Glossary of Terms 

Accommodation A loan accommodation includes, in general, any agreement to defer 

one or more payments, make a partial payment, forbear any delinquent 

amounts, modify a loan or contract or provide other assistance or relief 

to a borrower who is experiencing a financial challenge. 

Bond A certificate of indebtedness issued by a government or corporation. 

Call Report A report of a bank’s financial condition that is filed quarterly with the 

FDIC and known officially as the Report of Condition and Income. 

Capital The net worth or value that remains if an institution paid off all of its 

liabilities. At its core, bank capital is equity. Bank capital or equity can 

be expressed by the basic accounting formula: Assets – Liabilities = 

Equity. See also Regulatory Capital. 

CARES Act The Coronavirus Aid, Relief, and Economic Security (CARES) Act, signed 

into law on March 27, 2020, which provided $2.2 trillion in economic 

relief in response to the COVID-19 pandemic. 

Central Bank An institution that oversees and regulates the banking system and 

quantity of money in the economy. The Federal Reserve System is the 

central bank of the United States. 

Climate-Related Financial Risks Climate-related financial risks include physical risks and transition risks. 

Physical risks refer to the financial losses resulting from harm to people 

and property from climate-related events, such as hurricanes, wildfires, 

and drought, and longer-term climate shifts such as sea level rise. 

Transition risks refer to financial risks to certain institutions or industry 

sectors that arise over time from the process of adjusting toward a lowcarbon economy, which may be prompted by changes in climate and 

environmental policy, technology, or market sentiment. 

Collateral Property required by a lender and offered by a borrower as a guarantee 

of payment on a loan. Also, a borrower’s savings, investments, or the 

value of the asset purchased that can be seized if the borrower fails to 

repay a debt. 

Collateralized Loan Obligations (CLOs) Securitization vehicles backed predominantly by commercial loans. 

See also Warehouse Lending. 

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Community Bank FDIC-insured institutions meeting the criteria for community banks 

defined in the FDIC’s Community Banking Study, published in December 

2020 

(https://www.fdic.gov/resources/community-banking/ 

report/2020/2020-cbi-study-full.pdf). Noncommunity banks are banks 

that do not meet these criteria. 

Default Failing to promptly pay interest or principal when due. 

Farm Bank A bank with agricultural production loans plus real estate loans secured 

by farmland equal to or exceeding 25 percent of total loans and leases. 

Federal Funds Rate The interest rate at which a depository institution lends funds that are 

immediately available to another depository institution overnight. 

Forbearance A forbearance plan suspends mortgage payments. A provision of 

the CARES Act required mortgage servicers or lenders to provide a 

forbearance plan to any homeowner with a federally backed mortgage 

who requested such a plan. 

Great Recession The protracted economic contraction from December 2007 through 

June 2009. The collapse of the U.S. housing market in 2007 became 

the most severe financial crisis since the Great Depression, and the 

financial crisis, in turn, resulted in the Great Recession, whose effects 

spread throughout the global economy. 

High Yield A term that is generally synonymous with noninvestment grade, which 

refers to the lowest-rated bonds subjected to third-party credit risk 

assessments by nationally recognized statistical ratings organizations 

(NRSROs). In the United States, noninvestment grade bonds are 

typically rated Ba1 or below by Moody’s or BB+ or below by Standard & 

Poor’s or Fitch. 

Investment Grade Generally, the highest-rated bonds subjected to third-party credit risk 

assessments by NRSROs. In the United States, investment-grade bonds 

are typically rated Baa3 or above by Moody’s or BBB- or above by 

Standard & Poor’s or Fitch. 

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Leveraged Loans Numerous definitions of leveraged lending exist throughout the 

financial services industry and commonly contain some combination of 

the following: 

• Proceeds used for buyouts, acquisitions, or capital distributions. 

• Transactions where the borrower’s total debt divided by EBITDA 

(earnings before interest, taxes, depreciation, and amortization) 

or senior debt divided by EBITDA exceeds 4.0X EBITDA or 3.0X 

EBITDA, respectively, or other defined levels appropriate to the 

industry or sector. 

• A borrower recognized in the debt markets as a highly leveraged 

firm, which is characterized by a high debt-to-net-worth ratio. 

• Transaction in which the borrower’s post-financial leverage, as 

measured by its leverage ratios (for example, debt-to-assets, 

debt-to-net-worth, debt-to-cash flow, or other similar standards 

common to particular industries or sectors), significantly 

exceeds industry norms or historical levels. 

Long-Term Assets Loans and debt securities with remaining maturities or repricing 

intervals of more than five years. 

Negative Equity A situation in which a borrower’s mortgage principal is greater than 

the value of the underlying collateral, often real estate. See also 

Underwater. 

Net Interest Margin The difference between interest and dividends earned on interestbearing assets and interest paid to depositors and other creditors, 

expressed as a percentage of average earning assets. No adjustments 

are made for interest income that is tax exempt. 

Nonaccrual Loans and Leases Loans and leases 90 or more days past due and for which payment in 

full of principal or interest is not expected. 

Nonbank Firms that are not part of or affiliated with FDIC-insured depository 

institutions. See also Nondepository Financial Institution. 

Noncurrent Loans and Leases Loans and leases 90 days or more past due, and loans and leases in 

nonaccrual status. 

Nondepository Financial Institution A more specific categorization of nonbanks, consistent with the 

definition provided in the instructions for the Call Reports, including 

real estate investment trusts, mortgage companies, finance companies, 

holding companies of other depository institutions, investment 

banks, Small Business Investment Companies, and other financial 

intermediaries. For additional details, refer to the instructions for Call 

Report Schedule RC-C, Item 9.a. 

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OPEC+ 

Past-Due Loans and Leases 

Problem Banks 

Real Gross Domestic Product 

Rebooked Loans 

Regulatory Capital 

Regulatory Capital Requirements 

Recession 

Securitization 

Short-Term Liquid Assets 

An alliance formed in December 2016 of top oil-producing countries 

including members of the Organization of the Petroleum Exporting 

Countries (OPEC) and 10 non-OPEC partner countries. 

Loans and leases 30 to 89, or 90 days or more past due, and still accruing 

interest. 

Institutions with financial, operational, or managerial weaknesses that 

threaten their continued financial viability. Federal regulators assign a 

composite rating to each financial institution, based upon an evaluation 

of financial and operational criteria. The rating is based on a scale of 

1 to 5 in ascending order of supervisory concern. Depending upon the 

degree of risk and supervisory concern, problem banks are rated either 

“4” or “5.” 

The total market value of all final goods and services produced in an 

economy in a given year calculated by using a base year’s price for 

goods and services; nominal GDP adjusted for inflation. 

Bank repurchases of delinquent single-family mortgage loans backing 

mortgage-backed securities that are recorded on the mortgage banking 

schedule in bank Call Reports. 

Capital set aside to provide protection against (to absorb) losses. A 

measure of capital as defined by supervisory authorities. Generally, 

regulatory capital is calculated by deducting certain assets from bank 

capital that have no or limited loss-absorbing capacity, and adding 

other items. 

Requirements that consider the risk levels of a banking organization’s 

exposures and activities, and act to constrain leverage that a banking 

organization may incur by limiting the extent to which it can extend 

credit and invest in financial assets relative to money that the banking 

organization owes to others. Regulatory capital requirements are set at 

levels intended to foster the safety and soundness of individual banking 

organizations and the banking system. 

A period of declining real income and rising unemployment; significant 

decline in general economic activity over a period 

A financial transaction in which assets such as mortgage loans are 

pooled and securities representing interest in the pool are issued. 

Cash and due from accounts, federal funds sold, securities purchased 

under resale agreements, and securities maturing in less than one year. 

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Treasury Securities Bonds, notes, and other debt instruments sold by the U.S. Treasury to 

finance U.S. government operations. 

Treasury Yield The effective interest rate paid by the U.S. government to borrow 

money for different lengths of time. It is the return on investment on 

the government’s debt obligations. 

Underwater A situation in which a borrower’s mortgage principal is greater than the 

value of the house, so the borrower owes more on the mortgage loan 

than the house is worth. 

Warehouse Lending Short-term funding of a mortgage lender based on the collateral of 

warehouse loans (in mortgage lending, loans that are funded and 

awaiting sale or delivery to an investor). This form of interim financing 

is used until the warehouse loans are sold to a permanent investor. 

Warehouse financing is also extended in the arrangement of CLOs 

and to other securitization firms. In this context, warehouse financing 

is a line of credit the CLO manager uses to purchase assets. Upon 

the CLO’s closing, the CLO repays the warehousing lenders using the 

proceeds from the sale of the notes, and the CLO becomes the owner 

of the assets. The CLO manager uses warehousing to manage market 

risk when they purchase assets for the deal’s portfolio; the warehouse 

provider assumes the risk of any mark-to-market losses in the portfolio 

during the warehousing period. 

Wholesale Funding Federal funds purchased and securities sold under agreement to 

repurchase; borrowings from the Federal Home Loan Bank; brokered 

and listing service, municipal and state, and foreign deposits; and other 

borrowings (such as from the Federal Reserve’s Payment Protection 

Program Liquidity Facility). Providers of wholesale funding closely 

track institutions’ financial condition and may cease or curtail funding, 

increase interest rates, or increase collateral requirements if they 

determine an institution’s financial condition is deteriorating. 

Yield Curve The relationship between maturities and interest rates on government 

bonds. The yield curve captures the cost of borrowing money to 

finance consumption, investment, or government spending and thus 

is of central importance to the entire economy. Yield curves generally 

exhibit three different shapes—normal, flat, and inverted—which are 

characterized by long-term interest rates being above, similar to, or 

below short-term interest rates. The shape of the yield curve often is 

viewed as an indicator of future economic activity. 

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