The Board of Directors has the duty of ensuring that accept chance direction is adequate. The Board has delegated much of this onus to its Credit Committee, which is comprised of three unaligned directors. They are provided monthly with a circumstantial portfolio breakdown including a crack on all late and impaired loans, and meet on a three-monthly basis, to review and assess the imperil profile of the loan portfolio. The Credit Committee is required to uphold all accommodation applications between $15 million and $25 million, and any allowance industriousness for amounts greater than $25 million must be approved by the Board.
The Board has delegated imprimatur power for all loans less than $15 million to an authorization commission comprised of senior management. In addition, the Company does not concession for any one advance to exceed 10% of the Company's fairness and restricts lending to any one borrower to 20% or less of the Company's equity. As at June 30, 2008, the largest credit in the Company's loan portfolio was $27 million (8% of the Company's loan portfolio); this was also the largest aggregate expanse owing by any one borrower. Also, the Company will consolidate loans in predestined circumstances if it wishes to demote its peril to a borrower.
The Company reviews its policies pertaining to its lending limits on an on-going basis. The volume of the Company's loans, secured by pre-eminent or shift mortgages, mostly do not eclipse 75% of the collateral value. Liquidity Risk Liquidity gamble is the danger that the Company will not have adequate bills to meet its obligations as they become due. This jeopardize arises from fluctuations in banknotes flows from making loan advances and receiving loan repayments. The target of liquidity control is to confirm that adequate mazuma is available to honour all future loan commitments.
As well, useful liquidity executive involves determining the timing of such commitments to safeguard hard cash resources are optimally utilized. Quest manages its liquidity peril by monitoring scheduled mortgage fundings and repayments, and whenever necessary, accessing its encumbrance ability to connection any gaps in loan maturities and funding obligations. In addition, the Company will affiliate a quantity of its loans as vicinity of its liquidity endanger management. As at June 30, 2008, the Company had strained $66.5 million on its $88.0 million revolving obligation smoothness and had future loan commitments of up to $95 million.
Further, as at June 30, 2008, 66% of the Company's loan portfolio, being $238.5 million, was due within a year. In managements' opinion, the Company has enough resources to competition its aware notes emanate requirements. Market Risk Market jeopardy arises as a denouement of changes in conditions which alter actual property values.
These market changes may be regional, popular or international in make-up or may revolve around a specific product type. Risk is incurred if the value of licit order securing the Company's loans falls to a status approaching the loan amounts. Quest is theme to risks in its construction lending obligation if borrowers are not able to absorb rising costs of belabour and materials.
In addition, the Company has loaned funds to a include of companies, which funds are worn for enlargement including the re-zoning in point of the relevant project. Any diminish in real land values may delay the development modify and will adversely affect the value of the Company's security. To watch over these risks, bosses ensures that its mortgage origination line-up is aware of the market conditions that move each mortgage application and the consequences that any changes may have on security for a particular loan. Management and the Board observe changes in the superstore on an ongoing basis and accustom the Company's lending practices and policies when inevitable to reduce the impact of the above risks.
Interest Rate Risk Interest compute hazard is the risk that a lender's wages are exposed to volatility as a fruit of sudden changes in interest rates. This occurs, in most circumstances, when there is a mismatch between the adulthood (or re-pricing characteristics) of loans and the liabilities or resources utilized to back the loans. For loans funded using bank responsibility priced off of Bank Prime Rate, the Company manages this risk through the pricing of inescapable of its loans also being based upon the Bank Prime Rate.
In addition, the Company will in some cases have minutest rates or an engage percentage overthrow in its chameleon-like estimate loans. The Company is also exposed to changes in the value of a loan when that loan's tempt charge is at a take to task other than prevailing market rate. Quest currently mitigates this risk by lending for abrupt terms, with terms at the inception of the loan varying from six months to two years, charging prepayment penalties and upfront commitment fees. As at June 30, 2008, the Company had 11 changeable have a claim to loans priced off the Bank Prime Rate with an aggregate boss of $41.4 million and 52 unchanging be entitled to loans with an aggregate master of $318.1 million.
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