Bank Equity Research with Call Reports and Stress Tests

• Call Reports and stress-test disclosures are high-frequency, bank-specific sources that can reveal credit and funding inflections before sell-side models are updated.
• Focus on loan mix shifts, 30-89 and 90+ day delinquencies, nonaccruals, allowance coverage, and funding composition to build early-warning flags.
• Translate Call Report delinquencies and charge-offs into provisioning shocks and CET1 impacts using a simple provisioning-to-capital waterfall.
• Use stress-test tables to bound downside GDP/house-price loss scenarios, projected loan losses, and post-stress capital levels for sensitivity analysis.
• Automate FFIEC pulls, normalize schedules to your model segments, and set percentage-change thresholds to convert raw filings into tradeable signals.
• Avoid common mistakes: mis-mapping schedules, ignoring off-balance-sheet exposures, and overreacting to single-quarter noise.

Introduction

Bank equity research from regulatory filings uses Call Reports and stress-test disclosures as core inputs for early detection of credit deterioration and funding stress. These filings contain line-by-line details on loan composition, delinquencies, provisions, deposit behavior, and capital that you won't find in a headline earnings release.

Why does this matter to you as an analyst or investor? Because you can spot inflection points in the loan book and funding mix earlier than consensus, quantify the likely hit to earnings and capital, and decide whether model assumptions for loss rates, cost of funds, or capital raises need to change. How do you convert raw regulatory numbers into model-ready inputs, and what exact lines should you watch? This guide gives you a repeatable, advanced workflow.

Why Call Reports and Stress Tests Matter

Call Reports, filed quarterly with the FFIEC, break a bank's balance sheet and income statement into granular schedules such as loans by type, past-due and nonaccrual loans, deposits by category, securities, and off-balance-sheet exposures. These are the raw facts that feed an equity model's credit and liquidity assumptions.

Stress-test disclosures, published by the Fed for large banks and by firms for certain public releases, give scenario-based projections of losses, revenues, and post-stress capital. They provide boundaries for severe but plausible outcomes that you can use to stress your base model.

Call Report Workflow: Key Line Items and Early-Warning Signals

The workflow below turns raw Call Report schedules into structured signals you can monitor weekly or monthly. You want leading indicators that tend to move before a bank reports earnings stress. Set an alerting framework and normalize across peers.

1. Loan mix and concentrations

Which Call Report lines: Schedule RC-C details loans by category, including 1-4 family residential mortgages, construction and development, multifamily, commercial and industrial (C&I), commercial real estate (CRE), and consumer loans. Schedule RC-R may show large exposures.

What to do: Calculate each loan type as a share of total loans, and flag rapid increases in higher-risk categories such as CRE construction or commercial construction. Track borrower-type concentrations and geographic exposure when available in supplements.

2. Delinquencies and nonaccruals

Which Call Report lines: Schedule RC-N contains past due loans by days delinquent (30-89, 90+), nonaccrual loans, and restructuring activity. These are direct measures of credit stress.

What to do: Monitor changes in 30-89 day delinquencies as an early staging ground for future nonaccruals and charge-offs. A step-up from 0.4% to 1.2% in 30-89 day delinquencies for a specific loan class is a red flag that charge-offs could follow in the next two quarters.

3. Allowance for loan and lease losses (ALLL) and coverage ratios

Which Call Report lines: Schedule RC-R and the balance sheet show the allowance for loan and lease losses and purchase credit-impaired loans allowances. Convert to allowance-to-loans and allowance-to-nonperforming loans ratios.

What to do: Watch allowance coverage trends. A falling allowance ratio while delinquencies rise suggests either management optimism or earnings pressure ahead. Estimate incremental provisions necessary to restore a target coverage ratio.

4. Funding composition and liquidity

Which Call Report lines: Schedule RC-E lists deposits by type, including transaction accounts, savings, time deposits, and brokered deposits. Schedule RC-K and other schedules include large time deposits and uninsured deposit levels.

What to do: A rising share of brokered or wholesale funding or a large uninsured deposit base increases run risk. Track loan-to-deposit ratio, liquid securities holdings, and short-term borrowings to estimate near-term refinancing needs.

5. Securities and unrealized losses

Which Call Report lines: Schedule RC-B details securities held-to-maturity and available-for-sale, with unrealized gains and losses. For banks with long-duration securities, mark-to-market or OTTI risk matters for capital if sales or other-than-temporary impairment occur.

What to do: Combine unrealized OCI losses with liquidity needs to assess whether securities sales may force realized losses. That feeds into potential provision recognition and capital erosion scenarios.

6. Off-balance-sheet exposures and derivatives

Which Call Report lines: Schedule RC-L and RC-F capture derivatives and guarantees, unused commitments, and letters of credit. These can convert to funded exposures in stress.

What to do: Convert unused commitments to expected drawdowns under stress, using historical utilization rates or stress-test multipliers, and add potential loss exposure to your loan-loss estimate.

Translating Call Report Signals into Equity Model Inputs

Once you detect a signal, you need to convert it into provisions, net interest margin changes, and capital impacts. Use a clear mapping from Call Report metrics to model variables so you and your team react consistently.

Step 1: From delinquencies to provisioning

1. Take the change in 30-89 and 90+ delinquencies by loan class over the last two quarters.
2. Estimate the migration-to-charge-off rate. For example, assume 30% of 90+ day loans convert to charge-off over the next year, and 10% of 30-89 day loans migrate to 90+ then charge-off.
3. Apply assumed LGD (loss-given-default) by loan class, for example 40% for C&I and 60% for CRE construction.
4. Compute incremental charge-off dollars and compare to current allowance to estimate required incremental provisions.

Example: A bank with $20 billion C&I loans shows a rise in 90+ delinquencies from 0.5% to 1.5%, implying $200 million of new 90+ loans. With a 30% migration-to-charge-off and 40% LGD, expected incremental loss is $24 million, which informs provision and EPS impact.

Step 2: Funding and NII impact

If Call Reports show shrinking core deposits and rising brokered deposits, assume an upward repricing of funding costs. Map deposit beta to interest rate resets and compute NII hit by re-pricing a portion of the funded loan book.

Step 3: Capital impact and CET1 sensitivity

1. Incremental provisions reduce net income and retained earnings, which flow into CET1. For a given provision shock, calculate the CET1 percentage change: CET1 reduction equals provision / risk-weighted assets.
2. Adjust RWAs for loan growth or migration into higher-risk buckets. For example, reclassifying performing loans to nonperforming may increase risk weightings in stress.
3. Use stress-test disclosures as bounds to check plausibility of severe but feasible CET1 paths.

Example: A $250 million additional provision on a bank with $20 billion RWA reduces CET1 by roughly 1.25 percentage points, assuming no offsetting gains or capital actions. That frames whether the bank must build capital or curtail dividends.

Stress-Test Disclosures: What to Extract and How to Use It

Stress-test tables provide scenario-based projections for large banks and often include projected pre-provision net revenue, provisions, net income, and post-stress capital ratios. They are helpful because they translate macro scenarios into bank-level outcomes.

Key stress-test items to capture

• Projected cumulative loan losses by quarter and by loan category in the scenario.
• Pre-provision net revenue trajectory, which affects the ability to absorb losses.
• Post-stress CET1 ratios and whether the bank triggers a need to raise capital or cut dividends.
• Sensitivity to unemployment, house prices, and GDP, to tie macro-to-bank loss elasticities.

How to use them: Calibrate your loss-given-shock multipliers to match stress-case outcomes. If stress tests show 5% cumulative losses for CRE in a severe scenario, your severe-case LGD should be in that neighborhood. Use stress results as sanity checks for your worst-case scenarios.

Real-World Examples

Here are practical scenarios showing how the workflow translates to actionable model adjustments. These are illustrative and not recommendations.

Example 1: CRE construction concentration

Situation: Bank X reports rapid growth in construction and land development loans from 8% to 14% of total loans in two quarters. 30-89 day delinquencies for that category rise from 0.6% to 1.8%.

Action: You map construction loans into your model's CRE construction segment, assume a 20% migration to charge-offs over 12 months for recent delinquents, and apply a 60% LGD. For a $5 billion construction book, incremental expected loss is material and necessitates a $30-60 million increase in provisions, shrinking EPS and reducing CET1 once recognized.

Example 2: Rapid uninsured deposit outflows

Situation: $BANK reports a quarter-over-quarter decline in transaction accounts by 10%, while brokered deposits rise from 4% to 12% of total deposits. Securities available for sale have $400 million of unrealized losses.

Action: Estimate short-term refinancing needs and assume a 50 basis point higher funding cost on the replaced balances. Model a potential securities sale to meet liquidity commitments, realize part of the $400 million losses, and incorporate the capital impact into your CET1 projection.

Common Mistakes to Avoid

• Mis-mapping Call Report schedules to model segments, which leads to incorrect loss allocations. Avoid this by building a consistent mapping table and testing it across peers.
• Ignoring off-balance-sheet and derivatives conversion risk. Convert commitments and unused lines into stressed exposures using realistic utilization rates.
• Overreacting to a single-period spike in delinquencies, which may be noisy. Use rolling averages or look at 2-4 quarter trends to filter noise.
• Failing to consider allowance policy and accounting changes like CECL adoption or purchased credit impaired accounting, which change provisioning dynamics. Adjust historic comparables accordingly.
• Assuming stress-test results apply uniformly across peers. Stress scenarios are bank-specific in outcomes, so use them as bounds not direct inputs for all banks.

FAQ

Q: How often should I pull Call Reports for monitoring?

A: Pull Call Reports quarterly after filings are released, but automate weekly or monthly FFIEC database queries for flagged changes to balances and delinquencies. Weekly checks let you see intra-quarter trend filings and corrections.

Q: Which single Call Report line is the best early warning for credit stress?

A: The 30-89 day delinquency rate by loan class is the best single early-warning indicator because it sits upstream of nonaccruals and charge-offs. Use it alongside loan growth and concentration shifts to avoid false positives.

Q: Can stress-test disclosures replace my own downside analysis?

A: No, stress tests are useful bounds and calibration tools but they reflect the regulator's scenarios and model choices. Use them to check plausibility of your severe-case assumptions, then tailor scenarios to bank-specific concentrations.

Q: How do I model the timing between delinquencies and charge-offs?

A: Use migration matrices derived from historical behavior by loan class, for example a 30% 90+-to-charge-off conversion over 12 months for C&I. Adjust timing and rates for the bank's historical speed of charge-off and collateral liquidation timelines.

Bottom Line

Call Reports and stress-test disclosures give you a practical edge if you treat them as structured, repeatable inputs rather than one-off facts. By focusing on loan mix shifts, delinquencies, allowance coverage, and funding composition you can detect inflections earlier than headline earnings would suggest.

Start by automating FFIEC data pulls, normalizing schedule mappings to your model segments, and setting percentage-change thresholds that trigger deeper investigation. Then convert delinquencies into provision and capital impacts using migration and LGD assumptions, and use stress-test disclosures as plausibility bounds.

At the end of the day, your job is to turn regulatory detail into timely model adjustments and risk assessments. Keep testing your assumptions, watch peer behavior, and let Call Reports and stress tests sharpen your view before the market updates consensus.