Commercial Real Estate Key Terms

Commercial Real Estate {CRE} - Includes construction loans, loans for non-residential property and loans for multi-family property such as condominiums.

Tier 1 Capital – A bank’s core capital. Includes equity capital and reserves and is the prime measure of a bank's financial health.

Tier 2 Capital - The second portion of the two-tier risk-based capital standard used by regulators. Includes undisclosed reserves, general loss reserves, subordinated term debt, and more.

Total Capital – Total of Tier 1 and Tier 2 capital.

FDIC – Federal Deposit Insurance Corporation. An independent agency created by the Congress to maintain stability and public confidence in the nation's financial system by insuring deposits, examining and supervising financial institutions for safety and soundness.

OCC- Office of the Comptroller of the Currency. Charters, regulates, and supervises all national banks. It also supervises the federal branches and agencies of foreign banks. Comptroller of the Currency is currently John Dugan.

OTS - Office of Thrift Supervision. Supervises the national savings & loan industry.

Call Report – Quarterly financial status report filed by national banks, state member banks and insured nonmember banks

Thrift Financial Report- Quarterly financial status report filed by thrifts, also known as savings & loans.

National Bank – A banking institution chartered by the Office of the Comptroller of the Currency.

Member Bank- A bank that is a member of the Federal Reserve system.

Non-Member Bank - Commercial bank, savings bank, or savings and loan association that is not a member of the Federal Reserve system.

Receivership- A bankruptcy in which a receiver is appointed by bankruptcy courts or creditors to run the company.

Loan Underwriting - .A detailed analysis of the credit worthiness of a loan applicant prior to the granting of the loan.

Deposit Insurance Fund – A FDIC maintained insurance fund that guarantees deposits at banks and other savings institutions up to a certain amount. The insured amount currently stands at $250,000 per depositor but is scheduled to drop back to its former level of $100,000 for all accounts except IRAs in 2014.

Cost of Capital - The rate of return capital can be expected to earn if invested in a different investment with similar risk.

Depreciation - The method of distributing the cost of an asset over its useful life.

Interest Only Loan - A loan that for a set period of time the borrower pays only the interest on the principal amount, while the principal is paid at maturity.

Leverage - the use of debt to supplement an investment. Investors use leverage, or borrowed money, to increase the rate of return on an investment. Also used to describe debt.

Securitization - Aggregating debt into a pool to spread risk. Mortgages are securitized and sold to investors.

Cash Flow - A company's cash receipts minus its cash payments. Used to measure financial health.




Source: FOX Business