I have a question: Since deposits are liabilities and mortgages/loans are assets, then isn't a highly leveraged bank a *GOOD* tihng? Here are two examples: Bank A: It has $1M in total assets, of which $100K is equity, and $900K is in depositor's accounts which is a liability. The leveraged position here is 10x.
Bank B: It has $1M in total assets, of which $500K is in equity, and $500K is in depositor's accounts which is a liability. The leveraged position here is 2x. However, this sounds like a stronger balance sheet, but keep in mind, they have far more in outstanding mortgages/ loans that they've financed. This is a bad thing.
On the other hand, Bank A has far less in outstanding mortgages/loans, and therefore, they are less "margined" or leveraged.
I'm confused. Which bank is in a better predicament, and what ratio would show that it's in a better predicament?