Glossary

Definition:

To minimize the chance that an investment’s actual return will be less than expected. This includes the chance of losing some or all of the original investment. Risk is minimized by doing due diligence. In this process the risk is often measured by calculating the standard deviation of the historical returns or average returns of a specific investment.

Definition:

The end of the life of a security.

Definition:

A nonprofit organization is an entity formed for the purpose of serving a public or mutual benefit other than the accumulation of profits.

Definition:

A certificate of deposit is a promissory note issued by a bank. It is a time deposit that restricts holders from withdrawing funds on demand. Although it is still possible to withdraw the money, this action will often incur a penalty.

Definition:

Risk capital, also known as Tier 1 capital, is the core measure of a bank's financial strength from a regulator's point of view. It consists primarily of shareholders' equity but may also include preferred stock that is irredeemable and noncumulative and retained earnings.

Definition:

Noncurrent loans represent loans on banks/credit union books that are overdue by more than 30 days.

Definition:

Diligence write-ups are complete, waiting for Investment Committee vote/approval.

Definition:

Calculated by dividing equity by total assets, the equity/assets ratio is used as a measure or risk. The higher the equity/assets ratio the more protection depositors have against bank losses. This ratio is referred to as net worth/assets for credit unions.

Definition:

Investing that has a double bottom line focused on achieving both financial and social returns.

Definition:

The United States Home Mortgage Disclosure Act (or HMDA, pronounced HUM-duh) was passed in 1975. It requires financial institutions to maintain and annually disclose data about home purchases, home purchase pre-approvals, home improvement, and refinance applications involving 1 to 4 unit and multifamily dwellings. It also requires branches and loan centers to display a HMDA poster.

HMDA was designed by the Federal Reserve Board in order to:

• Help public officials to distribute public-sector investments;
• Discover if financial institutions are serving housing needs of communities; and
• Identify where there are discriminatory lending practices.
  

Definition:

A type of investing for which real return rates or periodic income is received at reasonably predictable levels.

Definition:

Dollars expected to be reinvested in low- to moderate-income communities