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Glossary of Terms

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.

Census Regions The four broad regions of the U.S. as defined by the U.S. Census 

Bureau. The Northeast includes Connecticut, Maine, Massachusetts, 

New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, 

and Vermont. The Midwest consists of Illinois, Indiana, Iowa, Kansas, 

Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South 

Dakota, and Wisconsin. The South includes Alabama, Arkansas, 

Delaware, District of Columbia, Florida, Georgia, Kentucky, Louisiana, 

Maryland, Mississippi, North Carolina, Oklahoma, South Carolina, 

Tennessee, Texas, Virginia, and West Virginia. The West comprises 

Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, 

New Mexico, Oregon, Utah, Washington, and Wyoming.

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. 

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

are banks that do not meet these criteria. 

Composite Rating A rating assigned by federal regulators to each financial institution, 

based on an evaluation of financial and operational criteria. The rating 

is based on a scale of 1 to 5 in ascending order of supervisory concern.
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Consolidation Net consolidation comprises newly chartered banks and banks that 

close. A bank may close because of voluntary merger, failure, or other 

reason (such as voluntary liquidation or termination of FDIC insurance, 

or acquisition by an institution without FDIC insurance, such as a credit 

union).

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.

Federal Open Market Committee A committee created by law that consists of the seven members of 

the Board of Governors; the president of the Federal Reserve Bank 

of New York; and, on a rotating basis, the presidents of four other 

Reserve Banks. Nonvoting Reserve Bank presidents also participate in 

Committee deliberations and discussion.

Forbearance A provision of the CARES Act required mortgage servicers or lenders to 

provide a forbearance plan, which suspended mortgage payments, 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 (Junk) Terms 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.

• Transactions when 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.

Loan Classifications Expressions of different degrees of the risk of nonpayment. Adversely 

classified loans are allocated based on the risk to three categories: 

Substandard, Doubtful, and Loss. Other loans of questionable quality, 

but involving insufficient risk to warrant classification, are designated 

as Special Mention loans.

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 house.

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.

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

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

definition provided in the instructions for the Consolidated Reports of 

Condition and Income (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 RCC, Item 9.a. 

OPEC+ 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, collectively 

known as OPEC+. 

Past Due Loans and Leases Loans and leases 30 to 89, or 90 days or more past due, and still 

accruing interest.

Problem Banks 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.” 

Real Gross Domestic Product 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.

Rebooked Loans Bank repurchases of delinquent single-family mortgage loans backing 

mortgage-backed securities that are recorded on the mortgage banking 

schedule in bank Call Reports.

Recession A period of declining real income and rising unemployment; significant 

decline in general economic activity over a period of time.

Revolving Credit A line of available credit usually designed to be used repeatedly, with a 

preapproved credit limit. The amount of available credit decreases and 

increases as funds are borrowed and is then repaid with interest.

Secondary Market The market in which investors buy and sell securities among each other.

Securitization A financial transaction in which assets such as mortgage loans are 

pooled and securities representing interest in the pool are issued.

Short-Term Liquid Assets 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.

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 CLO 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 (FHLB); 

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.