Financial Statement Requirements

Membership Guidelines

·  North Island underwrites both the property and the sponsorship looking to the sponsor for the financial strength and experience that will provide secondary support to the loan.

·  The borrower/guarantor must reside in, or own a business in, San Diego, Riverside or Orange County.

·  The property must be located in San Diego, Riverside or Orange County.

Property Parameters And Requirements

Loan to value

·  The following loan to value guidelines represent the maximum allowed. In certain circumstances the maximum ratios may be reduced dependent on the circumstances surrounding an individual transaction or the type of collateral.

·  For owner-users, the maximum loan to value ratio for a Purchase Transaction is 75% of the appraised value or sales price, whichever is lower. For investment properties the maximum is 70%.

·  The maximum loan to value ratio for a Rate and Term Refinance is 75%.

·  The maximum loan to value ratio for a Cash-Out Refinance is 65%.

·  The maximum combined loan to value for SBA Loans is 90%. (50% first and 40% second)

Debt Coverage Ratios

·  The minimum requirement for Debt Coverage Ratios are:

PROPERTY TYPE

/ DCR
INVESTMENT / DCR
OWNER USER / CDCR
OWNER USER
Commercial & Industrial / 1.40x / 1.40x / 1.30x
Retail - Anchored / 1.30x / 1.30x / NA
Retail - Unanchored / 1.40x / 1.40x / 1.50x
Office Buildings / 1.30x / 1.30x / 1.50x
Multi-Family / 1.20x / N/A / N/A

DCR – Debt Coverage Ratio CDCR – Combined Debt Coverage Ratio

·  For SBA Loans the minimum DCR for the first trust deed is 1.30x and for the combined first and second the minimum is 1.20x.

·  For a property to be considered as Owner User, the owner must occupy over 50%.

·  For Retail Property to be considered Anchored, the center must include a known chain operation (e.g. McDonald’s) or a true credit tenant.

·  For Investment Properties the income from the existing leases should be sufficient to meet DCR requirements and should be supported by the results of any appraisals or feasibility studies.

·  For Owner User Properties the market rent as reported in the appraisal should be sufficient to meet the DCR requirements. The CDCR calculation includes the income and expenses of the business occupying the property.

Appraisals

·  North Island can not accept appraisals that were ordered for or by the borrower or broker.

On an exception basis, we may consider appraisals prepared by other federally insured institutions, provided the reports are delivered directly from the other cooperating institution. The reports must be less than six months old (at the time of funding) and after a thorough review, the reports must meet our underwriting guidelines. In some situations we may require that the report is reviewed by one of North Island approved appraisers; an additional charge will apply and must be paid in advance of the review

Appraisal Report Requirements

Amount / LTV / Appraisal Report Format / Comments/Alternate Valuation Documentation
$250,000 or Less / 50% or less / None / At a minimum, Lender’s Drive By Inspection Report and an Evaluation analysis or a Restricted Use Appraisal.
$250,000 or Less / Over 50% / Restricted / Restricted Use Appraisal and Lender’s Drive By Inspection Report.
$250,000 + / N/A / Appraisal Report / Appraiser will determine if a Narrative or a Form style of Summary Report is appropriate for the type of property.

Environmental Requirements

·  The environmental risk is analyzed for all commercial real estate loans and the amount of due diligence is based on the property type, use, neighboring properties and/or history of a particular neighborhood. Refer to the chart below for the minimum environmental requirements.

Environmental Reporting Matrix

·  The Environmental Questionnaire (EQ) can be found in the Forms and Applications Section on the Brokers Web Site.

·  The credit union will order and pay for a preliminary EDR Collateral Screen Report, Based on the initial results and Loan Officer inspection, further due diligence steps may be warranted.

·  The EDR Environmental Report is paid for by the borrower and ordered through the Credit Union.

·  A Phase I and/or Phase II Environmental Report is paid for by the borrower and ordered by the Originator or lender.

·  The credit union strongly suggests that borrowers obtain a Phase I report on all purchase transactions to establish their protection under the all appropriate inquires rule.

Loan Type / Required Action / Further investigation if indicated / Additional Action if indicated
Loans secured by multifamily properties offices and retail / ·  Loan Officer Inspection
·  Environmental Questionnaire / ·  EDR Environmental Report / ·  Clean Phase I Report
Loans secured by properties located on or adjacent to an Industrial Site. / ·  Loan Officer Inspection
·  Environmental Questionnaire
·  EDR Environmental Report / ·  Clean Phase I Report / ·  Clean Phase II
·  Remedial Action
· 
Loans secured by properties in which the Loan Officer or Appraiser observes contamination or hazmat materials on site. / ·  Loan Officer Inspection
·  Environmental Questionnaire
·  Clean Phase I Report / ·  Clean Phase II
·  Remedial Action
· 

Borrower/Guarantor Requirements

·  The cash flow and overall financial condition of the borrower/guarantor will be evaluated on all commercial real estate loans.

·  In addition, on properties that are 50% or more occupied by a single tenant, we will require sufficient financial information on that tenant to allow us to evaluate their ability to honor the terms of the Lease Agreement.

·  Personal guarantees are required if the borrower is an entity. All individuals with 20% or more ownership in the borrowing entity must qualify for membership, join the credit union as members and guaranty the full debt. In addition, at least 51% of the ownership must be included as guarantors.

·  Complete loan packages are required for each borrower/guarantor.

·  When submitting a loan package for Underwriter review:

·  Refer to the Required Information and Stacking Order form included in the Information Section on the Broker Web Site.

·  Refer to the Wholesale Commercial Real Estate Loan Programs for details on the loan flow process.

Financial Statement Requirements

·  The following chart describes the entity/borrower/guarantor financial information that should be submitted for specific loan types:

Real Estate Secured Loans / Personal Financial Statement
Personal Tax Returns / Business Tax Returns / Company Prepared Statements / Compiled Statements / Reviewed Statements / Audited Statements
Up to $250,000
Individual Investors / X
Owner User / X / X / Year ends
Business Investors / X / X
Non Profits / YTD Interim / Year ends
$250,001- $1,000,000
Individual Investors / X
Owner User / X / X / YTD Interim / Year ends
Business Investors / X / X
Non Profits / YTD Interim / Year ends
$1,000,000- $5,000,000
Individual Investors / X
Owner User / X / X / YTD Interim / Year ends
Business Investors / X / X
Non Profits / YTD Interim / Year ends
$5,000,000 +
Individual Investors / X
Owner User / X / X / YTD Interim / Year ends
Business Investors / X / X
Non Profits / YTD Interim / Year ends

*Not for member distribution

Rev 4/2014