Connecting the Income Statement and the Balance Sheet

For any firm:

"Earning net income increases retained earnings."

Ofc conversely, negative income decreases retained earnings... diagram:





And then more specifically for Bank accounting:

The bank capital can be thought of as the book value of shareholders' equity on a bank's balance sheet. Because many banks revalue their financial assets more often than companies in other industries that hold fixed assets at a historical cost, shareholders' equity can serve as a reasonable proxy for the bank capital. Typical items featured in the book value of shareholders' equity include preferred equity, common stock and paid-in capital, retained earnings,...

So negative income at the bank reduces bank capital... and will decrease any regulatory ratio of capital:assets...