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F e d e r a l

R e se r v e

B a n k

OF DALLAS

Dallas, Texas, April 10, 1942

OPERATING RATIOS OF MEMBER BANKS

T o th e M e m b e r B a n k A d d r e s s e d ;

There is presented on the following pages the annual compilation of
operating ratios of member banks in the Eleventh Federal Reserve District
for the year 1941. The current report is similar to those mailed your bank
covering operations for each of the years 1937 to 1940, inclusive, although
the ratios have been rearranged in the order of their probable interest to
the banker.
The items of assets and liabilities upon which the ratios are based
represent the averages of the amounts shown on member bank condition
reports of December 31, 1940, and April 4, June 30, and September 24,
1941. The data on earnings and expenses were taken from the report of
earnings and dividends covering the year ended December 31, 1941.
As in former years, the banks are grouped according to the amount of
their deposits. The ratios of each group are the averages of the ratios of
individual banks in th at group; consequently, the data on the large banks
in a group do not have an undue influence on the group averages.
The ratios of your bank have been inserted in the column a t the right
of the statement in order that they may be readily compared with those
of its group. It will be noted th at the group in which the figures of your
bank are included is indicated by a check mark. A memorandum relating
to the use that might be made of the operating ratios statement is printed
on the reverse side of this folder.
It is hoped th at the information presented herein will be of interest
and value to your bank.
Yours very truly,
R. R. GILBERT
President

EFENSE
BUY
UNITED
STATES
SAVINGS
"B O N D S
AN STAMPS
D

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)

C A LEN D A R YEAR 1941
A V E R A G E O P E R A T IN G R A T IO S O F M EM B ER B A N K S IN T H E E L E V E N T H F E D E R A L R E S E R V E D IS T R IC T
( G R O U P E D A C C O R D IN G T O S IZ E O F D E P O S I T S )

$500,001 $1,000,1)01
to
to
$1000,000 $2,000,000

$2,000,001
to
$5,000,000

$5,000,001
to
$10,000,000

Groups with average deposits of.

Up to
$250,000

$250,001
to
$500,000

Number of banks in each group.

84

121

147

98

51

23

38

562

8.0

10.8

6.0
3.6

9.8
5.3

11.3
10.7
5.1

11-4
10.3
5.2

10.6
9.0
3.7

9.8
8.1
3.9

8.3
7.9
3.6

10.4
9.3
4.6

5.5
3.8
1.7
1.3

4.9
3.3
1.6
1.5

4.4
2.9
1.5
1.4

3.7
2.5
1.2
1.1

3.4
2.4
1.0
.9

2.9

2.2
1.6
.6

4.3
2.9
1.4

.5

1.2

80.6
9.5
9.9

72.9
14.0
13.1

67.9
16.7
15.4

64.5
19.8
15.7

62.2
20.2
17.6

54.8
22.9
22.3

55.5
22.8
21.7

68.4
16.5
15.1

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

7.7
1.6

5.8
3.2

6.7
2.6

31.9
7.0
5.8
28.9
20.-b '

31.9
6.0
8.3
26.7
27.1

34.5
3.9
«^5.3

Over
Average
$10,000,000 A ll Groups

Your
Figures

SUMMARY RATIOS

Percentage of Total Capital Accounts
1. Net current earnings........................
2. Net profits........................................
3. Cash dividends declared..................
Percentage of Total Assets
4.
5.
6.
7.

Total earnings............. .
Total expenses.............
Net current earnings—
Net profits....................

2.1
.8

SOURCES AND DISPOSITION OF EARNINGS

Percentage of Total Earnings
8. Interest and discount on loans.................................
9. Interest and dividends on securities.........................
10. All other earnings.....................................................

11.
12.

Ite m 10)% ..........................................................
T ru st d e p a r tm e n t ea rn in g s (in c lu d e d in Ite m 10)%.

4.8

6.4

6.7

8.0

13.

7.4
2.2

14. Salaries and wages...................................................
15. Interest on time deposits..........................................
16. Taxes other th‘ _ 'ja l estate.....................................
^

36.2
2.6
5.5

36.3

34.0
3.5

34.0
4.6
5.4

AW olVvcx expevv.
,.. - ......- , - - v
.............— — ;
^iVet c u r r e n t v u r * ' ^ ^ ................................................................

241
3 1 .6

is.? -.
‘ ’~ 3 x .8 "

33.2
5.9
5.8
25.6

20. Net charge-offs*.......................................................
21. Net profits.................................................................

_

S e rv ic e ch arges on d e p o s it accou n ts (in c lu d e d in

7.4
24.2

1.9
29.9

31.0

2.7
29.5

1.8
27.7

3.6
22.8

1.2
25.9

2.8
28.5

9.2
.9
1.4

8.6
.9
.8

8.1
.8
.6

7.7
.6
.7

7.2
.6
.5

6.3
.6
.5

4.7
.5
.3

7.9
.8
.8

3.7
.3
.2
.2

3.5
.1
.3
.2

3.1
.1
.3
.4

2.9
.1
.3
.3

2.7
.2
.3
.4

2.5
.4
.3
.8

1.9
.2
.4
.4

3.1
.1
.3
.3

48.9
13.1
2.6
35.2

43.3
18.2
2.2
36.2

37.6
21.3
2.0
39.0

32.0
23.9
1.9
42.1

30.0
23.3
2.3
44.3

26.6
25.1
2.7
45.4

26.6
24.7
2.4
46.1

37.7
20.4
2.2
39.6

7.8

12.6

12.8

13.6

15.5

10.6

8.2

12.0

37.0
32.0
9.1

26.0
20.0
9.2

22.3
15.6
10.0

20.0
13.0
11.1

19.3
11.6
16.2

18.1
10.2
20.5

14.2
8.2
15.8

23.9
17.5
11.3

2.0

1.8

1.8

1.6

1.4

1.1

.9

1.6

V7 .

Total earnings........................................................

2 .6

5.8

.41
1.6

2 3.8
3 2.2

'

xt.3
>

RATES OF EARNINGS ON LOANS AND SECURITIES

Percentage of Total Loans
22. Interest and discount on loans...........................
23. Recoveries on loans............................................
24. Charge-offs on loans...........................................
Percentage of Total Securities
25.
26.
27.
28.

Interest and dividends on securities..................
Recoveries on securities.....................................
Profits on securities sold....................................
Charge-offs on securities....................................

DISTRIBUTION OF ASSETS

Percentage of Total Assets
29.
30.
31.
32.

Loans............... ± .......................................................
Securities..............................................
Real estate assets.......................................................
Cash assets.................................................................

Percentage o f Total Loans
33. Personal andretail instalment paper.........................
CAPITAL AND DEPOSIT RATIOS— In Percentage

34. Capital accounts to loans, securities and real estate
assets..................................................................
35. Capital accounts to deposits......................................
36. Time deposits to total deposits..................................
37.

In terest on tim e d e p o sits to tim e deposits% ..............

♦Total charge-offs (including those on banking house, furniture and fixtures, etc., as w ell as on loans and securities) less profits on securities sold and recoveries.
tBanks reporting zero amounts were excluded in computing this average, and figures are not shown where there were few er than 3 banks in a group.
'
NOTE: Balance sheet figures used as a basis for the ratios are averages of amounts reported for December 31, 1940, and April 4, June 30, and September 24, 1941, except
that in the case of item 33 (personal and retail instalment paper) only June 30 figures were used.
*
’

MEMORANDUM ON
HOW TO USE THE OPERATING RATIOS STATEMENT
During recent years, member bankers in this district have shown an increasing interest in the annual operating
ratios statements compiled by the Federal Reserve Bank of Dallas. The purpose of the statements, of course, is to provide
a means by which an individual bank may make a comparison of its figures relative to operating results with the averages
for banks of approximately the same size. The statement provides information with respect to earning capacity, chargeoffs, distribution of assets, and many other factors affecting the successful operation of a bank.
It is recognized that no two banks of the same size have exactly the same problems and it is not expected that all
banks would have the same pattern of distribution of earning assets, expenses, deposits, etc. Although some minor varia­
tions in operating results may be due to differences in bookkeeping methods, the average operating ratios will point
to significant differences between the figures of individual banks and their group averages that may furnish leads for
possible improvements in earning power. The following hypothetical data will indicate some of the practical uses that
may be made of the ratios:
Group
Average

RATIOS OF EARNINGS TO CAPITAL
(Percentage of total capital accounts)
Net current earnings...........................................
Net profits...........................................................

Individual
Bank

.... 11.3
.... 8.7

— 3.6
8.7

.... 28.7
.... 18.3

59.6
26.8
10.8
18.3

DISPOSITION OF EARNINGS
(Percentage of total earnings)
Salaries and wages.............................................
Interest on time deposits...................................
Taxes other than real estate...............................
Other expenses.....................................................
RATE OF INTEREST PAID ON TIME DEPOSITS

......

6 .6

.... 18.4
....

1.5

1.9

It will be noted that the bank in the illustrative case referred to above had the same percentage of net profits on its
capital account as the group average for banks of its size, but an analysis of the data shows that this satisfactory result
was due to recoveries on previously charged-off assets and not to net current earnings, which were actually “in the red.”
In studying other ratios which indicate the uses made of earnings, it is observed that salaries and wages consumed more
than twice the average percentage of total earnings; interest on time deposits was about one-half higher than the average
due chiefly to a higher rate paid on time deposit, and taxes were somewhat higher than the average. Possibly the
abnormal conditions revealed by the ratios are beyond the banker’s control; nevertheless, the ratios furnish leads for
further detailed study, which is all that these operating ratios are designed to do.
The accompanying statement presents your bank’s 1941 ratios and the average ratios of member banks in this
district in various size groups. While the summary ratios relative to earnings are very important, there are many other
ratios which have a significant bearing upon bank operations. Therefore, after reviewing the earning record of your
own bank as compared with the average for banks of similar size, the banker may then look to the other groups of
ratios for answers to questions such as the following:
1. What were the sources of earnings?
2. What was the disposition of earnings?
3. What was the gross rate of return on loans and securities, and the net return after charge-offs and recoveries?
(Care should be exercised in interpreting this ratio since recoveries and charge-offs may reflect the condition of
assets in former years.)
4. How have the assets been invested?
5. How large is your capital structure as compared with the size of your bank?
6. How important a factor is interest on time deposits?
While these ratios are useful tools, we do not hold them out as substitutes for mature banking experience and good
judgment. The mere fact that a given bank has attained a certain volume of loans or deposits does not necessarily mean
that the bank enjoys the same opportunities as other banks of approximately the same size. Moreover, the ratios are
merely averages and there are about as many banks above the average as there are below it. Thus, the average should
not be considered as a “goal” of performance. It is not important that the ratios of a bank conform to the average, but
it is important to know why there are differences. In making comparisons, the individual banker should study the ratios
of his bank in the light of operating conditions. While too much emphasis should not be placed on minor differences
between the group averages and the ratios of a single bank, it is desirable to look for combinations of factors that may
indicate unfavorable trends. A very helpful procedure in studying trends is to compare the 1941 statement with those
sent to you for the years 1937 to 1940, inclusive.
NOTE: For the bankers who wish to make a more intensive study of their own particular institutions, we will send on
request a detailed list of questions that might be answered about each of the principal ratios.

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