| Schedule of identification and calculation of allowance for credit losses for each of the following portfolio segments |
Loan Pool | | Risk Characteristics | One-to-Four Family Mortgages | | This category consists of loans secured by residential real estate. The performance of these loans may be adversely affected by, among other factors, local residential real estate market conditions, the interest rate environment, and inflation. | | | | Construction Loans | | This category consists of loans to finance the ground-up construction and/or improvement of residential and vacant lot loans. The performance of construction loans is generally dependent upon the successful completion of improvements and/or land development for the end user. The successful completion of planned improvements and development may be adversely affected by changes in the estimated property value upon completion of construction, projected costs, and other conditions leading to project delays. | | | | Home Equity Loans/ Lines of Credit | | This category consists of loans secured by first and junior liens on residential real estate. The performance of these loans may be adversely affected by, among other factors, local residential real estate market conditions, the interest rate environment, and inflation. | | | | Commercial Real Estate | | This category consists of loans primarily secured by office and industrial buildings, warehouses, retail shopping facilities and various special purpose properties, including hotel and restaurants. The performance of these loans may be adversely affected by, among other factors, conditions specific to the relevant industry, the real estate market for the property type and geographic region where the property of the borrower is located. This category consists of loans to finance the ground-up construction and/or improvement of commercial properties. The performance of these loans is generally dependent upon the successful completion of improvements and/or land development for the end user. The successful completion of planned improvements and development may be adversely affected by changes in the estimated property value upon completion of construction, projected costs and other conditions leading to project delays. | | | |
Commercial and Industrial | | This category consists of purchased business loans made to various practitioners and other professionals. These loans are often originally secured by blanket UCC-1 filings. When the loan is purchased, the Bank purchases 100% of the loan and remits 97% of the loan balance to the seller and the seller establishes a reserve deposit account with the Bank equal to 3% of the loan balance. If a loan becomes delinquent, the Bank withdraws payment from the reserve deposit account. If a loan becomes 90 days delinquent, the seller typically replaces the delinquent loan with a performing loan of equal or greater balance (although this is not a contractual obligation of the seller). The performance of these loans may be adversely affected by among other factors, local and national market conditions, the interest rate environment and inflation. This category consists of purchased business loans to independent insurance professionals for the purpose of business acquisition, expansion, refinance and working capital. These loans are fully collateralized by the business assets of the insurance agency, and typically require a life insurance policy for the agent in the amount of the loan. All loan payments are received directly via electronic transfer. Loans have a 10 year commitment on a 15 year amortization with a fixed rate for the first 5 years. Loans reprice for the remaining 5 years at prime plus a margin. The performance of these loans may be adversely affected by local and national market conditions, the interest rate environment, inflation and other factors. This category consists of commercial loans purchased from a third-party originator that provide short-term, 12-month interim financing to small businesses. These loans serve as bridge financing for borrowers waiting to secure permanent funding through Small Business Administration (SBA) guaranteed loan programs. The primary source of repayment for these loans is the planned SBA buyout at the end of the 12-month interim period. The performance of these loans may be adversely affected by, among other factors, local and national market conditions, the interest rate environment and inflation. | | | | Consumer Loans | | This category consists of loans to individuals for household, family, and other personal use. The performance of these loans may be adversely affected by national and local economic conditions, inflation, and other factors affecting the borrower’s income available to service the debt. |
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