What Is a Call Report?
A call report is a comprehensive quarterly financial statement that U.S. banks and other regulated financial institutions are required to file with their primary federal regulators. It is a critical component of financial reporting and regulatory oversight, providing detailed data on a bank's financial condition, income, and various risk exposures. The official name for a call report is the "Consolidated Reports of Condition and Income" (RC), and it serves as a primary tool for federal regulators, such as the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board (FRB), and the Office of the Comptroller of the Currency (OCC), to monitor the safety and soundness of the banking system.
History and Origin
The requirement for banks to submit regular financial reports dates back to the 19th century, with early "statements of condition" being compiled. However, the modern concept of the "call report" as a standardized, periodic submission gained prominence following periods of banking instability. The term "call report" originated from the Office of the Comptroller of the Currency (OCC), which would "call" for reports of a bank's financial condition on specific, often irregular, dates. This irregular timing was intended to prevent "window dressing," where banks might temporarily improve their balance sheet for a known reporting date.10
The widespread and catastrophic bank failures at the onset of the Great Depression underscored the urgent need for more rigorous regulatory oversight. The creation of the Federal Deposit Insurance Corporation (FDIC) in 1933 played a pivotal role in solidifying the quarterly requirement for call reports, which were then heavily scrutinized for evidence of insolvency.9 Today, these reports are standardized by the Federal Financial Institutions Examination Council (FFIEC), an interagency body that coordinates regulatory efforts among various federal financial regulatory agencies. The FFIEC provides forms and instructions for the Consolidated Reports of Condition and Income (Call Report), ensuring consistency in the data collected across the banking industry. The FFIEC provides a detailed history of the call report on its website.8
Key Takeaways
- A call report is a mandatory quarterly financial filing by U.S. banks to federal regulators.
- It provides a granular view of a bank's balance sheet, income statement, and other critical financial details.
- Regulators use call reports to assess a bank's capital adequacy, asset quality, liquidity, and profitability.
- The data from call reports is publicly available, offering transparency into the U.S. banking system.
- Compliance with call report requirements is crucial for all regulated financial institutions.
Interpreting the Call Report
Interpreting a call report involves a comprehensive analysis of the various schedules and data points it contains. The report is typically structured into two main parts: the Report of Condition (similar to a balance sheet) and the Report of Income (similar to an income statement), along with numerous supporting schedules.7
Analysts and regulators examine key sections to understand a bank's financial health. For instance, the Report of Condition details a bank's assets (like loans and investments), liabilities (such as deposits and borrowings), and equity. The Report of Income provides insights into interest income and expenses, non-interest income and expenses, and ultimately, net income. Beyond these core statements, specialized schedules offer data on concentrations of credit risk, derivatives, off-balance sheet activities, and regulatory capital calculations. A thorough review allows for an assessment of a bank's capital adequacy, liquidity, and overall risk profile.
Hypothetical Example
Imagine "Community Trust Bank," a hypothetical medium-sized U.S. bank. At the end of a quarter, its accounting department compiles the data necessary for its call report.
Report of Condition (Excerpt):
- Assets:
- Cash and Due from Banks: $50 million
- Investment Securities: $200 million
- Net Loans and Leases: $700 million
- Premises and Equipment: $20 million
- Other Assets: $30 million
- Total Assets: $1,000 million
- Liabilities:
- Equity Capital:
- Common Stock: $50 million
- Retained Earnings: $40 million
- Total Equity Capital: $90 million
- Total Liabilities and Equity Capital: $1,000 million
Report of Income (Excerpt for the quarter):
- Total Interest Income: $15 million
- Total Interest Expense: $5 million
- Net Interest Income: $10 million
- Total Non-interest Income: $2 million
- Total Non-interest Expense: $6 million
- Provision for Credit Risk Losses: $1 million
- Net Income: $5 million
Regulators reviewing this call report would analyze the bank's composition of loans and deposits, its net interest margin, and its capital levels relative to its assets, among many other metrics. This data provides a snapshot of Community Trust Bank's financial standing and performance over the reporting period.
Practical Applications
Call reports have several vital practical applications for various stakeholders in the financial system:
- Regulatory Supervision: Federal banking regulators, including the FDIC, Federal Reserve, and OCC, use call reports as their primary source of financial data to monitor the health and stability of individual banks and the broader banking sector. This data helps them identify emerging risks, enforce prudential regulation, and ensure compliance with banking laws and regulations. The FDIC's supervisory process heavily relies on the information gleaned from these reports.6
- Market Analysis and Investment: Financial analysts, investors, and researchers use publicly available call report data to assess the performance, risk profiles, and valuation of financial institutions. This transparency aids in informed decision-making within capital markets. The FFIEC provides public access to call report data through its Central Data Repository (CDR).5
- Academic Research: Economists and academic researchers frequently utilize the extensive historical data contained within call reports to study banking trends, systemic risks, and the impact of economic policies on the financial sector.
- Internal Bank Management: While primarily a regulatory requirement, the process of compiling call reports also serves as a crucial internal control for banks, helping management understand their own financial condition, asset quality, and profitability.
Limitations and Criticisms
While call reports are indispensable for regulatory oversight and market transparency, they are not without limitations.
One criticism centers on the static nature of the data. Call reports provide a quarterly snapshot of a bank's financial condition, which may not fully capture dynamic or rapidly evolving risks. Significant changes in market conditions or a bank's portfolio could occur between reporting periods, potentially leading to a delayed understanding of emerging vulnerabilities.
Another challenge lies in the complexity and volume of the data. The sheer amount of detailed information required can make comprehensive analysis challenging, even for experienced professionals. Differences in accounting practices or internal classifications, despite standardization efforts, can also complicate direct comparisons between banks. The Federal Reserve Bank of Chicago noted that while the call report is a powerful tool, it presents challenges in terms of data quality and comparability across different banks due to varying accounting practices.4
Furthermore, the focus of call reports is on historical financial performance and current condition. While they inform risk assessments, they may not fully predict future performance or unforeseen events. The data primarily reflects reported figures rather than providing forward-looking insights into a bank's strategic decisions or granular risk management frameworks beyond what is mandated for disclosure.3
Call Report vs. Financial Statement
While a call report is a type of financial statement, it's important to understand the distinction in their purpose and audience.
A call report is a highly detailed, standardized regulatory filing specifically mandated for U.S. banks by federal agencies like the FDIC, Federal Reserve, and OCC. Its primary purpose is to enable regulatory oversight and ensure the safety and soundness of the banking system. The forms and content are prescribed by the FFIEC, making them uniform across institutions. They often contain far more granular data than what is typically presented in a general-purpose financial statement prepared for the public.
In contrast, a general financial statement (which includes a balance sheet, income statement, statement of cash flows, and statement of changes in equity) is prepared by all types of companies, not just banks, to provide a broad overview of their financial performance and position to a wider audience, including investors, creditors, and the public. While these statements must adhere to accounting standards like Generally Accepted Accounting Principles (GAAP), they offer less granular detail than a call report and are typically audited annually rather than filed quarterly with the same level of granular regulatory scrutiny.
FAQs
Q: Who is required to file a call report?
A: All U.S. banks that are insured by the FDIC—including national banks, state member banks, and insured nonmember banks—are required to file call reports quarterly with their primary federal regulator.
Q: Can the public access call reports?
A: Yes, call reports are publicly available documents. The FFIEC's Central Data Repository (CDR) provides public access to the detailed data contained within these reports, allowing for transparency and analysis of financial institutions.
##1, 2# Q: What kind of information is contained in a call report?
A: A call report includes comprehensive financial data such as a bank's balance sheet (assets, liabilities, and equity), income statement (revenues and expenses), and various supporting schedules detailing items like loans by type, deposits by category, regulatory capital calculations, and derivatives exposures.