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42 Cards in this Set
- Front
- Back
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Real Estate Loans |
Credit secured by real property, including short-term credit to support building construction and land development and longer-term credit to support the purchase of residential and commercial structures |
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Financial Institution Loans |
Both long- and short-term credit extended to banks, insurance companies, and other financial institutions |
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Agricultural Loans |
Credit extended to farm and ranch operations to assist in planting and harvesting crops and to care for and market livestock |
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Commercial and Industrial Loans |
Credit granted to businesses to help cover purchases of inventory, plant, and equipment and to meet other operating expenses |
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Loans to Individuals |
Credit extended to households to finance the purchase of automobiles and appliances, medical and personal expenses, and other household needs |
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Wholesale Lenders |
Lending institutions that devote the bulk of their credit portfolios to large-denomination loans extended to corporations and other relatively large business firms and institutions |
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Retail Credit |
Smaller-denomination loans extended to individuals and families as well as to smaller businesses |
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CAMELS Rating def |
A system that assigns a numerical rating to a depository institution based on examiner judgment regarding its, capital adequacy, asset condition, management quality, earnings record, liquidity position, and sensitivity to market risk |
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Cash |
referring to the generation of income or cash flow by a borrowing customer |
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Cash Flow |
Often measured by the net income plus noncash expenses (such as depreciation) of a business loan customer |
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Promissory Note |
A negotiable instrument evidencing a loan agreement reached between lender and borrower; generally this instrument represents the basis for a lawsuit if a lender seeks to recover funds on a defaulted loan |
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Loan Commitment Agreements |
Promises to provide credit to a customer in the future, provided certain conditions are met |
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Collateral |
A borrower's possession of adequate net worth, quality assets, or other items of value that give added support to his or her ability to repay a loan; represent assets that the company pledges as an alternative repayment source for the loan |
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Restrictive Covenants |
Parts of a loan agreement, specifying actions the borrower must take or must not take for a loan agreement to stay in force |
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Warranties |
A section within a loan agreement in which a borrower affirms to the lender that the information he or she supplies is true and correct |
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Events of Default |
A section contained in most loan agreements listing what actions or omissions by a borrower would represent a violation of the terms of the agreement and what action the lender is legally authorized to take in response |
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Loan Review |
A process of periodic investigation of all outstanding loans to make sure each loan is paying out as planned. all necessary documentation is present, and loan officers are following the institution's loan policy |
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Loan Workouts |
Activity within a lending institution that focuses on delinquent loans and that tries to develop and implement strategies designed to recover as much as possible from troubled borrowers |
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Pass Loans |
This type of loan doesn't raise any concerns for examiners; receive pass credits |
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Criticized Loans |
Loan that raises concerns for examiners, but not yet determined to be an adversely classified loans |
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OAEM |
(Other assets especially mentioned) loan is not adversely classified and does not expose an institution to sufficient risk to warrant adverse classification. This loan has potential weaknesses that deserve management’s close attention |
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Classified Loans |
Any bank loan that is in danger of default. These Loans have unpaid interest and principal outstanding, and it is unclear whether the bank will be able to recoup the loan proceeds from the borrower. |
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Substandard Loans |
is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any |
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Doubtful Loans |
has all the weaknesses inherent in one classified substandard with the added characteristic that the weakness make collection or liquidation in full, on the basis of current existing facts, conditions, and values, highly questionable and improbable. |
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Loss Loans |
considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this basically worthless asset even though partial recovery may be affected in the future. |
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Non-Accrual |
nonperforming loan that is not generating the stated interest rate because of nonpayment from the borrower, typically due to financial difficulties. These loans are more likely to default, meaning that the investor will not recoup his or her principal. |
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Primary Repayment Source |
borrowers operating cash flow |
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Secondary Source of Repayment |
assets pledged as collateral and guarantors |
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Tertiary Source of Repayment |
Other assets not already pledged and third party refinancing |
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Strengths |
Reasons to make the loan |
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Weaknesses |
Risk of accepting a loan; there are dangers to the repayment of the loan |
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Mitigants |
Ways to handle weaknesses in loans |
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Term Sheet |
a bullet-point document outlining the material terms and conditions of a business agreement. After this document has been "executed", it guides legal counsel in the preparation of a proposed "final agreement". |
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Problem Loans |
nonperforming loans |
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Types of Loans |
-Real Estate Loans -Commercial and Industrial Loans -Loans to Individuals -Miscellaneous Loans -Financial Institution Loans -Lease Financing Receivables -Agriculture/Farm Loans |
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Factors Determining Mix of Bank Loans |
-Characteristics of market area -Lender Size (participations) -Experience & Expertise of management;loan policies -Expected Yield -Regulation |
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Camels Rating System |
-Capital Adequacy -Asset Quality -Management Quality -Earnings Record -Liquidity Position -Sensitivity to Market Risk |
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5 C's of credit |
-Character -Capacity -Capital -Conditions -Collateral |
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Character |
What is the character of management? Management's reputation in the industry and community? Investor look for impeccable credentials and references |
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Capacity |
Company's borrowing history and track record of repayment? How much debt can you company handle?
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Capital |
How well-capitalized is your company? How much money have you invested in the business? Want to ensure the bank perceives the bank as solid |
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Conditions |
what are current economic conditions and how does your company fit in? what are industry trends and how does your company fit in?
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