income of the borrower or lessee. The loan and lease terms are two to ten years
and generally amortize to either a full repayment or residual balance or investment
that is expected to be collected through a sale of the equipment to the lessee
or a third party.
Consumer Loans
Consumer loans include personal loans, auto loans, home equity lines of credit,
revolving lines of credit, other loans typically made by banks to individual
borrowers, and purchased participation interests in student loans originated
and serviced by a third-party lender. We do not currently originate first trust
deed home mortgage loans. Home equity lines of credit are revolving lines of
credit collateralized by junior deeds of trust on residential real estate properties.