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Reading the Bank: A 10-K Framework for Equity Investors

When I first started investing, I thought analyzing a bank would be similar to analyzing any other company. I assumed I could pull up the income statement, glance at revenue growth, check earnings per share, look at a few valuation metrics, and arrive at an intelligent conclusion. I was wrong. Banks are different animals entirely. A manufacturing company produces products. A retailer sells merchandise. A software company sells subscriptions. Banks, however, essentially sell money. They borrow it from one group of people, lend it to another group of people, collect the spread, manage risk, and hopefully avoid making catastrophic mistakes along the way. That sounds simple enough until you open a bank's annual report and discover two hundred pages of terminology that appears specifically designed to intimidate ordinary investors. Suddenly you're reading about net interest margins, allowance for credit losses, Tier 1 capital ratios, commercial real estate exposure, unrealized losse...
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