Wait, maybe he recognized Lloyd's clothes as being dwarf-made, and thinks those are two of their cities far below underground.

Not... that that makes much sense, because how can Bolin not recognize at least one of those names as a country? Or a world, if he'd somehow missed the fact that the worlds had been reunited?

Still, it's the best guess Lloyd's got (maybe Bolin's just really, really bad with geography?), so that what he's going to go with. His expression lightens somewhat with understanding. "No, those are countries. I'm just dressed like this because my Dad's a dwarf."