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Once upon a time in the enchanted land of financial services, a small but ambitious bank set off on a grand adventure, chasing the pot of gold at the end of the regulatory rainbow. But little did they know—hidden along the way were threshold traps, business combination clovers, and the mighty leprechauns of compliance!

 The Magical Growth Spell: Threshold-Based Reporting

Every St. Patrick’s Day, banks across the land celebrate their growth, raising a toast to the new opportunities that lie ahead. But beware! As your bank’s total assets and loan portfolio change or grow, call report reporting obligations sprout up faster than a field of enchanted shamrocks.

 When Can a Bank Take a Wee Leprechaun’s Nap from Reporting?

If a bank’s total assets or financial data—like agricultural loans or credit card lines—stay below the set threshold for four straight quarters, it earns the right to rest under a shimmering rainbow where golden fortunes await like shorter or fewer schedules required.

What’s the Big Deal with the Call Report? (A Dramatic Retelling)

Once upon a time in the world of banking, there was a humble yet mighty document called the Call Report. Often misunderstood, frequently feared, and rarely appreciated, the Call Report wasn’t just another stack of spreadsheets—it was the unsung hero of the financial universe.

Why the Call Report Deserves Its Spotlight

Think of the Call Report as the banking world’s most dramatic reality show. Every quarter, it spills all the tea on a bank’s assets, liabilities, loans, and more. Regulators tune in to see who’s thriving, who’s just surviving, and who might be teetering dangerously close to the edge.

• For Regulators: It’s the ultimate backstage pass. They use it to spot risks, check for trouble, and keep the financial world running smoothly.
• For Bankers: It’s the mirror they hold up to themselves. Are we growing? Are we healthy? Did we, gulp, miss something critical?

And for the rest of us? It’s the reason your mone...

A Call Report Christmas Tale: 2024 in Review 🎄

’Twas the night before the Call Report deadline, and all through the Bank,
Not an error was stirring—oh wait, let’s be frank.
With CECL in the spreadsheets and edits galore,
2024 kept us learning (and maybe crying on the floor).

But let’s step back from the stress and take a festive look at the highlights of this regulatory rollercoaster year:

🎁 The Gift of CECL
This year, we unwrapped the first full year of Current Expected Credit Losses (CECL) implementation—a present that required a lot of assembling. Sure, there were a few bumps (and maybe some "misplaced" instructions), but like a child with a new toy, we figured it out.

🎁 TDRs, We Hardly Knew Ye
Out with the old and in with the new! Troubled Debt Restructurings (TDRs) bid us farewell as loan modifications for borrowers in financial difficulty took center stage. It’s like swapping fruitcake for cookies—different, but better with practice.

🎁 Uninsured Deposits – Naughty or Nice?
T...

Do you ever find yourself sitting at your desk, spacing out, and questioning your life decisions when thinking about suspense accounts and negative accounts? Me too! Check this out! It’s like a “cheat sheet” to understanding these accounts!    

Suspense Accounts

Definition: Imagine suspense accounts as the "waiting room" for your transactions, where they sit and chill until we figure out where they really belong.

Purpose:

• Temporary Holding: Like a detective with a magnifying glass, they keep transactions until all the clues are uncovered.
• Error Correction: Think of them as your financial spell-check, catching and fixing mistakes.
• Incomplete Information: When a transaction is a riddle wrapped in a mystery, it hangs out here until the answer comes to light.

Examples:

• An unknown bank deposit? It’s like finding a mysterious present on your doorstep.
• An invoice with vague details? It’s the recipe card without the name of the dish!

Negative Accounts

Definition: Negative ac...

Schedule RC-K of the Call Report requires banks to report certain quarterly average balance sheet figures. The main purpose of this schedule is to provide data for the calculation of yields and costs of funds for the bank’s Uniform Bank Performance Report (UBPR or “beeper” report as all the kids call it). It also feeds the FFIEC’s statistics machine for the calculation of financial performance figures for the industry as whole.

 Most of the averages for loans and deposits are easy enough to find in the bank’s quarterly general ledger or other reports. The total average asset figure, however, can be trickier than it looks. The Call Report instructions start off by saying that the definition of “Total assets” is the same as for Schedule RC item 12, “except that…”.  It is in the “except that’s” wherein lies the gotcha.

 “Except that” #1: “All debt securities not held for trading” are reported at amortized cost. This means that average unrealized gains and losses on Available for Sale se...

For those who don’t already know, the Texas Two-Step is a simple dance that is perennially popular at country dances. It has the virtue of being learnable even by the clumsiest cowpoke with two left feet. Figuring and reporting Average Tangible Equity is like that. Once you get it down it’s easy.

 The reason that the FDIC wants to know your bank’s Average Tangible Equity is to help them figure out how much to charge for deposit insurance. Premiums are no longer based on total deposits, but on total liabilities less tangible assets. They need the number to calculate the tab.

 The mistakes we see sometimes are that banks either don’t follow the definition in the instructions on what constitutes tangible equity, or they use and averaging method that is incorrect. Now let’s get to the step-by-step dance instructions.

Step One

 Calculate the tangible equity as of quarter end. The instructions say that it is the same definition as for Schedule RC-R Part line 26. Fortunately, Schedule...

In years past (yes, I am old.) there was a public service announcement that would appear on television late in the evening. A stern voice would ask, “It’s ten o’clock, do you know where your children are?” Parents of teenagers know that they get to the point where they may not know, or even want to know. But sooner or later, youthful indiscretions will come out and must be dealt with.

Likewise, some banks are still behind the curve on their ASC 842 accounting. Banks are required now to account for leases using this standard, but it has been a change that some have ignored. But like teenage hijinks, accountability for the accounting will eventually come around.

I will leave it to the accounting profession to explain why this rule is useful and important. Your local CPA will be happy to explain and audit it for you. Practically, what it means is that the fair value of the liability for an operating lease must be booked as an intangible “Right of Use” asset for leased property. This is ...

If you are one of those Call Report preparers who hopes that the regulators will add more reporting items accompanied by vague instructions, well you have got your wish! All banks are now required to report data on sweep deposits twice a year in their December and June reports. This requirement became effective for the December 2021 report for all filers.

The instructions define Sweep Deposits as, “A deposit held at the reporting institution by a customer or

counterparty through a contractual feature that automatically transfers to the reporting institution from

another regulated financial company at the close of each business day amounts under the agreement

governing the account from which the amount is being transferred.” I am glad that they make it so clear.

“Sweep Deposits” to be reported are a different animal from the kind of sweep arrangement where money is swept between deposit accounts within the same institution (“Retail Sweeps”). It has nothing to do with the “ATS...

Call Report preparers for banks that cannot opt for the Community Bank Leverage Ratio (“CBLR”) option get to experience the joys of Schedule RC-R Part II. I think it is the schedule we all love to hate more than any other. After slogging our way through schedules RI through RC-O at the end we are rewarded with the most tedious and arcane part of the Call Report.

3PR Inc. is often engaged to review banks’ call reports, including the infamous Schedule RC-R. Here are some of the more common issues we have seen:

Misstating the risk of due from depository institution balances. Balances due from depository institutions are generally weighted at 20%, but the first $250,000 in deposits at each institution are FDIC insured and may be weighted at 0%. But, if the bank’s outstanding cash items in process are included in the general ledger balance for a correspondent bank, that amount should be considered separately and weighted at 20%. Deposits at Federal Reserve banks carry a 0% risk weig...