Financial reports provide valuable information on whether or not performance is meeting expectations. They also help identify evolving problem areas. Ultimately, the reports you review should allow you to judge the bank’s risk taking and the quality of its risk management.

Insights’ financial reports include some of the following types of basic reports:

Balance Sheet - A bank’s balance sheet is one effective tool to judge its current risk taking. It provides information on bank assets, liabilities and capital at a given point in time. Decisions about the mix and structure of the bank’s assets and liabilities can impact the bank’s financial performance on a daily basis. For more information, review the Balance Sheet lesson.

Income Statement - An income statement provides information on bank income and expense items over a period of time. Because you can see the net result (income and expense) of your decisions over time, income statements are an effective tool to judge the effectiveness of risk management. For more information, review the Income Statement lesson.

“Evaluation 8” Ratios - Many times the reports you receive will contain basic financial ratios as well as dollar amounts generated from the bank’s reports. An example of some ratios you might see are similar to those we refer to as the “Basic Ratio Analysis,” in this course. These are eight commonly used ratios derived from balance sheet and income statement information that you can use to judge bank earnings and earnings quality, asset quality and capital position. Often the Evaluation 8 ratios are compared with history, budget and peer bank data in order to provide a context by which to judge current performance.

Uniform Bank Performance Report (UBPR ) - A financial ratio report that allows a detailed analysis of bank performance relative to banks of similar asset size, branch structure and urban/rural location. For more information about the UBPR and how it can be used, review the lesson on Making Financial Comparisons.

Note that special versions of your bank’s balance sheet and income statement are generated quarterly. This quarterly report is called the Report of Condition and Income or the “Call Report.”

There is a good likelihood that you will encounter this report simply because directors are often asked to sign the Call Report before it is filed with the bank's primary regulator. In signing the report, the director is attesting to its accuracy and its preparation in accordance with generally accepted accounting principles.

In addition to a balance sheet and income statement, the Call Report includes a number of schedules that provide more detailed information relating to balance sheet and income statement items and other supplemental information useful in evaluating a bank performance. Banking agencies use the information included in the Call Report to track bank performance between bank examinations. If the bank’s Call data indicates performance problems, banking supervisors may schedule an early examination.

With the exception of a few items, all Call Report information is available to you for use in conducting a bank analysis.

You will find that much of the analytical work based on Call Report data has already been done by your bank, market analysts, consultants and banking supervisors. Their analyses are organized into financial reports that provide frequently used measures to judge good performance and to identify reasons behind that performance. This greatly reduces your analytical burden.

You may receive financial reports more frequently than once a quarter when Call Report information is available. Because performance plays a critical role in many management decisions, most boards make it a standard practice to receive and review their bank’s financial information at each meeting. Consequently, if your bank’s board meets more than four times a year, and most boards do, you may receive interim reports (for example, monthly reports for boards that meet 12 times a year).

After you have reviewed the various types of basic reports, complete the Try This at Your Bank: Derivation of Net Income exercise to help diagnose performance problems and areas of strength for your bank.