Examiner Test Flash Cards
(186 cards)
Two condition that must be met before any loan is made to an insider per Reg O
- Made on substantially similar terms as those to non-insiders
- Doest not include more than normal risk of repayment
Can you amortize or accrete a premium or discount to the Call Report Date?
NO, from purchase date to actual Maturity only
Trouble or new institutions need prior approval to hire whom? Length of notice?
Senior Officers & Directors
30 day notice required
List factors to consider when assessing Sensitivity to Market Risk (3)
- impact to earnings and capital during adverse rate changes
- nature and complexity of risk
- Management’s ability to identify, measure, monitor and control risk given size, complexity and risk profile.
How to account for a loan moved to non accrual status.
Reverse all previously accrued but not collected interest on Balance Sheet and Income Statement
CR - Accrued Interest Rec ( to reverse uncollected interest)
Dr - Interest and fee income on loans ( if during current calendar yr)
Records for Reg O, Applying to all insiders
– identify through annual survey, all insiders of the member bank
– maintain record of extension of credit, amount and terms to insiders of member bank
– maintain record of extension of credit to insiders of affiliates by using: survey method, borrower inquiry method.
Securities have appropriate credit quality and marketability characteristics to be purchased and held by banks if you can determine what 2 things about the issuer?
A. Issuer presents low risk of default
B. The security is currently trading above par value.
C. Management’s documented assessment indicates issuer will make full and timely repayment of P/I.
D. Security is currently rated BBB or better.
A. Issuer presents low risk of default
C. Management’s documented assessment indicates issuer will make full and timely repayment of P/I
What is considered a concentration in securities?
Exemptions?
25 percent of Total Capital
US Government & treasury and any Fed Funds or loans secured by the same, including FHLB, FHLMC, FNMA
Change in the $ amount of NII from one period to the next is caused by variances of 3 distinct factors (MLR)
MIX - change in earning assets and funding liabilities shows the effect of the composition of the asset/ liability structure
Level - shows the effect ( cost/ return) of changes in the level of average assets
Rate - measures the effect of changes in asset yields & cost of funds
When capital is low enough, What guidelines should be used to assess concentrations?
Generally 2 percent of Total Assets
T or F: Dividend check issued and outstanding should be reported as Other Liabilities
False - Dividends declared but NOT YET PAID are reported as Other Liabilities
Issued = paid
Actions that constitute negligence on the part of the Board?
Attitude of general indifference towards bank affairs
Are Fed Funds Sold secured by FHLMC bond included in concentration amount?
NO
Key-man life insurance held on a VP who is no longer employed - what two actions can be taken?
–surrender / dispose of policy
– justify the benefit of keeping it
To add coverage to the blanket bond, the Bank may obtain a ________ .
Rider
Prior to acquiring a corporate debt security, management must determine …
A. Future CF results in a DSCR of 2x or greater
B. The Interest Rt is comparable to a government bond.
C. The issuer has the ability to meet the financial commitment for the projected life of the investment.
D. A & C
C. The issuer has the ability to meet the financial commitment for the projected life of the investment.
Bank management determines they will purchase an investment based solely on Aa rating issued by Moody’s. Is this permissible? Why or why not.?
NO
Management can not rely solely on external credit ratings to determine whether or not a security is permissable or investment grade.
Are managing partners of LLC liable for the debt of the LLC?
Reg. O
LLL
Reg O – Managing members have ownership so if >/= 25 percent of control is met then include w/ insider (related interest)
LLL – do not include unless loan benefit the individual
4 Lists the Board of Directors must review & minimum amounts.
(RSMo 362.275)
In order - [NAPD]
First List: New loans - greater of $10M or 5% of the LLL
Second List: Aggregate Indebtedness - greater of $50M or 5xs the loan list amount
Third List: Past Due >/= 30 days
Fourth List: DOE Indebtedness
Legal Lending Limit
– If a corporation is a general partner in a limited/ general partnership would a loan to the partnership be attributed to the corporation for legal lending limit?
YES (understand concepts)
Why should bank checks be pre-numbered?
To ensure all outstanding checks are considered for reconcilement & to control the supply of unused checks to prevent fraud.
Kiting occurs when …
the aggregate amount of draws exceeds the sum of collected balances in all accounts.
A return item is considered late when?
After midnight of next business day. ( 2 business days )
Public Funds are reviewed due to ________ and
potential __________.
Size ( 2 percent or greater of Total Deposits)
Volatility