Central Bancompany

Glossary

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401(k) plan
A tax-deferred defined contribution retirement plan offered by an employer.

403(b) Plan
A tax-deferred annuity retirement plan available to employees of public schools and certain nonprofit organizations.

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Accounts for Minors
Depending on the type of saving you would like to do for your child or grandchild, we can set up the appropriate account. If you would like the account to be in their name, we have a Growth Account which can be started with as little as $25. If, however, you're just thinking of putting away money for their future, we have other options such as CDs, money market accounts and other products that can work for you. Let us know your goal and we'll help you find the right type of account.

American Stock Exchange (AMEX)
A private, not-for-profit corporation located in New York City that handles approximately one-fifth of all securities trades within the United States.

Annuitize
To change an annuity contract from the accumulation (pay-in) stage to the distribution (pay-out) stage.

Annuity
A contract between an insurance company and an individual in which a sum of money is deposited for a specified period of time. During the accumulation phase, the funds grow tax deferred. During the income phase, income is paid for a specified period of time.

APR
APR is Annual Percentage Rate. APR was developed to help consumers compare loans programs offered by different lenders. APR includes the interest rate plus other charges such as PMI payments, prepaid interest, origination fees and discounts points to reflect the actual finance charges associated with a mortgage loan.

ARM
ARM stands for Adjustable Rate Mortgage. An ARM loan interest rate at the end of each designated period. This period can be one year, three years, or more. The interest rate is determined by taking an index and adding a margin.

ATM Charges
When you use your ATM or CheckPlus card at a 24-Hour Bank with a dogwood logo, you will not be charged a fee. If you use another ATM, you may be charged a fee. When you begin your transaction at a bank's ATM, it should immediately inform you of the charge before you begin so you have the opportunity to avoid this charge.

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Balanced Investment Strategy
A method of portfolio allocation and management aimed at balancing risk and return. A balanced portfolio may combine stocks, bonds, packaged products and cash equivalents.

Balloon Loan
Balloon Loans are conventional, fixed rate loans that are amortized over 30 years but have a much shorter maturity date. We offer 5 and 7-year Balloon Loans. With these loans, the amount of your monthly payment would be the same as if you had a 30-year fixed loan. However, at the end of the 5 or 7 year term, you would need to pay off the loan or refinance.

Bond
A debt instrument in which the issuing authority promises to pay the bondholders a specified amount of interest for a specified length of time and to repay the principal invested on a given maturity date.

Business Accounts
We have a wide variety of money management options for businesses, small and large. It's important for you to know your needs and then choose the types of accounts and services that meet those needs. You may think you just need a business checking account when, in reality, you need more than that to keep your business moving smoothly. Every business is different. Let us create a package of services to serve you right.

Consumer Price Index (CPI)
A measure of price changes in consumer goods and services used to identify periods of inflation or deflation.

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Caps
Caps indicate the maximum rate change an ARM loan can undergo. The caps are expressed as a pair of numbers, such as 2/6. In this example, the 2 indicates that the rate can go up or down no more than two percentage points for any single adjustment. The 6 indicates that, over life of the loan, the rate can change no more than six percentage points from the original rate. Lenders may offer a variety of caps with different kinds of ARM loans.

Certificate of Deposit
A Certificate of Deposit or also known as a CD is a time deposit investment issued by the bank with a stated date of maturity and interest rate.

CheckPlus Debit MasterCard®
Looks like a credit card. Works like a check. The CheckPlus Debit MasterCard® card allows you to make purchases without carrying cash, and without the hassle of writing checks. With the CheckPlus Debit MasterCard® card, you'll enjoy 24-hour banking convenience at ATMs all over town, across the country, and around the world.

Committee on Uniform Securities Identification Procedures (CUSIP)
A committee that assigns identification numbers and codes to all securities, to be used when recording all buy and sell orders.

Current Yield
The annual rate of return on an investment based on the income received during a year compared with the investment's current price.

CUSIP Number
The individual identification number assigned to most securities in the United States.

Custodial Account
An account in which a custodian enters trades on behalf of the beneficial owner, often a minor.

Custodian
An institution or a person responsible for making all investment, management and distribution decisions in an account maintained in the best interests of another.

Closing Costs
The dollar amount of closing costs depends upon the loan amount, interest rate, closing date and type of loan. However, a list of closing costs for purchasing a home may include the following: At closing, the borrower will pay interest for the period between closing day and the first day of the next month. If the loan closes on the 20th, the borrower will pay 10 or 11 days of interest. If it closes on the 1st, the borrower would pay no interim interest.

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Debt Ratio
Lenders use debt ratios to determine how much a borrower can afford for a mortgage payment. Debt ratios come in two parts, mortgage debt and total loan debt. The mortgage debt ratio is calculated by dividing the proposed mortgage payment (including escrows) by gross monthly income. Total debt ratio is calculated by dividing the total of all monthly debt payments (car loans, credit cards, student loans, child support, etc.) by gross monthly income. Living expenses such as utilities, health insurance and day care are not included in the total debt ratio. A loan program may allow the borrower up to 28%/36% debt ratios. In this case, a borrower could have a loan payment of up to 28% of gross monthly income as long as the total debt is no more than 36% of gross monthly income. Maximum allowable debt ratios vary from loan program to loan program.

Direct Payroll Deposit
Direct deposit is the electronic transfer of your pay check directly into your bank account. It’s the fastest way to get your money and many employers provide the service.

Discount Rate
The interest rate charged by the 12 Federal Reserve Banks for short-term loans made to member banks.

Diversification
A risk management technique that mixes a wide variety of investments within a portfolio, thus minimizing the impact of any one security on overall portfolio performance.

Dividend
The payment designated by the board of directors to be distributed pro rata among the shares outstanding of common or preferred stock or a mutual fund.

Dow Jones Industrial Average (DJIA)
The most widely recognized market indicator, made up of 30 large and actively traded industrial stocks.

Deposit Insurance
Your deposits are insured for up to $250,000. If you choose to place your money in one of our products called a PAC-CD, you are insured for up to $3.25 million. However, it is important to note that products offered by InvestorServices are NOT FDIC insured and do involve risk. Make sure you completely understand the kind of products you are investing in and whether they are insured before you decide what to do with your money.

E


Escrow
Many customers prefer to make monthly payments to the bank toward their yearly home owner's insurance and tax bills. In turn, the bank pays those bills when they come due. These payments are "escrow" payments. When you buy, you pay for the first year of home owner's insurance and the seller pays the taxes for the part of the year they occupied the property. When the loan closes, the bank collects enough funds from the borrower and the seller to ensure there will be enough escrow to pay the bills when they are due. For example: Your loan closes during the 5th month of the year. At closing, the bank collects taxes from the seller for the first five months and insurance from you for the first month. The balance needed to pay your tax and insurance escrow bills will come from your escrow payments during the following months.

Escrow Requirements
In most cases, it is up to you whether you escrow for taxes and insurance. Some people want to take care of these bills themselves; others prefer the convenience of having the bank collect monthly escrow payments and paying them. Many government loans require the borrower to escrow for taxes and insurance. Also, you must escrow for taxes and insurance, if you are required to have private mortgage insurance.

Estate
All assets a person possesses at the time of death, such as securities, real estate, interests in business, physical possessions and cash.

F


Federal Home Loan Mortgage Corporation (FHLMC)
A publicly traded corporation that promotes the nationwide secondary market in mortgages by issuing mortgage-backed pass-through debt certificates. Syn. Freddie Mac.

Federal National Mortgage Association (FNMA)
A publicly held corporation that purchases conventional mortgages and mortgages from governments agencies, including the Federal Housing Administration, Department of Veterans Affairs and Farmers Home Administration. Syn. Fannie Mae.

Federal Reserve System
The central bank system of the Untied States. Its primary responsibility is to regulate the flow of money and credit. The system includes 12 regional banks, 24 branch banks and hundreds of national and state banks. Syn. Fed.

Fixed Annuity
An annuity policy in which the issuing insurance company guarantees a fixed interest rate for a specified period of time.

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Image Statements
Our image statement provides an organized copy of all your canceled checks.

InfoLine Telephone Banking
Stay in touch with your money 24 hours a day, 7 days a week with just one call from your touch-tone phone. Transfer money between accounts, make loan payments without mailing a check, balance your checking, plus much more.

L


Loan Approval
Loan approval involves a credit history analysis and an appraisal of the property. The time required to complete these tasks can be very different, depending on the type of loan. Conventional loans can generally be approved in 14 to 21 days. Some conventional loans can be approved within 24 hours (pending a satisfactory appraisal), if sufficient documentation of assets and debts are supplied with the application. Other loans, including all government loans may take from 30 to 40 days for approval.

O


One Statement Banking
A monthly snapshot of all your finances in an easy-to-read format including deposit, loan, and investment information. We also provide an annual interest statement at tax time that includes interest earned on deposits and paid on loans.

Origination Fee
An origination fee is a one time charge by the lender, similar to a discount point, which helps secure a better interest rate.

Overdraft Access
If you make an honest mistake in your checkbook, we've got you covered with Overdraft Access. Instead of returning your checks unpaid, we'll pay them for you, up to your Overdraft Access limit.

P


PMI
PMI is Private Mortgage Insurance. PMI covers the bank against loss should a borrower default on their home loan. In the past, home buyers could not get a home loan unless they had a down payment of at least 20% of the sales price. Everyone knows how difficult it is to save 20% for a down payment. PMI was developed so people could purchase a home with as little as 5% in down payment. In general, banks require PMI on loans for over 80% of the sales price of the property. Loans with PMI include an insurance premium that is added to the monthly payment. This addition to the monthly payment continues for a set number of years, or until the loan principal is paid down to less than 80% of the sales price, whichever comes first.

Principal and Interest
In the first few years of a loan, most of your monthly payment goes toward interest. As your principal balance decreases, the interest part of your payment decreases. So, the principal part of your payment will increase with each payment. With a 30 year loan, about 9% of the first payment goes toward principal. A first payment on a 20-year loan will have about 20% going toward principal and 30% of the first payment on a 15-year loan will go toward principal. The principal payment will become 50% of the total payment approximately 20 years into a 30-year loan. For a 20-year loan, it will take 11 years to reach 50%. For a 15-year loan, it will take six years.

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Retirement Plans
Whether your company would like to offer a 401(k), 403(b), Profit Sharing or Money Purchase plan, we have the staff of experienced experts you can count on. You can choose traditional or daily valuation. Plus we offer Internet access to the plan sponsor and the plan participants to keep you in touch with your money.

Rollover IRA
Are you getting ready to retire? How about starting off on a second career? We can help by moving your 401k into a Rollover IRA. Much like an Investment Management Account, our team of experts will actively monitor your account to maximize your return. We will also ensure your account meets all tax requirements, including monitoring your beneficiaries, required minimum distributions, or setting up substantial equal payments.

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Withdrawal Penalties
We can offer you a higher savings rate on your CD because you have agreed to leave it with us for the term of the CD. If you decide to withdraw it early, you will be charged a penalty. If you're concerned about how much that penalty will be, just ask and we'll figure it out for you.

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