The typical bank model revolves around the concept of borrowing money from one party at a low rate, and then lending to another party at a slightly higher rate.  The old-fashioned savings and loan institutions would take deposits from customers, represented on the balance sheet as liabilities.  The money you deposit at the bank is an asset for you and a liability to your bank because your bank has to return it to you.  After they take your money, they lend it out, frequently to homeowners in the form of a mortgage.  These loans are represented on the balance sheet as an asset because someone owes the bank money (or in the default scenario, a house).  Alongside the deposits, the bank must also have some of its own money invested.  This money represents the shareholders equity, money that either came directly from investors or that has been reinvested from historic profits.  Banks are required to maintain certain equity levels to protect lenders (depositors) from a loss if assets end up being worth less than the bank thought.  The model looks like this...