Bank Capital, Liquidity, and Profitability

Bank capital, liquidity, and profitability terms describe how banks absorb losses, fund assets, meet cash outflows, and generate earnings. This branch covers bank capital, liquidity versus capital, net stable funding ratio, loans-to-deposit ratio, reserve asset cost, cost of funds, net interest income, non-interest income, net interest margin, BOLI, and the 3-6-3 rule.

Use these pages when a bank metric changes resilience analysis, funding cost, earnings quality, liquidity risk, capital adequacy, or balance-sheet interpretation.

What This Branch Covers

Decision Lens

Start with the financial statement or regulatory report. Capital absorbs losses, liquidity meets cash demands, funding ratios test stability, and profitability measures earnings; these are related but not interchangeable.

Evaluation Checklist

• Identify the bank, reporting period, balance-sheet base, capital category, funding source, liquidity asset, earning asset, interest expense, and income component.
• Separate capital adequacy, liquidity coverage, stable funding, spread income, fee income, deposit funding, wholesale funding, and reserve costs.
• Check call reports, regulatory disclosures, audited financial statements, footnotes, management discussion, rate schedules, and supervisory materials.
• Review whether the metric changes solvency, liquidity, profitability, deposit pricing, lending capacity, or risk appetite.
• Treat investment, regulatory, accounting, tax, and supervisory conclusions as professional-advice areas.

Common Mistakes

• Treating a profitable bank as automatically well capitalized or liquid.
• Confusing accounting equity, regulatory capital, reserves, and liquid assets.
• Comparing net interest margin across banks without checking business mix and rate environment.
• Reviewing liquidity without funding maturity, deposit concentration, and contingent cash needs.

In this section

Choose a subsection first. Deeper term pages live inside each subsection, which keeps large topic hubs readable.