====== Consolidated Reports of Condition and Income (Call Reports) ======
Consolidated Reports of Condition and Income (also known as 'Call Reports') are the mandatory, highly detailed financial x-rays that every U.S. commercial bank and savings institution must submit to their regulators each quarter. The primary supervisors are the [[Federal Deposit Insurance Corporation (FDIC)]], the [[Federal Reserve System]], and the [[Office of the Comptroller of the Currency (OCC)]]. Think of a Call Report as the unvarnished, no-nonsense diagnostic report a mechanic gives you, as opposed to the glossy brochure you get from the car dealership. The 'Condition' part refers to the bank's [[Balance Sheet]]—a precise snapshot of its assets and liabilities—while the 'Income' part details its [[Income Statement]], revealing its profitability over the quarter. Unlike the polished annual reports produced for shareholders, Call Reports are raw, standardized, and packed with hundreds of pages of data schedules. They form the bedrock of U.S. banking supervision and, for the diligent investor, represent an unparalleled source of unfiltered information.
===== Why Should a Value Investor Care? =====
For anyone serious about analyzing a bank, Call Reports are not just useful; they are essential. While an annual report provides management's narrative and strategic vision, the Call Report provides the cold, hard facts that underpin that story. This is where a [[Value Investor]] can truly practice their craft.
The standardized format of these reports is their superpower. It allows for a true "apples-to-apples" comparison between different banks, stripping away the marketing gloss. By digging into the data schedules, you can uncover crucial details that are often aggregated or obscured in shareholder communications. You can see the precise breakdown of a bank’s [[Loans]], the quality of its [[Investment Securities]], the stability of its [[Deposits]], and the adequacy of its [[Allowance for Loan and Lease Losses (ALLL)]]. This is where you find the early warning signs of deteriorating credit quality or the hidden strengths of a conservatively managed institution, long before they become common knowledge.
===== What's Inside a Call Report? =====
A Call Report is divided into numerous schedules, but they all boil down to two fundamental financial statements.
==== The Balance Sheet (Report of Condition) ====
This section (primarily Schedule RC) presents a snapshot of what the bank owns ([[Assets]]) and what it owes ([[Liabilities]]) at a specific moment in time. The difference between these two is the bank’s [[Equity]], or its net worth. Key items to scrutinize include:
  * **Loans and Leases:** This is the heart of the bank's business. Call Reports break this down by type, such as commercial real estate, residential mortgages, and credit card loans, allowing you to see where the bank is taking risks.
  * **Allowance for Loan and Lease Losses (ALLL):** This is a reserve account built up to cover expected loan defaults. Watching the size of the ALLL relative to the loan portfolio is a key indicator of management's prudence.
  * **Investment Securities:** The portfolio of bonds and other financial instruments the bank holds for investment, liquidity, or hedging purposes.
  * **Deposits:** The primary source of funding for a bank. The report provides a detailed breakdown of deposit types, such as non-interest-bearing checking accounts (a cheap source of funds) versus high-cost certificates of deposit.
==== The Income Statement (Report of Income) ====
This section (primarily Schedule RI) tells the story of the bank’s performance over the entire quarter. It shows how the bank made—or lost—money. Key components include:
  * **[[Net Interest Income]]:** The lifeblood of most banks. It's the difference between the interest earned on assets (like loans) and the interest paid on liabilities (like deposits).
  * **[[Provision for Loan Losses]]:** An expense item on the income statement. It represents the amount set aside during the period to build up the ALLL. A sudden spike in this provision is often a red flag that the bank expects more loans to go bad.
  * **[[Non-interest Income]]:** Revenue from fees for services, such as account maintenance, wealth management, and mortgage origination.
  * **Non-interest Expense:** The costs of running the bank, including salaries, technology, and marketing. Often called "overhead."
  * **[[Net Income]]:** The bottom line after all revenues and expenses, including taxes, have been accounted for.
===== Finding and Using Call Reports =====
==== Where to Find Them ====
While these reports are filed with regulators, they are public documents. The most direct source is the [[Federal Financial Institutions Examination Council (FFIEC)]]'s website, which maintains a central repository. However, for a more user-friendly experience, the FDIC's "BankFind Suite" is an excellent resource. It allows you to look up any FDIC-insured institution, access its historical Call Reports, and even use tools to compare its performance against its peers.
==== Key Metrics to Watch ====
The raw data in a Call Report is the foundation for calculating critical ratios that reveal a bank's true health and profitability. Here are a few to get you started:
  - **[[Net Interest Margin (NIM)]]:** This ratio (Net Interest Income / Average Earning Assets) measures the profitability of a bank's core lending and investment activities. A higher, stable NIM is generally desirable.
  - **[[Efficiency Ratio]]:** This measures operational prowess (Non-interest Expense / (Net Interest Income + Non-interest Income)). It tells you how many cents it costs the bank to generate a dollar of revenue. Lower is better.
  - **[[Texas Ratio]]:** A famous stress-test metric that compares a bank's troubled assets to its loss-absorbing capital. It is calculated by dividing [[Non-performing Assets (NPAs)]] by the sum of tangible common equity and the loan loss allowance. A ratio approaching 100% signals severe financial distress.
  - **[[Tier 1 Capital Ratio]]:** A primary measure of a bank's financial strength from a regulator's point of view. It compares a bank's core equity capital to its total risk-weighted assets. Higher ratios indicate a greater capacity to absorb unexpected losses.
  - **Asset Quality Ratios:** Simple but powerful checks like Non-performing Assets / Total Assets. A rising trend in this ratio is a clear warning sign that the quality of the bank's loan book is declining.