What are Riverview Bancorp Inc's Business Segments?
Commercial Business Lending. Commercial lines of credit are typically made for
the purpose of providing working capital and usually have a term of one year or
less. Lines of credit are made at variable rates of interest equal to a negotiated
margin above an index rate and term loans are at either a variable or fixed rate.
The Company also generally obtains personal guarantees from financially capable
parties based on a review of personal financial statements.
Commercial lending involves risks that are different from those associated
with residential and commercial real estate lending. Although commercial business
loans are often collateralized by equipment, inventory, accounts receivable
or other business assets, the liquidation of collateral in the event of default
is often an insufficient source of repayment because accounts receivable may
be uncollectible and inventories may be obsolete or of limited use, among other
things. Accordingly, the repayment of commercial business loans depends primarily
on the cash flow and credit worthiness of the borrower and secondarily on the
underlying collateral provided by the borrower. Additionally, the borrower's
cash flow may be unpredictable and collateral securing these loans may fluctuate
in value.
Other Real Estate Mortgage Lending. The Company originates other real estate
loans including office buildings, warehouse/industrial, retail, assisted living
facilities and single-purpose facilities (collectively "commercial real
estate loans"); as well as land and multi-family loans primarily located
in its market area.
Commercial real estate and multi-family loans typically have higher loan balances,
are more difficult to evaluate and monitor, and involve a higher degree of risk
than one-to-four family residential loans. As a result, commercial real estate
and multi-family loans are generally priced at a higher rate of interest than
residential one-to-four family loans. Often payments on loans secured by commercial
properties are dependent on the successful operation and management of the property
securing the loan or business conducted on the property securing the loan; therefore,
repayment of these loans may be affected by adverse conditions in the real estate
market or the economy. Real estate lending is generally considered to be collateral
based lending with loan amounts based on predetermined loan to collateral values
and liquidation of the underlying real estate collateral being viewed as the
primary source of repayment in the event of borrower default. The Company seeks
to minimize these risks by generally limiting the maximum loan-to-value ratio
to 80% and strictly scrutinizing the financial condition of the borrower, the
quality of the collateral and the management of the property securing the loan.
Loans are secured by first mortgages and often require specified debt service
coverage ("DSC") ratios depending on the characteristics of the collateral.
The Company generally imposes a minimum DSC ratio of 1.20 for loans secured
by income producing properties. Rates and other terms on such loans generally
depend on our assessment of credit risk after considering such factors as the
borrower's financial condition and credit history, loan-to-value ratio, DSC
ratio and other factors.
Real Estate Construction. The Company originates three types of residential
construction loans: (i) speculative construction loans, (ii) custom/presold
construction loans and (iii) construction/permanent loans. The Company also
originates construction loans for the development of business properties and
multi-family dwellings. All of the Company's real estate construction loans
were made on properties located in Washington and Oregon.
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