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Glossary of Financial Terms



Call Report
A sworn statement of a bank's financial condition as of a certain date, submitted in response to a demand from a supervisory agency or authority.

An accounting term describing an excess of assets over liabilities. Capital accounts include money raised through the sale of stock, retained earnings, and borrowings in the form of notes or debentures.

Capital Ratio
A measure of profitability, determined by dividing stockholders equity by total assets.

Capital Stock
Usually synonymous with common stock; the total amount of shares of ownership in a corporation. The total amount of a corporation's common and preferred stock is authorized by its charter or certificate of corporation.

This option determines if a bank has authorized system-generated transactions at month-end, increasing or decreasing loan principal and variances. A bank would use this to collect delinquent payments through system-generated transactions by either charging delinquent interest and/or escrow to the principal balance and advancing the paid-to-date by the frequency, or taking prepaid principal payments and using these funds for the delinquent payment.

Cash Back Deposit
A deposit of only part of a check; the other part is cashed and given to the customer.

Cash Letter
An interbank transmittal form resembling a deposit slip used to accompany cash items sent from one bank to another.

Certificate of Deposit (CD)
A formal receipt issued by a bank for a specified amount of money left at the bank. CDs commonly bear interest payable at a specified future date or after a specified minimum notice of intent to withdraw. Some CDs are non-interest bearing, in which case may be payable on demand or at a future date. CDs may be issued in negotiable or non-negotiable form. They are payable only upon surrender with proper endorsement and are carried on the bank's general ledger rather than on individual customer account ledgers.

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Certified Check
A depositor's check across the face of which an authorized party in the drawee bank has stamped the word certified and added a signature. Through certification of a check, the drawee guarantees that sufficient funds have been set aside from the depositor's account to pay the item. A certified check is a bank's promise to pay.

Charge Off
A loan, obligation, or cardholder account which the bank no longer expects to be repaid and is written off as a bad debt expense.

A written order directing the financial institution to pay money as directed.

Check Digit
A calculation used for the last digit of the account number to ensure that duplicate accounts do not exist. The check digit also provides a security system for the account number. Since the entire account number is used in the calculation, the check digit helps prevent fraud.

Check Hold
A hold placed on funds originating with a check. The hold may be placed on a check deposited to an account or to a check cashed against an account balance.

Check Kiting
An attempt to draw against non-existent funds for fraudulent purposes. The depositor issues a check, overdrawing an account at one bank and deposits a check drawn on another bank, which is also drawn against insufficient funds.

Check Routing Symbol
The denominator (lower portion) of a fraction appearing in the upper right corner of checks drawn on all Federal Reserve member banks. The ABA transit number is the upper portion of this fraction. The check routing symbol identifies the Federal Reserve district in which the drawee is located, the Fed facility through which the check can be collected, and the availability assigned to the check under the Fed schedule.

Specific property pledged by a borrower to secure a loan. If the borrower defaults, the lender has the right to sell the collateral to liquidate the loan.

Collected Balance
A DDA or Savings term meaning an account's actual balance less float amounts. Float is used only to delay the accrual of interest on deposits.

Collection Item
Any item received by a bank for a customer's account and for which the bank does not or cannot give immediate, provisional credit. Also called a non-cash item. Collection items receive deferred credit, often require special handling, usually are subject to special fees and do not create float.

Commercial Loan
Loans given to business customers, corporations and commercial facilities.

Common Stock
Certificates evidencing ownership of a corporation and generally giving the stockholder voting rights. Common stockholders have rights inferior to those who hold the corporation's bonds, preferred stock and other debts.

Community Reinvestment Act (CRA)
An act encouraging banks to meet the credit needs of all communities within its market area. Under the act, banks are to make available credit on a safe and sound basis to moderate and low income neighborhoods within its delineated market area.

Competitive Equality Banking Act (CEBA)
Legislation passed by Congress in 1987 which contains provisions regarding availability to bank customers of deposited checks, the operations of non-bank banks, and the authority of banks to offer certain services. Title IV of this act is called the Expedited Funds Availability Act.

Comptroller of the Currency
An official of the U.S. government appointed by the president and confirmed by the Senate, who is responsible for the chartering, examining, supervising and liquidating of all national banks.

Construction Loan
An advanced principal commitment based on percentage of construction completion. A line of credit for a company or person that wants to build. The entire principal of a construction loan is not advanced at one time. This means the customer only pays interest on the portion of the loan he/she has drawn. For more information see Construction Loans.

Consumer Credit
The general banking term for loans extended to individuals or small businesses, providing for monthly repayment. Customers may get loans for cars, appliances, boats, furniture, minor home improvements, etc.

Correspondent Bank
A bank that maintains an account relationship and/or engages in an exchange of services with another bank.

A person who signs a loan with the borrower, but is not legally responsible for repayment unless the borrower defaults.

An advance of cash, merchandise or other commodity in exchange for an agreement to pay at a future date, with interest if so agreed.

Credit Card
A plastic card to be used from time to time by the cardholder to obtain money, goods, or services or possibly under a line of credit established by the card issuer. The cardholder is billed for any outstanding balance.

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