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F e d e r a l R e s e r v e Ba n k



Circular No. 67-2^1
November 30, 1967


Recently, bankers who participated in our 1966 program were polled
concerning ways in which the report has been a helpful tool in increasing
earnings, decreasing expenses, or otherwise improving operating efficiency.
We were gratified by the replies, as a number indicated significant profit
gains have already been realized. Hopefully, in reviewing the following
summary of uses made of the 1966 report, you will find some profitable ideas
that can be utilized even before your bank receives its 1967 report.
Management Aids
Assist with feasibility study for banks considering
computer installation or use of off-premise computer service.
Indicated the usefulness of an account analysis to
determine the profitable and unprofitable customers of the
Used as a basis for deciding how to register under
the new Texas consumer credit laws.
Served as a guide for preparing the bank budget.
A guide to determine the cost and income potential
of new services.
Information source used for preparing a report to
estimate the cost of a greater interest rate on time
certificates of deposit.
Spotlighted superior employees by revealing functions
under their control to be well above average; also indicated
overstaffed areas of operation.
A positive report to induce the bank officers to be
more expense conscious.
Focused attention on neglected areas of bank operations,
such as real estate loans, etc.
Employed as a useful guide in more effectively budgeting
employees’ time.

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (




Served as a guideline to help control costs of busi­
ness acquisition*
Pointed out low yield areas and brought about a study
to provide corrective measures.
Bank's Board of Directors used the cost study to
determine the soundness of past management decisions.
Income Improvement
Redirected emphasis to seek better income producing
types of loans.
Federal funds market brought to management's attention
as an excellent way to make profits from short-term idle funds•
Safe deposit charges were reviewed and found to he
inadequate and rates were subsequently raised.
Account maintenance charges, return check charges, and
overdraft charges were found, in numerous cases, to be
extremely low. Break even points for deposit accounts were
used in this evaluation.
Enforcement of the collection of instalment loan late
Initiated a charge for frequent withdrawals from
savings accounts.
Adjustments were made in the size of the minimum
loan accepted and the minimum charge for a loan.
Indicated more cash than necessary and prompted the
bank to become more fully invested.
Instalment Loans
Instalment loan section of cost study indicated it
would he more profitable to concentrate on specific types
of loans rather than equal emphasis on all types.
Brought about a study to determine more economical
methods of processing instalment loan payments.
Several hanks analyzed the instalment loan operation
with thoughts of reducing or discontinuing those types of
loans which were producing inadequate profit.




Discontinued advertising for special checking accounts.
Directed advertising for savings accounts toward least
costly types of savings.
Increased instalment loan advertising.
Redirected advertising to functions with the highest
profit potential.

Certain portions of the workpapers for the 19&7 report can only he
completed after the hooks are closed, but there is much that can be done before
the end of the year, such as distribution of salaries and other expenses, item
counts, etc. We trust that you already have much done on your 1967 workpapers.
There is one change to take into consideration when preparing your
1967 workpapers:
Federal Funds sold and bank borrowings will be adjusted
only on banks submitting monthly balance sheets . To in­
dicate which type of balance sheet you are submitting, please
add an Item 75 (Schedule D) with a small rectangular box
opposite the item number. Insert the figure "1" if your
balance sheet on Schedule C reflects a daily average or "0”
if it represents a monthly, semi-monthly, weekly, or other type.
* * *

We are enclosing a booklet, Performance Characterisitcs of High
Earning Banks, which will be of special interest to the bankers who participated
in 19b6 and will emphasize the cost study's usefullness to all 19&7 participants.
A comparision of the performance of your bank against the achievements of the
high earning banks that most closely resemble your bank’ structure should be
* * *

Should any problems arise in completing the 1967 workpapers, please
contact us: Area Code 214 - RI2-3271, Extension 370 or 240.

Leon W. Cowan
Assistant Vice President

Carroll D. Blake
Functional Cost Analyst

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