A Glossary of banking terms you should know

A collection of terms we use on this blog and what they mean

As you read any of our articles, you may notice there’s some terminology you’re not quite familiar with. We wanted to provide this reference for the most important of these terms, as we use them consistently. Some are more complicated than others, and there are links to more information about these terms within the definitions of several. Please reach out to us if you believe there’s something missing on this list, as we will continue to update it.

• Bank- a for-profit financial institution, meaning they make it a priority to maximize profits to their owners and shareholders.

• banking designation- a title awarded to a banking institution by a moderating banking institution which indicates their mission and performance. May come with federal or independent resources provided by these moderating institutions. Learn more here and here.

• BankLocal- a website we use to obtain information about financial institutions. Check out more about their site and how they get their statistics here.

• CDBI (Community Development Banking Institution)- a term defined and used by NCIF which means the bank in question meets or exceeds their benchmarks for DDI and DLI-HMDA. This term is only used for banks.

• CDCU (Community Development Credit Union)- a credit union whose primary goal is to serve low-and-moderate income communities and is a member of inclusiv. Learn more here and here.

• CDFI (Community Development Financial Institution)- a banking designation given by the CDFI Fund to banking institutions whose primary goal is to serve underserved communities and neighborhoods. Learn more here and here.

• community development bank- any bank whose main goal is to economically reinvigorate low-and-moderate income areas

• cooperative bank- any bank owned by their customers rather than by a few owners and shareholders.

• CRA (Community Reinvestment Act) rating- a rating determined through evaluation by the FFIEC which indicates whether a bank is giving to low-and-moderate income neighborhoods as well as performing proficiently. Learn more here and here.

• Credit Union- a non-for-profit banking institution, providing traditional banking services, which is cooperatively owned and typically has fewer fees and lower interest rates.

• DDI (Development Deposit Intensity)- one of NCIF’s social performance metrics. The percentage of a bank’s branches located in low-and-moderate-income census tracts. Learn more here.

• DLI-HMDA (Development Lending Intensity)- one of NCIF’s social performance metrics. The percentage of a bank’s lending, based on HMDA- (Home Mortgage Disclosure Act) reported lending, which is occurring in low-and-moderate-income census tracts. Learn more here.

• FDIC (Federal Deposit Insurance Corporation)- an independent agency created by the Congress to maintain stability and public confidence in the nation's financial system which insures deposits in all banks up to $250,000. Learn more here.

• FFIEC (Federal Financial Institutions Examination Council)- a body of five federal regulating institutions in the banking industry which determine if banking institutions are following the CRA and operating properly. Learn more here.

• green banking- banking practice to invest in companies and businesses which are ecologically friendly. Learn more here.

• housing lending/focus- the percentage of a banking institution’s assets being used for mortgage loans. Learn more here.

• inclusiv- previously called the National Federation of Community Development Credit Unions, which provides resources and assets to their members (CDCUs). Learn more at their website.

• LICU (Low-Income Credit Union)- an official designation given by the NCUA which indicates that “a majority of the credit union’s membership meets certain low-income thresholds, based on census data. Learn more here and here.

• LMI (low-and-moderate-income)- any neighborhood or community in which the majority of the individuals make a low-or-moderate income in comparison to the national average.

• loan fund- a lending institution which does not provide traditional banking services but instead focuses on providing loan services to a specific population.

• MDI (Minority Depository Institution)- an official designation given by the FDIC to a banking institution which either (1) has a concentration of ownership among members of a certain minority group, or (2) primarily serves a particular minority group. Learn more here.

• mission-driven banking- banking practice primarily driven by the institutions’ core mission statement.

• NCIF (National Community Investment Fund)- “a non-profit private equity trust fund created in 1996 to capitalize and strengthen the mission-oriented banking sector.” Learn more here.

• NCUA- the federal regulatory institution which regulates and insures credit unions up to $250,000. Learn more at their website.

• Net-Loans-to-Deposits Ratio- how much of a banking institutions’ assets are currently being used for lending. Learn more here.

• redlining- the discriminatory practice of banks, landlords, and insurance companies labeling specific neighborhoods, usually primarily occupied by certain minority groups, as “unsafe for investment.” Learn more here.

• Return on Assets- an indicator of how profitable a bank is relative to its total assets. Learn more here.

• Small business lending- the percentage of a bank’s assets which go to loans for small businesses. Learn more here.

• Small farm lending- the percentage of a bank’s assets which go to loans for small-scale and local agriculture. Learn more here.

• underserved neighborhood/community- any census tract which has been disproportionately ignored by traditional banks and banking services.