What are Sunshine Financial's Business Segments?
Real Estate Mortgage Loans. Real estate mortgage loans are loans comprised
of four classes: One- to- four family, Lot loans, Commercial real estate and
Construction loans. The Company generally originates one- to- four family mortgage
loans in amounts up to 80% of the lesser of the appraised value or purchase
price of a mortgaged property, but will also permit loan-to-value ratios of
up to 95%. For one- to- four family loans exceeding an 80% loan-to-value ratio,
the Company generally requires the borrower to obtain private mortgage insurance
covering any loss on the amount of the loan in excess of 80% in the event of
foreclosure. Commercial real estate loans are generally originated at 75% or
less loan-to-value ratio and have amortization terms of up to 20 years and maturities
of up to ten years. Construction loans to borrowers are to finance the construction
of one- to four-family, owner occupied properties. These loans are categorized
as construction loans during the construction period, later converting to residential
real estate loans after the construction is complete and amortization of the
loan begins. Real estate construction loan funds are disbursed periodically
based on the percentage of construction completed. If the estimate of construction
cost proves to be inaccurate, the Company may be compelled to advance additional
funds to complete the construction with repayment dependent, in part, on the
success of the ultimate project rather than the ability of a borrower to repay
the loan. The Company carefully monitors these loans with on-site inspections
and requires the receipt of lien waivers on funds advanced. Construction loans
are typically secured by the properties under construction. The Company also
makes loans for the purchase of developed lots for future construction of the
borrower's primary residence. Construction and lot loan lending is generally
considered to involve a higher degree of credit risk than long-term permanent
financing of residential properties.
Commercial. Commercial loans are primarily underwritten on the basis of the
borrowers' ability to service such debt from income. The cash flows of borrowers,
however, may not be as expected and the collateral securing these loans may
fluctuate in value. As a general practice, the Company takes as collateral a
security interest in any available real estate, equipment, or other chattel,
although loans may also be made on an unsecured basis. Collateralized working
capital loans typically are secured by short-term assets whereas long-term loans
are primarily secured by long-term assets.
Consumer Loans. Consumer loans are comprised of five classes: Home equity,
Automobile, Credit cards and unsecured, Deposit account and Other. The Company
offers a variety of secured consumer loans, including home equity, new and used
automobile, boat and other recreational vehicle loans, and loans secured by
savings deposits. The Company also offers unsecured consumer loans including
a credit card product. The Company originates its consumer loans primarily in
its market area. Repayment of these loans is primarily dependent on the personal
income of the borrowers, which can be impacted by economic conditions in their
market areas such as unemployment levels. Loans to consumers are extended after
a credit evaluation, including the creditworthiness of the borrower(s), the
purpose of the credit, and the secondary source of repayment. Consumer loans
are made at fixed and variable interest rates and may be made on terms of up
to twenty years. Risk is mitigated by the fact that the loans are of smaller
individual amounts and spread over a large number of borrowers.
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