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Bank financial statements

How to read a bank's financial statements

Every FDIC-insured bank publishes a balance sheet and an income statement each quarter, as Schedules RC and RI of its Call Report. They read differently from a company's statements: loans are the bank's assets, deposits are its debts, and the income figures add up through the year.

Find a bank's statements What is a Call Report?

Where a bank's financial statements come from

A bank does not need to be public to publish its numbers. Every national bank, state member bank, insured state nonmember bank and savings association files the Call Report with its regulators each quarter, and the data is public. Three schedules make up the core statements:

  • Schedule RC, the balance sheet, as of the quarter-end date.
  • Schedule RI, the income statement, for the calendar year to date.
  • Schedule RI-A, the changes in equity capital, which connects the two.

Supporting schedules break each line down: RC-B for securities, RC-C for loans, RC-E for deposits, RC-N for past-due and nonaccrual loans, and RC-R for regulatory capital.

The balance sheet (Schedule RC)

Read a bank's balance sheet from the bank's side. A loan is money the bank expects to collect, so it is an asset. A deposit is money the bank owes its customers on demand, so it is a liability.

Assets

  • Cash and balances due from other banks and the Federal Reserve.
  • Securities: held-to-maturity at amortized cost and available-for-sale at fair value. The gap between the two is where unrealized losses hide when rates rise.
  • Loans and leases, net of the allowance for credit losses, the reserve the bank holds against expected loan losses. For most banks this is the largest asset.
  • Premises, goodwill and other assets.

Liabilities and equity

  • Deposits, split into noninterest-bearing (mostly business checking) and interest-bearing. The share that is core deposits shows how stable the funding is.
  • Borrowings: federal funds purchased, repurchase agreements, Federal Home Loan Bank advances and subordinated debt.
  • Equity capital: what is left for shareholders, and the cushion that absorbs losses before depositors are at risk.

The income statement (Schedule RI)

A bank earns most of its money on the spread between what it charges and what it pays:

  1. Interest income on loans and securities, less interest expense on deposits and borrowings, gives net interest income.
  2. Provision for credit losses: the charge that builds the allowance. It rises before charge-offs do, so it is an early read on credit.
  3. Noninterest income (fees, service charges, trust and mortgage banking) and noninterest expense (salaries, occupancy, technology).
  4. Income taxes, then net income.

Three traps for new readers

Income is year-to-date. The instructions require Schedule RI to cover the calendar year to date, so a September 30 report shows nine months of income. To compare one quarter with another, subtract the prior quarter's figure first. Only the March 31 report is a single quarter.

The bank is not the holding company. The Call Report covers the bank alone. A public holding company's 10-K, and its FR Y-9C, consolidate the bank with its nonbank subsidiaries and parent-level debt, so the two sets of figures do not match.

Subchapter S banks pay no entity-level income tax. Their shareholders pay it instead, so their net income and return on assets look higher than a taxed bank's with the same operations. Compare pre-tax figures when a peer group mixes the two.

The ratios that summarize the statements

Analysts condense the two statements into a handful of ratios, each built from Call Report line items:

A ratio means little alone. Every bank profile here sets each one against the bank's own history and its peer group, quarter by quarter, back to 2000.

Frequently asked questions

Where can I find a bank's financial statements?

Every FDIC-insured bank files a balance sheet (Schedule RC) and an income statement (Schedule RI) in its quarterly Call Report, and the data is public. Search the bank on BankRegReports to read both, quarter by quarter. A bank owned by a public holding company also appears in the holding company's 10-K and 10-Q filings with the SEC.

What is the difference between a bank's Call Report and its 10-K?

The Call Report covers the bank itself, follows the FFIEC instructions, and is filed every quarter by every insured bank. A 10-K covers the publicly traded holding company, including any nonbank subsidiaries, and only listed companies file one. For most U.S. banks, which are privately held, the Call Report is the only public financial statement.

Why is a bank's income statement year-to-date?

The Call Report reports Schedule RI on a calendar year-to-date basis, so the September 30 figures cover nine months. To get one quarter, subtract the prior quarter's year-to-date figure; the March 31 report is the only one that is a single quarter.

What are the most important numbers in a bank's financial statements?

Analysts start with net interest margin and return on assets for earnings, the efficiency ratio for cost, nonaccrual and past-due loans for credit quality, the loan-to-deposit ratio and core deposits for funding, and the leverage and CET1 ratios for capital. Each one is calculated from Call Report line items.

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