If there is one industry that has the stigma of being old and boring, it would be banking; however, a global trend towards deregulation has opened up many new businesses for banks. In addition to technological developments such as internet banking and ATMs, the banking sector is obviously doing its best to shed its lackluster image. There is no doubt that banking stocks are among the most difficult to analyze. Many banks hold billions of dollars in assets and have multiple branches in different industries. A perfect example of what makes analyzing bank stocks so difficult is the length of their financial data: they typically exceed 100 pages. While it would take an entire textbook to explain all the ins and outs of banking, here we will shed light on the most important areas to consider when analyzing a bank as an investment. (For basic reading, see Analyzing a Bank's Financial Statements.) There are two main types of banks in North America:* Regional (and thrift) banks - These are the smallest financial institutions, which focus primarily on a geographical area within a country. In the United States, there are six regions: Southeast, Northeast, Central, etc. Providing deposit and lending services is the primary line of business for regional banks.* Major (mega) banks - While these banks may maintain local branches, their primary focus is in financial centers such as New York, where they become involved in transactions and international subscriptions. Could you imagine a world without banks? This might seem like a great idea at first! But banks (and financial institutions) have become pillars of our economy for several reasons. They transfer risk, provide liquidity, facilitate major and minor transactions, and provide financial information for both individuals and businesses. Managing a bank is just as difficult as analyzing it for investment purposes. The management of a bank must consider the following criteria before deciding how many loans to grant, to whom they can be granted, what rates to set and so on:* Capital adequacy and the role of capital* Management of assets and liabilities: there is a middle ground between banks that overextend themselves (lending too much) and lend enough to make a profit.* Interest rate risk: Indicates how changes in interest rates affect profitability.* Liquidity: is formulated as the proportion of loans outstanding on total assets.