How to Analyze a Bank's Financial Statements: A 7-Step Guide

To analyze a bank's financial statements, start with its deposits, then compare the balance sheet with the income statement, and only then look at earnings. In practice that means seven steps: check how stable and insured the deposits are; measure unrealized losses on securities against equity; read the net interest margin and its sensitivity to rates; examine credit quality and concentrations; test capital and liquidity; see how the bank earns its return on equity; and read the regulators' and board's record. Most of the data is public in a bank's 10-K, its quarterly call reports and the FDIC's BankFind tools.

The order matters. In 2022 Silicon Valley Bank reported rising net interest income and low loan losses. An analyst who started with earnings saw a healthy bank. An analyst who started with deposits and unrealized losses saw a bank that was about 94% uninsured and had lost roughly its entire equity on paper. This guide is educational and draws on the bank diligence checklist in The Money Equation; it is not investment advice.

Where do you find a bank's numbers?

Step 1: How stable are the deposits?

Deposits are a bank's cheapest funding and its greatest exposure. Start here.

• Insured versus uninsured. The FDIC insures $250,000 per depositor, per bank, per ownership category. Uninsured depositors have every reason to leave at the first sign of trouble. Compare uninsured deposits with cash, unencumbered liquid securities and available borrowing capacity.
• Concentration. Look at the top 10 and top 100 depositors and at concentration by industry or network: technology, crypto, real estate or a single fintech partner. Signature Bank, about 90% uninsured with many crypto-linked deposits, lost about 20% of its deposits in a single day two days after SVB failed.
• Mix. Noninterest-bearing operating accounts, retail savings, money-market accounts, CDs and brokered deposits behave very differently in a rate rise. Track each over the last eight quarters.
• Deposit beta. How much of the last rate rise did the bank pass on, by product? Industry betas ran roughly 40–55% in 2022–24, as reported. Compare the bank with its peers.

For context, uninsured deposits were 43.3% of US commercial-bank deposits at the end of 2025, down from a peak of 47.4% in late 2021.

Step 2: How large are the unrealized losses?

A bank's securities are split into available-for-sale (AFS), whose price changes flow into equity through accumulated other comprehensive income, and held-to-maturity (HTM), whose price changes appear only in the footnotes. Many banks below the largest tier have also opted out of counting AFS losses in regulatory capital.

So recompute equity yourself. Take reported equity, subtract after-tax unrealized losses on both AFS and HTM securities, and compare with total assets. Then note the duration of the securities book: price change is roughly duration times the change in yield. US banks carried about $684 billion of unrealized securities losses at the peak in the third quarter of 2023.

The book's stylized $200 billion bank in Chapter 1 shows why this step comes before earnings. After a 300 basis-point rise, its unrealized loss reaches about 109% of equity, yet year-one net interest income falls only from about $5.6 billion to $4.5 billion. Unrealized losses are capital that has already been spent. Whether the bill is ever paid depends on Step 1.

Step 3: How does the bank earn its margin?

Now read the income statement. Net interest income is 60–80% of revenue at most banks. Calculate net interest margin, net interest income divided by average earning assets, and compare it with peers and with the policy rate. The US industry averaged about 3.32% in the second quarter of 2026. Our explainer on what net interest margin is covers the mechanics.

Then read the rate-sensitivity tables in the 10-K:

• Net interest income sensitivity to rate moves of 100 and 200 basis points up and down.
• Economic value of equity (EVE) sensitivity, which captures the change in the value of all assets and liabilities.
• Repricing gap: how much of the balance sheet reprices in 0–3 months, 3–12 months, 1–5 years and beyond.
• Hedges: interest-rate swaps, caps and floors, and whether they were recently removed. SVB let most of its AFS hedges run off or terminated them in 2022 (as reported).

A bank whose NII sensitivity looks fine but whose EVE falls sharply has the SVB shape: earnings protected, value exposed.

Step 4: Where is the credit risk?

Credit costs are what turn a good year into a bad one. Check non-performing loans, 30–89 day delinquencies and net charge-offs by product, and look at them across the last cycle, not just the last year. In 2009 US banks charged off more than 2.5% of loans; in good years net charge-offs run under 0.5%, with credit cards far higher.

Then look for concentrations. US supervisory guidance flags commercial real estate above 300% of total capital, or construction above 100%, with rapid growth. Office loans were a supervisory focus through 2024–26. Note the allowance for credit losses against loans and against non-performing loans, and any fast growth in a new product or region. Loans to non-bank lenders and private-credit funds deserve a separate look after the 2025 Tricolor and First Brands collapses, which hit several banks' books.

Step 5: Is there enough capital and liquidity?

Check common equity tier 1 (CET1), tier 1 and total capital ratios against the minimums plus buffers, and the leverage ratio. For banks that exclude unrealized losses from capital, compute CET1 including them. Read stress-test results where they exist.

For liquidity, ask how much the bank could raise in a day, a week and a month. Is collateral pre-positioned at the Federal Reserve's discount window and the Federal Home Loan Bank, and has the bank tested the lines? SVB had not tested them at scale and was not ready to use the discount window on 9 and 10 March 2023, according to the Fed's review.

Capital ratios have limits. Credit Suisse reported a CET1 ratio of about 14.1% and a liquidity coverage ratio of about 144% at the end of 2022 and still collapsed in March 2023, because clients no longer believed the numbers. Capital ratios measure what a bank can lose, not whether its funders trust the measurement. The book's study of capital, liquidity and bank regulation explains the rules.

Step 6: How does the bank earn its return on equity?

Return on equity is return on assets times leverage. The industry's ROA was about 1.37% in the second quarter of 2026. Break ROE into its sources:

A high return from margin, fees and efficiency is durable. A high return from leverage or extra credit risk is borrowed from a later year. JPMorgan Chase reported a return on tangible common equity of about 20% in 2025 while keeping what its chief executive calls a fortress balance sheet; its company profile shows how it turned that strength into acquisitions in 2008 and 2023.

Step 7: What do the regulators and the board know?

The last step is people and supervision. Look for consent orders, matters requiring attention and other enforcement history. Check board risk-committee expertise and whether the chief risk officer and treasurer are new or missing; SVB's chief risk officer post was vacant for about eight months in 2022. Read incentive plans: are bonuses tied to loan growth or accounts opened? Wells Fargo's sales-practices scandal is the warning. Note any asset thresholds the bank is about to cross, such as $10 billion (the Durbin cap on debit interchange), $100 billion and $250 billion, because each brings higher costs.

If the bank partners with fintechs, ask who holds the ledger and how often it is reconciled. Our case study on what happened to Synapse shows the cost of getting this wrong.

A one-page summary

In money-equation terms, Steps 1, 2 and 5 test the fourth factor, a balance sheet that survives the bad year; Step 4 tests the second, risk priced correctly; and Steps 1 and 7 tell you whether the first, trust, rests on anything real. The book's Chapter 5 on banks concludes that banks rise and fall on the fourth factor more visibly than any other financial firm.

The takeaway

Analyze a bank from the funding side first: stable, insured, diversified deposits are worth more than any earnings beat. Then recompute equity for unrealized losses, read the rate-sensitivity tables, and test credit, capital and governance before trusting the return on equity. The banks that failed in 2023, including Silicon Valley Bank and First Republic, looked fine on earnings and poor on every one of the first two steps. For how banks fit into the wider industry, see our guide to how financial companies make money, and for the full framework read Chapter 5, "Banks".