Banking Terms & Definitions

Banking Terms & Definitions

The Salin Bank & Trust Company banking glossary is designed to provide definitions of commonly used banking terms, as well as terms specific to Salin Bank.

A

Account balance

The amount of money in an individual or business account at the start of a business day.

Account statement

A statement of transactions for a specific period of time.

American Bankers Association (ABA)

The ABA is a Washington, D.C.-based trade association for the U.S. banking industry. Founded in 1875, the ABA represents banks of all sizes and charters, including community banks, regional and money center banks, savings associations, mutual savings banks, and trust companies.

Annual percentage rate (APR)

A measure of the cost of credit as defined as a yearly rate.

Annual percentage yield (APY)

A percentage reflecting the total amount of interest paid on a deposit account based on the interest rate and the frequency of compounding for a 365-day period.

Automated Clearing House (ACH)

A nationwide funds transfer network in which participating financial institutions are able to electronically credit, debit, and settle entries to bank accounts.

Automated Teller Machines (ATMs)

An electronic device through which customers may perform various banking transactions, including withdrawals and deposits.

Average daily balance

The sum of all daily account balances during an accounting period (usually a monthly statement cycle) divided by the number of days in the same period.

Automated funds transfer

The electronic transfer of funds from one account to another.
 

B

Balance

Balance refers to the amount of money in a particular account. In credit, balance refers to the amount owed.

Bank Secrecy Act

The Bank Secrecy Act of 1970 (or BSA, or otherwise known as the Currency and Foreign Transactions Reporting Act) requires financial institutions in the United States to assist U.S. government agencies to detect and prevent money laundering. Specifically, the Bank Secrecy Act requires financial institutions to keep records of cash purchases of negotiable instruments, and file reports of cash purchases of these negotiable instruments of more than $10,000 (daily aggregate amount), and to report suspicious activity that might signify money laundering, tax evasion, or other criminal activities.

Banking Center

The physical location of a bank that customers can go to in order to conduct their banking.

Bill Pay

A service from Salin Bank that enables customers to pay their bills online.

Bounced check

A check that cannot be processed because the account holder has insufficient funds to cover the amount written on the check.

Business Bill Pay

A service from Salin Bank that allows business customers to pay vendor bills online.
 

C

Canceled check

A check that a bank has already paid and charged to the account holder's account. Once a check is canceled, it is no longer valid.

Capital Adequacy Ratio (CAR)

The Capital Adequacy Ratio, also known as Capital to Risk (Weighted) Assets Ratio (CRAR), is the ratio of a bank's capital to its risk. National regulators track a bank's CAR to ensure that it can absorb a reasonable amount of loss and complies with statutory Capital requirements.

Cashier’s Check

A check issued by a bank, drawn on its own funds rather than on one of its depositor’s funds.

Certificate of Deposit (CD)

An interest-bearing certificate issued by a bank in exchange for funds provided to the bank by the holder of the certificate.

Check image

A service that provides images of canceled checks. Each account statement includes images of checks that posted to the account during the statement cycle.

Check safekeeping

A service in which the bank retains a copy or digital image of all checks written against an individual’s account for seven years instead of returning the checks with the account statement.

Closing costs

The costs incurred by sellers and buyers in the transfer of real estate ownership.

Collateralized Mortgage Obligation (CMO)

A type of mortgage-backed security in which principal repayments are organized according to their maturities and into different classes based on risk.

Collected balance

The balance in a deposit account, excluding items that have not yet been paid or collected.

Combined balance

The total funds an account holder has their linked deposit accounts, such as savings, checking and CDs.

Compound interest

Interest that is calculated on both the accumulated interest and the principal balance in the account.

Cost of Funds Index (COFI)

A cost of funds index is a regional average of interest expenses incurred by financial institutions, which in turn is used as a base for calculating variable rate loans. The interest rate on an adjustable rate mortgage, for example, is often linked to a regional COFI specified in the particular loan documents. COFIs, in turn, are usually calculated by a self-regulatory agency like Federal Home Loan Banks.

Credit card

A personal credit card or business credit card issued by Salin Bank that gives the account holder the ability to borrow funds against the account named on that card.

Credit Disability Insurance

Insurance that makes payments on a loan(s) if the owner of the loan becomes unable to work due to a disability.
 

D

Debit

A decrease in a deposit account’s balance, such as what occurs when a check is posted to the account.

Debit card

A debit card allows electronic access to initiate withdrawals from an individual’s funds.

Deposit

Money that is added into a customer’s bank account.

Direct deposit

A service that automatically transfers recurring deposits into your checking, savings, or money- market account.

Disclosure

Information pertaining to an account’s services, fees, and regulatory requirements.
 

E

Electronic funds transfer (EFT)

Any transfer of funds initiated by electronic means from an electronic terminal, telephone, computer, ATM, or magnetic tape.

Enhanced log-in security

Enhanced technology that protects an account from being easily accessed by someone who is unauthorized to do so.

Equal Credit Opportunity Act (ECOA)

Enacted in 1974, the Equal Credit Opportunity Act (ECOA) aims to give all legal individuals an equal opportunity to apply for loans from financial institutions and other loan-granting organizations.

E-Statements

Free electronic statements for eligible Salin Bank checking, savings, and credit card accounts.

Executor

The person in a will who is designated as responsible for distributing funds and property in an estate to the rightful heirs.
 

F

Federal Deposit Insurance Corporation (FDIC)

A United States government corporation created by the Glass–Steagall Act of 1933. The FDIC provides deposit insurance, which guarantees the safety of deposits in member banks, up to $250,000 per depositor per bank.

Federal Home Loan Mortgage Corporation (Freddie Mac)

A stockholder-owned, government-sponsored enterprise (GSE) chartered by Congress in 1970 to keep money flowing to mortgage lenders in support of homeownership and rental housing for middle income Americans. The FHLMC purchases, guarantees and securitizes mortgages to form mortgage-backed securities. The mortgage-backed securities that it issues tend to be very liquid and carry a credit rating close to that of U.S. Treasuries.

Federal National Mortgage Association (Fannie Mae)

The Federal National Mortgage Association (FNMA), commonly known as Fannie Mae, was founded in 1938 during the Great Depression as part of the New Deal. It is a government-sponsored enterprise (GSE), though it has been a publicly traded company since 1968. The corporation's purpose is to expand the secondary mortgage market by securitizing mortgages in the form of mortgage-backed securities (MBS), thus allowing lenders to reinvest their assets into more lending and increasing the number of lenders in the mortgage market by reducing the reliance on locally-based savings and loan associations

Federal Reserve Bank

The Federal Reserve Bank is the central bank of the United States and the most powerful financial institution in the world. The Federal Reserve Bank was founded by the U.S. Congress in 1913 to provide the nation with a safe, flexible and stable monetary and financial system.

Federal Trade Commission

The FTC is a bipartisan federal agency whose mission is to protect consumers and promote competition.

Finance charge

The amount of interest paid on a loan.

Float

The time between the date when a check is deposited into an account and the date in which the funds become available.
 

G

Generally Accepted Accounting Principles

The common set of accounting principles, standards and procedures that companies use to compile their financial statements.

Gramm Leach Bliley Act of 1999 (GLBA)

Also known as the Financial Services Modernization Act of 1999, the Gramm Leach Bliley Act (GLB was enacted on November 12, 1999; it repealed part of the Glass–Steagall Act of 1933 and, specifically, removed barriers in the financial market among banking companies, securities companies and insurance companies that prohibited any one institution from acting as any combination of an investment bank, a commercial bank, and an insurance company. With the passage of the Gramm Leach Bliley Act, commercial banks, investment banks, securities firms, and insurance companies were allowed to consolidate.

Government Accounting Office (GAO)

The Government Accountability Office (GAO) is an independent agency that provides to the United States Congress audit, evaluation, and investigative services. The GAO is part of the legislative branch of the United States government.

Government Sponsored Enterprise (GSE)

A GSE is a privately held corporation with public purposes created by the U.S. Congress to reduce the cost of capital for certain borrowing sectors of the economy. Members of these sectors include students, farmers, and homeowners.
 

H

Home Equity Loan

A home equity loan is a type of loan in which the borrower uses the equity of his or her home as collateral. Home equity loans are often used to finance major expenses such as home repairs, medical bills, or higher education. A home equity loan creates a lien against the borrower's house and reduces the actual equity in the home.

Home Equity Line of Credit

A home equity line of credit is a loan in which the lender agrees to lend a maximum amount within an agreed period (called a term), where the collateral is the borrower's equity in his/her house. Because a home often is a consumer's most valuable asset, many homeowners use home equity credit lines only for major items, such as education, home improvements, or medical bills, and choose not to use them for day-to-day expenses.

Health Insurance Portability and Accountability Act of 1996 (HIPAA)

The Health Insurance Portability and Accountability Act of 1996 was enacted on August 21, 1996 and signed by President Bill Clinton. HIPAA also has been known as the Kennedy-Kassebaum Act or Kassebaum-Kennedy Act after two of its leading sponsors. Title I of HIPAA protects health insurance coverage for workers and their families when they change or lose their jobs. Title II of HIPAA, known as the Administrative Simplification (AS) provisions, requires the establishment of national standards for electronic health care transactions and national identifiers for providers, health insurance plans, and employers.

Home Mortgage Disclosure Act (HMDA)

The Home Mortgage Disclosure Act (HMDA) was enacted by Congress in 1975 and was originally implemented by the Federal Reserve Board's Regulation C. On July 21, 2011, rule writing authority for HMDA transferred from the Federal Reserve Board to the Consumer Financial Protection Bureau (CFPB). The CFPB's Regulation C now implements HMDA and requires lending institutions to report public loan data.

Home Ownership and Equity Protection Act of 1994 (HOEPA)

Signed into law in September 1994 by President Clinton, this law deals with deceptive and unfair practices in home equity lending, and includes requirements for certain loans with high rates or high fees. These loans also are called “Section 32 Mortgages” after the section of the law that addresses them.
 

I

Inactive account

An account that hasn’t had a deposit or a withdrawal within a certain (usually extended) period of time.

Individual Retirement Account (IRA)

An investing tool used by individuals to earn and earmark funds for retirement savings. There are several
types of IRAs: Traditional IRAs, Roth IRAs, Simple IRAs and SEP IRAs.

Interest rate

The amount paid by an individual to a lender over a certain period of time.
 

J

Joint account

An account that's shared by at least two people.
 

L

Lien

The right to hold any property given as a pledge or security until the debt it secures is paid. To constitute a lien, the debt must be enforceable in equity or law; (i.e. a mortgage).

Line of Credit

An arrangement between a financial institution and a customer that establishes a maximum loan balance that the bank will allow the borrower to maintain. The borrower can draw down on the line of credit at any time, as long as he or she does not exceed the maximum amount established in the agreement.

Liquidity

The portion of total assets that is not held in fixed assets and not loaned to an individual.

Loan to Value (LTV ratio)

A lending risk assessment ratio that financial institutions and others lenders examine before approving a mortgage. Typically, assessments with high LTV ratios are generally seen as higher risk and, therefore, if the mortgage is accepted, the loan will generally cost the borrower more to borrow or he or she will need to purchase mortgage insurance.
 

M

Maturity date

The date on which a certificate of deposit, bond or other instrument comes due.

Minimum daily balance

The lowest end-of-day balance in an account during a statement cycle; a certain minimum daily balance is often required with interest-bearing accounts to avoid a service charge or to qualify for special banking services.

Monetary Control Act

The Monetary Control Act is a two-title act enacted in 1980 that amended the manner in which the banking industry operated by deregulating the interest rates paid by banks, revising reserve and deposit requirements and raising the Federal Insurance Deposit Corporation (FDIC) insurance protection from $40,000 to $100,000 per account. In addition, the act requires all banks and all institutions that accept deposits from the public make periodic reports to the Federal Reserve System. Starting in September 1981, the Fed charged banks for a range of services that it previously had provided for free. This included check clearing, wire transfer of funds, and the use of automated clearinghouse facilities.

Money Market Account

An interest-bearing account that typically pays a higher interest rate than a savings account, and which provides the account holder with limited check-writing ability. A money market account thus offers the account holder benefits typical of both savings and checking accounts. This type of account is likely to require a higher balance than a savings account, and is FDIC insured.
 

N

National Automated Clearing House Association

A non-profit membership association charged with overseeing the Automated Clearing House (ACH) system, which operates the largest electronic payment network in the world.

National Flood Insurance Program (NFIP)

In 1968, Congress created the National Flood Insurance Program (NFIP) to help provide a means for property owners to financially protect themselves. The NFIP offers flood insurance to homeowners, renters, and business owners if their community participates in the NFIP. Participating communities agree to adopt and enforce ordinances that meet or exceed FEMA requirements to reduce the risk of flooding.

Net Asset Value

A mutual fund's price per share or exchange-traded fund's (ETF) per-share value. In both cases, the per-share dollar amount of the fund is calculated by dividing the total value of all the securities in its portfolio, less any liabilities, by the number of fund shares outstanding.
 

O

Online banking

Account information, services, and products that are available online.

Overdraft protection

Protection in the form of “back-up funds” to prevent a fee from accruing in the event an account holder spends more than what is available in his or her account.
 

P

Personal Identification Number (PIN)

A specified number that allows an account holder to gain access to an ATM.

Phishing

An attempt to acquire information such as user names and passwords by fraudulently posing as a trustworthy entity in an electronic communication.

Point-of-Sale

Terminals that allow you to pay for retail purchases with your debit card.

Prime rate

The interest rate a financial institution charges for loans made to larger business borrowers; the prime rate is generally considered the best rate available.

Principal

The original amount of money borrowed that is separate from interest.
 

R

Refinance

Replacing an old loan with a newer loan that offers better loan terms.

Routing number

A routing transit number (RTN), routing number, Institution Transit Number, or ABA number is a nine-digit bank code, used in the United States, which appears on the bottom of negotiable instruments such as checks to identify the financial institution on which the check is drawn. Salin Bank’s routing number is 074014035.
 

S

Salin Live Banking

Uses video-based interactive technology to allow customers to complete the majority of teller services that are conducted inside a banking center.

Salin Mobile

Provides free access to accounts via any Web-enabled mobile device, allowing customers to check balances, transfer funds between accounts, deposit checks, and pay bills.

Savings account

An account that is maintained by an individual with the purpose of saving money and accumulating funds.

Service charge

A charge that is issued for a specific service provided by a financial institution.

Small Business Administration (SBA)

The Small Business Administration (SBA) is a United States government agency that provides support to entrepreneurs and small businesses. The mission of the Small Business Administration is "to maintain and strengthen the nation's economy by enabling the establishment and viability of small businesses and by assisting in the economic recovery of communities after disasters". The agency's activities are summarized as the "3 Cs" of capital, contracts and counseling. SBA loans are made through banks, credit unions and other lenders who partner with the SBA. The SBA provides a government-backed guarantee on part of the loan.

Smooth Salin Rewards

A rewards program for Salin Bank customers and family members who use the Salin Bank debit card.

Special Flood Hazard Area (SFHA)

Land areas that are at high risk for flooding are called Special Flood Hazard Areas (SFHAs), or floodplains. These areas are indicated on Flood Insurance Rate Maps (FIRMs). In high-risk areas, there is at least a 1 in 4 chance of flooding during a 30-year mortgage.

Stop payment

When an account holder issues a verbal or written statement denoting that they no longer wish to pay a specific check or draft. Once a stop payment is issued, funds cannot be drawn on that check.

Suspicious Activity Report (SAR)

In United States financial regulation, a suspicious activity report (SAR) is a report made by a financial institution to the Financial Crimes Enforcement Network (FinCEN) regarding suspicious or potentially suspicious activity.
 

T

Truth in Lending Act

A federal law enacted in 1968 for the purpose of protecting consumers in their dealings with lenders and creditors. The Truth in Lending Act was implemented by the Federal Reserve through a series of regulations. Key aspects of the act concern the pieces of information that must be disclosed to a borrower prior to extending credit: annual percentage rate (APR), term of the loan and total costs to the borrower. This information must be conspicuous on documents presented to the consumer before signing, and also possibly on periodic billing statements.

Taxpayer Identification Number (TIN)

A Taxpayer Identification Number (TIN) and Employer Identification Number (EIN) are defined as a nine-digit number that the IRS assigns to organizations. The IRS uses the number to identify taxpayers who are required to file various business tax returns.

Truth in Savings Act

A federal law passed by Congress on December 19, 1991, as part of the Federal Deposit Insurance Corporation (FDIC) Improvement Act of 1991. The act was implemented under Federal Regulation DD. The Truth in Savings Act was designed to help promote competition between depository institutions and make it easier for consumers to compare interest rates, fees and terms associated with savings institutions' deposit accounts. The Truth in Savings Act established uniform guidelines for how banks and other financial institutions disclose information about deposit accounts to individuals.
 

V

Variable rate

An interest rate that fluctuates during certain periods of a loan term.
 

W

Wire transfer

An electronic payment service for transferring funds.
 

Withdrawal

The removal of funds from an individual’s account.