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FE D E R A L R E SE R V E BAN K
O F NEW YORK
r Circular No. 3 3 1 5 1

L

March 9, 1948

J

Operating Ratios of Member Banks in the Second Federal
Reserve District for the Year 1947
To all Member Banks in the
Second Federal Reserve District:

Net profits of all member banks in the Second Federal
Reserve District declined sharply in 1947, owing
primarily to a heavy reduction in security profits, and
secondarily to an increase in expenses relative to earnings.
The average net profit was 8.1 per cent of the slightly
increased capital funds, compared with 11.2 per cent in
1946 and a record rate of return of 11.6 per cent in 1945.1
Despite the 30 per cent decline in the past two years, the
profit rate in 1947 was still two-thirds above the average
of the prewar years, 1936-39. The relative position of
different groups of banks varied widely; the rate of net
profits earned on capital funds was still substantially
higher than before the war for the smaller banks of the
District, but was back approximately to the prewar level
for the large New York City banks.
The group of New York City banks with deposits of 100
million dollars or more has been divided into two groups
this year— Group V I banks with 100 million to 1 billion
dollars of deposits, and Group V II banks with more than
1 billion dollars of deposits. It was found that in a num­
ber of cases ratios for banks in the former group were
appreciably different from the corresponding ratios for
banks in the latter group. The banks in Group V I
required a considerably higher percentage of total cur­
rent earnings to cover expenses than banks in Group V II,
and in addition a few banks in the group made substantial
charge-offs or other deductions from net current earnings

for special purposes. Consequently, the average ratio
of net profits to capital funds for this group was the
lowest for any group— about 4 per cent, compared with
an average of 6 per cent for New York City banks with
deposits over a billion dollars.
The decline during 1947 in net profits relative to
capital funds occurred in all groups of banks but was
generally most pronounced among the larger banks of
the District. Two thirds of the total number of banks
had lower dollar amounts of net profits than a year ago.
Fifteen banks reported net losses after taxes, usually
because of a combination of high expenses and either
substantial tax payments on the previous year’s high
earnings or substantial charge-offs. In general, the larger
banks in the District sustained greater declines in the
volume of security profits and took a larger proportion of
their income to cover expenses than did the small banks.
Partly offsetting these adverse factors in the earnings of
the larger banks were lower income taxes, due to the
reduced level of taxable net profits; in the smaller banks,
many of which are on a “ cash basis” , income tax pay­
ments were higher, as they were calculated against larger
1946 incomes.
The sources and disposition of earnings from 1939
to date for all member banks in the Second District are
shown in Chart I.

Chart I — Percentage Distribution of Total Earnings of Member Banks in Second District

nor r e p o r t s o

sep a ra tely

serous i»4s.

' i n c l u d e d i n o t h e r E X P E N S £ S “P R !O R TO t » * l .

1 All percentages represent unweighted averages of the figures for individual banks.




Total operating income, except in the largest New York
City banks, in which a moderate decline occurred, was
greater in 1947 than in 1946. In general, the postwar
increase in loans and loan income more than offset the
reduction in interest received on a reduced volume of
United States Government securities, which in turn
reflected the effect of the Treasury debt retirement pro­
gram. The divergent trends which have characterized
these two primary sources of income, loans and Govern­
ment securities, have progressed to a point where each
now contributes approximately 40 per cent of the gross
income of the average bank; in 1945, the last year of the
war, the proportions were 49.2 per cent for Government
security income and 28.8 per cent for loan income. Other
gross income, consisting of income from other securities,
service charges, and all other sources, declined slightly in
importance during this period, accounting for 19.2 per
cent of total income in 1947 compared with 22.0 per cent
in 1945.
Among the items of expense, salaries and wages and
“ all other” expenses, which consist largely of the physical
costs of providing banking services, increased propor­
tionately more than total earnings. Consequently, there
was a moderate decline in net current operating earnings
expressed as a fraction of gross operating income. How­
ever, 55 per cent of the banks in the District showed an
increase in the dollar amount of net current earnings
before income taxes. In the two smallest groups outside
New York City more than two thirds of the banks had
higher net current earnings than in the previous year, but
in all other groups, more than half of the banks showed
decreases, and every bank in New York City with total
deposits over 100 million dollars showed a decrease in net
current earnings.
Net recoveries and profits on securities sold were
reduced for the average member bank from 10.6 per
cent of total current earnings in 1946 to 1.8 per cent in
1947. This decline was caused mostly by the much lower
volume of security profits which accompanied the declin­

ing tendencies in prices of Government securities,
especially in the latter half of the year.
Dividend payments remained conservative during the
year, amounting on the average to 27 per cent of the net
profits available for distribution. The small increase
in 1947 merely kept pace with the growth in capital
funds, and as a result, the ratio of dividend payments to
capital funds remained unchanged at 2.2 per cent. The
average bank retained and added to its capital funds
nearly three fourths of its net profits in 1947 (although
the proportion was considerably smaller in the larger
banks). This was in keeping with the general policy of
the banks in the period of high earnings during and since
the war. They have used the greater part of their
expanded earnings in this period to strengthen their
capital funds, which in the aggregate have increased by
about 46 per cent since 1939.
In Chart II, the 1946 to 1947 percentage changes in
some of the major asset and liability accounts, based on
averages of three “ call dates” each year, are shown
for the various sized groups of member banks. Declines
in holdings of Government securities and demand deposits
were generally greatest in the larger banks, reflecting the
effect of public debt retirements by the Treasury. Loan
increases were proportionately greatest ampng the smaller
banks as commercial, agricultural, consumer, and real
estate loans— types which represent a relatively large
proportion of the smaller banks’ loan portfolios —
increased rapidly in 1947; in the two groups of largest
New York City banks the contraction in security loans
outweighed increases in other types of loans. Holdings
of securities other than United States Government obliga­
tions showed the greatest increases in the larger banks
outside New York City and the smaller banks in New
York City. Time deposits generally showed moderate
increases but there was no consistent difference between
large and small banks. Capital accounts rose more in
the smaller banks owing to proportionately larger profits
and smaller dividend payments.

Chart II — Percentage Increase or Decrease from 1946 to 1947 in Selected Asset and Liability Items by Size Groups of
Member Banks in the Second District*

* Percentage changes are based upon aggregate dollar figures of each size group, which groups correspond to those in the table showing operating ratios; figures
used as basis for comparison are averages of amounts reported for three call dates each year — the preceding year end, June 30, and the autumn call date.




Average Operating Ratios of Member Banks Grouped According to Size of Deposits and Proportion of Loans to Total Assets — 1 9 4 7
A il ratios are expressed in percentages and are arithmetical averages of the ratios of individual banks in each group, rather than ratios based on aggregate dollar figures

YOUR
BANK

SUMMARY RATIOS

Group

X

Number of Banks..

BANKS LOCATED OUTSIDE GREATE R NEW YORK
GROUP II—Deposits *2,000,000 to $5,000,000 GROUP III—Deposits $5,000,000 to $20,000,000

GROUP I—Deposits under $2,000,000

147

GROUP IV—Deposits over $20,000,000

BANKS IN GREATER NEW YORK*
GROUP V GROUP VI GROUP VII

Deposits
Deposits
Loans to Total Assets, Per cent
Loans to Total Assets, Per cent
Loans to Total Assets, Per cent
Group
Group
Loans to Total Assets, Per cent
Group
$100 million
under
n
Under 1 10-19.9 20-29.9 30 a dup Average Under 10 10-19.9 20-29.9 30 and up Average Under 10 10-19.9 20-29.9 30 and up Average Under 10 10-19.9 20-29.9 30 and Average million to $1 billion
C
up $100
24

54

42

27

258

40

103

72

43

265

36

116

69

44

4

70

31

25

Deposits

10

31

12

9

1945

1946

1947

805

$1 billion

798

792

1. Net current earnings before income taxes..............................

10.2

6.8

9.4

10.6

14.1

11.3

7.6

10.1

12.5

15.5

11.6

8.5

10 3

12 1

16.5

9.8

7 2

9.0

9.6

14.2

10.7

7.6

8.1

9.4

11.3

10.9

1

2. Profits before income taxes.......................................................

10.4

7.4

10.0

10.7

13.5

11.7

8.2

10.7

13.2

15.2

12.1

10.2

10.8

12.5

16 4

10.7

9.6

11.2

9.8

11.3

10.9

6.1

8.4

14.0

14.7

11 4

2

8.2

5.8

7.9

8.4

10.5

8.5

5.8

8.0

9.5

10.7

7.9

6.8

7.3

8.3

9.9

7.9

7.8

8.8

6.8

7 5

7 3

4 1

6 1

11.6

11.2

8.1

3

1.9

1.7

1.9

2.1

2.0

2.1

1.7

2.2

2.1

2.3

2.3

2.0

2.2

2.5

2.4

2.7

2.3

2 9

2.6

2.9

1.8

3.0

3.6

2.1

2.2

2.2

4

4. Cash dividends declared............................................................
Percentage o f Total Assets

5. Total earnings............................................................................

2.5

2.1

2.3

2.7

3.2

2.5

2.0

2.3

2.6

3.2

2.5

2.0

2.3

2.6

3.3

2.4

1.8

2.2

2 3

3.1

2.4

1.9

1.6

2.1

2.2

2.5

5

6. Net current earnings before income taxes..............................

0.9

0.6

0.8

0.9

1.2

0.8

0.6

0.7

0.9

1.1

0.8

0.6

0.7

0.8

1.0

0.7

0.4

0.6

0.7

1.0

0.7

0.6

0.7

0.6

0.7

0.8

6

7. Net profits .................................................................................

0.7

0.5

0.6

0.7

0.9

0.6

0.4

0.6

0.7

0.8

0.5

0.4

0.5

0.5

0.6

0.5

0.5

0.6

0.5

0.5

0.5

0.3

0.5

0.8

0.8

0.6

7

40.2

51.8

46.8

35.1

24.4

41.3

58.4

47.1

35.6

21.0

41.2

61.2

46.3

35.0

21.2

38.9

59.9

43.9

35.7

23.3

34.8

39.0

37.7

49.2

47.7

40.5

8

8.0

18.0

8.7

4.6

3.1

7.1

11.7

7.5

5.6

4.4

6.0

7.8

7.3

5.0

2.8

6.0

12.1

6.4

5.0

4.5

3.2

3.7

5.2

8.0

7.2

6.6

9

42.5

20.3

35.0

49.7

66.0

40.8

18.5

34.5

48.0

64.9

39.3

18.2

32.4

46.6

63.4

38.2

14.0

31.6

43.9

54.5

43.0

32.6

35.4

28.8

32.3

40.3

10
11

SOURCES AND DISPOSITION OF EARNINGS
P ercen tage o f Total Earnings

5.5

100.0

5.8

5.6

6.3

4.0

6.0

6.5

6.3

-

5.0

6.6

6.5

6.5

7.0

6.3

5.2

5.9

5.3

5.0

4.9

8.8

4.3

1.9

6.4

5.8

6.1

3.8

12. Other current earnings..............................................................

4.1

3.9

4.3

2.5

4.8

4.9

4.6

5.0

4.7

6.9

6.3

7.5

6.4

6.3

11.7

8.1

12.8

10.4

12.8

10.2

20.4

19.8

7.6

7.0

6.5

12

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

13

3.0

-

1.5

1.5

1.2

2.0

1.5

2.4

2.1

2.8

2.3

1.6

5.0

2.9

5.5

5.1

4.6

10.5

14.1

9.4

3.3

3.5

3.5

14

32.4

29.1

27.6

26.7

27.7

29.1

27.5

28.3

26.1

28.6

27.6

28.9

29.5

27.1

31.6

32.6

32.3

31.2

29.9

38.2

40.3

35.8

28.4

28.2

29.2

15

15.3

16.6

16.2

14.1

13.9

17.4

20.9

18.4

15.9

14.3

16.9

22.1

17.7

15.0

13.7

14.6

21.1

15.0

14.1

12.1

6.8

2.1

1.5

16.4

15.9

15.8

16

22.6

21.6

22.0

24.2

22.4

22.5

22.3

22.3

21.9

23.9

24.1

22.6

23.3

24.5

27.1

26.1

23.1

25.3

27.6

26.4

26.7

26.0

23.4

24.8

22.8

23.6

17

66.7

19. Net current earnings before income taxes..............................
20. Net recoveries and profits3 (or losses — ) ..............................

0

28.8

14. Trust department earnings2 ( included in item 1 2 )...............

70.6

67.3

65.9

63.0

67.6

72.3

68.2

66.1

64.3

69.6

72.3

69.9

69.0

67.9

72.3

76.8

72.6

72.9

68.4

71.7

68.4

60.7

69.6

66.9

68.6

18

33.3

29.4

32.7

34.1

37.0

32.4

27.7

31.8

33.9

35.7

30.4

27.7

30.1

31.0

32.1

27.7

23.2

27.4

27.1

31.6

28.3

31.6

39.3

30.4

33.1

31.4

19

1.4

2.4

2.3

0.9

0.6

1.9

2.1

2.5

2.7

- 0.7

2.1

6.3

2.2

1.2

- 0.1

2.8

9.0

6.3

0.9

- 5.6

0.6

5.7

1.4

15.5

10.6

1.8

20

10.6

11.1

12.2

7.6

5.9

7.1

8.4

8.1

9.3

-

-

-

7.5

6.5

7.4

7.8

8.3

9.2

9.0

8.5

10.0

10.2

11.1

11.6

27.2

25.3

27.6

27.2

28.1

25.1

20.8

25.8

26.6

24.8

21.4

22.4

21.7

21.1

19.8

22.9

26.3

26.6

19.6

17.9

1.9

1.8

1.9

1.9

2.1

1.8

1.8

1.8

1.8

1.8

1.8

1.8

1.8

1.8

1.7

1.7

1.7

1.7

1.7

2.9

3.0

3.2

2.6

2.9

2.7

2.9

2.7

2.7

2.5

2.6

2.6

2.7

2.6

2.6

2.7

3.9

3.1

2.3

0.1

«
*

0.1

0.2

0.1

0.1

*
*

0.1

0.1

0.1

0.1

0.1

0.1

0.2

0.2

5.6

5.6

5.4

*

0.1

0.1

- 0.1

51.7

57.6

57.3

7.2

13.3

7.5

20.6

7.4

19.8

-

7.9

10.3

7.8

10.1

9.4

21

19.6

18.0

30.4

38.1

33.6

23.8

22

1.7

1.5

1.4

1.4

1.6

1.7

1.8

23

2.3

2.9

2.4

2.4

3.1

2.9

2.7

24

0.1

0.1

0.1

0.1

0.4

0.3

0.1

25

5.0

26

RATES OF EARNINGS ON SECURITIES AND ON LOANS
Percen tag e o f U. S. G overnm ent Securities
P ercen tage o f O ther Securities
P ercen tage o f Total Securities

25. Net recoveries and profits on securities..................................

•
•

0.1

•

•
*

P ercen tage o f Total Loans
5.5

5 3

5 5

5.3

5.2

4.9

4.9

4.9

4.9

5.1

4 2

4 1

0.2

0.1

0.5

*

—01

—01

0 1

0.4

0 1

0 1

0 1

0 1

0.8

0 1

50.1

37.7

53.9

65.1

59.4

50.6

35.8

54.5

68.9

59.1

50.8

36.4

52.5

65.5

57.7

5.4

3.9

7.2

9.5

7.5

6.0

6.3

6.8

7.0

7.8

6.4

4.6

6.1

7.9

6.6

14.6

24.4

38.4

20.7

6.6

15.0

24.6

40.8

20.9

7.4

15.2

24.5

41.2

22.1

6.7

21.0

20.0

19.2

19.3

17.3

18.0

17.2

17.8

16.0

16.7

15.9

16.7

17.2

16.6

17.8

0.6

0.6

0.5

0.8

0.6

0.8

0.7

0.8

0.9

0.9

0.9

0.7

1.0

0.9

36.7

55.7

41.8

29.6

20.4

32.6

55.6

35.4

25.0

17.2

29.2

51.2

32.2

22.4

10.0

11.2

9.9

9.9

9.4

8.5

8.1

8.4

8.4

45.4

43.9

43.6

46.3

48.8

51.8

52.8

-

4 3

2.6

2 1

5.0

0.4

•

0 1

•

0.5

0.4

•

27

49.7

38.0

49.8

49.0

44.4

61.3

60.0

53.2

28

5.5

5.6

3.7

3.4

4.1

6.1

6.2

6.7

29

16.6

25.1

37.8

24.1

23.1

27.3

13.0

15.2

21.1

30

18.8

17.6

18.3

16.9

21.4

23.5

22.9

18.4

17.6

17.9

31

1.2

0.9

1 2

11

1 2

0.9

0 5

0.7

1.0

0.8

0.9

32

26.5

56.1

30.0

22.0

15.6

29.0

31.2

25.9

43.3

38.7

31.5

33

6.5

7.7

7.6

9 2

9.3

8.0

7.7

8.4

34

5.3

42.4

44.2

47.7

4.1

•

-

DISTRIBUTION OF ASSETS
P ercen tag e o f Total Assets

29.
30.
31.
32.

Other securities..........................................................................
Loans ....................................................... .
Cash assets.....................................- .............
Real estate assets.............................. .
T
-

CAPITAL AND DEPOSIT RATIOS — in P ercen tage

33. Capital accounts to total assets, less Gov’ts and cash assets..
34. Capital accounts to total deposits..............................................
35. Time deposits to total deposits.................................................

1 Interest and discount on loans plus service charges and other fees on loans.
2 Banks not reporting this item or reporting zero amounts were excluded in computing this average, and averages
are not shown where there were fewer than 3 banks in a group.
S Profits on securities sold or redeemed and recoveries on securities and on loans, less all charge-offs other than

recurring depreciation on banking house and furniture and fixtures which is included in item 17.



7.5

14.2

7.8
51.9

* Because of the small number of banks in Groups V, V I, and V II the subgrouping “ Loans
to Total Assets” has been omitted. Two banks have been omitted from Group V I because of
extreme ratios due to particular types of business.
• Less than 0.1 per cent,

Note: Balance sheet figures used as a basis for the ratios are averages of amounts
reported for December 31, 1946, June 30, 1947, and October 6, 1947.


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102