Glossary
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See Uniform Commercial Code.
See financing statement.
See amendment, assignment, continuation, partial release, release,
and termination.
See lien searches.
A line of credit that is approved by the bank but not disclosed
to the borrower until some specific event, usually a request for
funding from the borrower.
Legal term used (especially in UCC Article 8) as an adjective to
describe stocks, bonds, other investments, and certificates of deposit
held in nonmaterial form as electronic computer entries. Ownership
of these instruments is usually evidenced by a receipt or confirmation.
See naked.
or
An option or a future is a right or a commitment to buy or sell
something at a future date. The underlying is the financial instrument
that may or must be bought or sold in each option or futures contract.
FAS 133, as amended by FAS 149, defines an underlying to be a specified
interest rate, security price, commodity price, foreign exchange
rate, index of prices or rates, or other variable (including the
occurrence or nonoccurrence of a specified event such as a scheduled
payment under a contract). An underlying may be a price or rate
of an asset or liability but not the asset or liability itself.
The investment bank, commercial bank, or brokerage firm that works
with an issuer to sell a new issue. Issuers may select underwriters
by obtaining bids or on a negotiated basis. Potential underwriters
may form groups called underwriting syndicates to bid collectively.
The name used to describe the process of analyzing and structuring
a proposed loan. Good underwriting is the most important aspect
of secured lending. Outside of banking, the term primarily refers
to the purchase of risk.
Bank term for retained earnings. Bank profits from current as well
as prior years that have neither been distributed to shareholders
as dividends nor transferred to surplus. Corporate earnings accumulated
over time. One of a corporation’s equity or capital accounts.
See tier 1 capital and tier 2 capital.
or
The portion or component of risk or loss that exceeds the predicted
amount.
A contra equity account created under FAS 87 rules for cases in
which the amount of the additional minimum pension liability exceeds
the sum of unamortized prior service cost plus transition obligation.
Sometimes called minimum pension liability adjustment or minimum
pension liability in excess of unrecognized prior service costs.
A compilation of laws relating to commercial contracts involving
personal property. The code does not address real property. In addition,
a few types of personal property are also excluded. While the UCC
has been adopted by all 50 states, there are differences among the
versions adopted in each state. Secured lenders tend to focus on
UCC Article 2A covering leases, Article 8 covering securities, and
Article 9 covering all other personal property collateral.
A form of life insurance that combines term insurance protection
with a savings feature. The portion of the funds allocated to the
savings feature is invested in a tax-deferred account that typically
earns interest at rates comparable to prevailing money market interest
rates. A universal insurance policy offers the policy holder the
flexibility to change the amount of insurance coverage, the amount
of the premium payment and/or the portion of the premium payment
allocated to the savings feature.
Appraisal requirements published by the Appraisal Foundation. Prior
to 1994, USPAP rules were included as an appendix to the Uniform
Real Estate Appraisal Rule published by the four federal financial
institution regulators. Since 1994, USPAP rules are referenced in
the bank regulations but not provided in any form. Comments published
with the 1994 amendments to the bank regulations indicate that readers
are expected to assume that all references to USPAP in the regulations
are references to the most current version of USPAP then available.
A guaranty agreement that does not include any provisions restricting
the amount of debt guaranteed.
Land that is not platted. Land for which the property description
takes the form of a metes and bounds description rather than a lot
identification. See metes and bounds and platted
Term used to describe an opinion letter accompanying audited financial
statements in which the CPA states that the financial statements
fairly present the financial position and the results of operations.
The CPA will also state that the financial statements conform with
GAAP for the present and the preceding reporting periods.
The current unamortized balance, as of the financial statement date,
of the off-balance sheet asset for the initial transition asset
in a defined benefit pension plan. FAS 87 requires that this amount
be disclosed in a footnote to the financial statements. See transition
asset.
The current unamortized balance, as of the financial statement date,
of the off-balance sheet liability for the initial transition obligation
in a defined benefit pension plan. FAS 87 requires that this amount
be disclosed in a footnote to the financial statements. See transition
obligation.
or
An off-balance sheet asset or liability created under FAS 87 rules
when plan assets in a defined benefit pension plan exceed or fall
short of the projected benefit obligation (PBO). The gain or loss
is usually caused by actual investment returns for plan assets that
exceed or fall short of expected or assumed rates of return. Gains
or losses may also result from changes in actuarial assumptions.
These are off-balance sheet assets or liabilities because volatile
returns on plan assets realized in subsequent periods can reduce
or completely offset the unrealized gains or losses that previously
existed. These gains or losses are from changes in the plan or the
plan assets that occur subsequent to the adoption of FAS 87 rules
and should not be confused with initial transition assets, unrecognized
transition assets, initial transition obligations, or unrecognized
transition obligations. The amount of any unrecognized gains or
losses is disclosed in a footnote to the financial statements.
The current unamortized balance, as of the financial statement date,
of the off-balance sheet liability for prior service costs in a
defined benefit pension plan. FAS 87 requires that this amount be
disclosed in a footnote to the financial statements. See prior service
costs.
A phrase sometimes used to describe a guaranty of a loan to a borrowing
entity when the borrowing entity is a parent company or stockholder
of the guarantor.
A yield curve depicting a situation in which yields for shorter-term
maturities are lower than yields for longer-term maturities. Upward
sloping yield curves are common.
An acronym for the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act
of 2001, ("USA PATRIOT Act"). The USA PATRIOT Act substantially
amends the Bank Secrecy Act of 1970 (BSA). The statute contains
strong measures to prevent, detect, and prosecute terrorism and
international money laundering. The Act is far-reaching in scope,
covering a broad range of financial activities and institutions.
See Uniform Standards of Professional Appraisal Practice.
State and Federal laws establishing maximum allowable interest rates
that may be charged on specified types of credit extensions to specified
types of borrowers.
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