Stockholders' Equity
Net worth of a company — assets minus liabilities.
Definition
Stockholders' equity represents the residual interest in a company's assets after deducting all liabilities. It includes common stock, additional paid-in capital, retained earnings, and accumulated other comprehensive income (AOCI). For banks, AOCI adjustments from unrealized securities losses became a focus after the 2023 banking crisis.
Formula
Equity = Total Assets - Total Liabilities
Why It Matters
Equity is the cushion that protects depositors and creditors from losses. Bank regulators set minimum capital requirements based on equity relative to risk-weighted assets to ensure financial stability.