Introduction to Finance

Other Bank Assets 
Other bank assets represent about 16 percent of total bank assets. 
They include bank premises and fi xed assets, assets held in trading accounts, and all other 
assets, including other real estate owned and intangible assets.
As noted, about three-fi fths of the assets of commercial banks are in the form of loans, 
with about one-fourth of assets being held in the form of real estate loans. In contrast, S&Ls 
and savings banks have about three-quarters of their assets in the form of real estate mort-
gages and mortgage-backed securities. The assets of credit unions are largely consumer 
loans with a small percentage in government securities. Some credit unions also make home 
mortgage loans, although such mortgage fi nancing typically constitutes a small percentage 
of their total assets.
Liabilities and Stockholders’ Equity
There are two major sources from which banks and other depository institutions acquire their 
capital funds and liabilities. Common equity capital comes from the initial investment and 
retained earnings of the owners of the institutions. Liabilities represent the funds owed to 
depositors and others from whom the bank has borrowed. The most important liability of a 

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C H A PT E R 3 Banks and Other Financial Institutions
depository institution consists of its deposits of various kinds, but the other liabilities should 
be understood also. 
Deposits 
As can be seen in Figure 3.5, deposits represent about two-thirds of FDIC-
insured commercial bank liabilities and owners’ capital. Deposits are separated into transac-
tional accounts, which include demand (checking account) deposits and NOW accounts, and 
nontransactional accounts. Transactional accounts constitute about one-fi fth of total deposits, 
and demand deposits represent over three-fourths of transactional account deposits. Nontrans-
actional accounts comprise three-fi fths of total deposits. The remaining components are non-
domestic or foreign deposits. Nontransactional accounts are in the form of time and savings 
deposits, each being about one-half of the total. Money market deposit accounts (MMDAs) 
represent the largest component of savings accounts.
Most time deposits are