The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
Federal Reserve Bank OF D ALLAS Dallas, Texas, August 18,1948 SELECTED OPERATING RATIOS OF MEMBER BANKS To Member Banks in the Eleventh Federal Reserve District: The usual mid-year report showing selected operating ratios o f member banks in the Eleventh Federal Reserve District is presented on the inside pages o f this letter. This report, which supplements the more detailed annual statement o f member bank operating ratios, is limited to nine important ratios reflecting operations during the first half of 1948; figures fo r the first six months o f 1947 are shown for comparative purposes. The proportion o f total earnings derived from interest on Government securities declined at member banks in all size-groups during the first half of 1948 as compared with the same period o f 1947, while interest and discounts on loans represented a larger part o f total earnings o f all size-groups o f member banks in this District. These trends have been in evidence during the postwar years and are an out growth of several factors. There has been a substantial increase in loans o f member banks in the District during the period, accompanied by an increase in interest rates. The average interest rate on Government securities also has risen, but holdings o f Government securities by member banks in this District have declined. For all member banks in the District, interest on Government securities during the first half of 1948 was 22.8 percent of total earnings as contrasted with 24.8 percent during the same period of 1947; interest and discounts on loans rose to 58.2 percent of total earnings during the first six months of 1948 from 55.2 percent during the same months o f 1947. Salaries and wages as a percentage o f total earnings declined at member banks in all size-groups, resulting in a decline fo r all member banks in the District from 30.4 percent to 29.3 percent between the two six-month periods under comparison. Although net current earnings before income taxes as a percentage o f total capital accounts increased at member banks in all size-groups during the first half o f 1948 as compared with the rela tionship during the period January-June 1947, net profits after income taxes represented a smaller percentage of total capital accounts at member banks in all size-groups except the two groups o f smallest banks and the group o f banks with deposits from $2,000,000 to $4,999,999. The sharpest decline in the ratio o f net profits after income taxes to total capital accounts occurred at the largest member banks in the District. This group o f banks, reporting deposits in excess of $100,000,000, experienced a decline in this ratio from 4.1 percent during the first six months of 1947 to 2.5 percent during the same period in the current year. Cash assets of member banks in the District averaged 33.2 percent o f total deposits on June 30, 1948, as compared with 35.8 percent on June 30, 1947. This percentage declined at member banks in all size-groups except those two groups including member banks with deposits between $25,000,000 and $49,999,999 and $50,000,000 and $99,999,999. The average increases at banks in these groups, however, were comparatively insignificant, as was the average decrease fo r banks in the largest size-group with deposits in excess o f $100,000,000. Member banks in these three large size-groups with deposits in excess of $25,000,000 showed no marked tendency to change the percentage of deposits held in cash assets, whereas most o f the groups o f smaller banks showed decreases in the percentage. The ratios for your bank have been inserted in columns on the left of the report to facilitate com parison with the ratios of banks in your size-group. For your convenience, the column indicating the size-group in which your bank is included has been checked. Additional copies of this report will be provided upon request. Yours very truly, R. R. GILBERT President This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) ELEVENTH FEDEF& RESERVE DISTRICT Selected Member Bhk Operating Ratios JANUARY - T *s J°48 AND 1947 V JBY.rCS WITH JUNE 30 DEPOSITS (in thousands of dollars) $500 - $999 Under $500 1948 1947 Your Bank Number of Banks 1948 1947 1948 $1,000 - $ 1,99913,000 - $4,999 1948 88 1947 1948 1947 1948 1947 1948 1947 1948 1947 1948 1947 80 51 49 19 17 10 10 11 10 611 596 22.4 6.3 57.2 28.6 24.5 6.5 53.7 29.1 28.0 31.0 6.2 6.2 43.9 30.2 35.6 4.0 44,5 30.4 28.1 38.8 3.8 38.6 28.7 25.3 4.0 55.9 25.3 28.7 3.3 52.3 27.4 22.8 5.9 48.4 29.5 33.4 3.6 47.7 28.9 34.1 2.7 3 1 .^ 3 26.3 6.8 52.3 30.3 58.2 29.3 24.8 6.0 55.2 30.4 10.0 p . 7 10.8 12.8 12.2 6.8 3.5 3.5 7.3 4.7 6.9 2.5 10.2 8.7 9.1 6.5 11.0 7.5 10.5 5.7 6.0 8.4 19.6 6.4 9.9 858.6 * 36.0 |2.3 4.1 7.6 7.9 4 5 35.3 5.8 31.3 5.4 33.7 5.1 31.9 5.4 34.0 5.2 32.9 4.7 32.8 4.6 31.9 4.8 31.5 5.2 34.9 75 YU. 6.2 35.0 6.5 33.2 7.0 35.8 6.7 6 7 55.3 17.3 62.3 53.7 56.7 57.3 62.6 69.5 67.1 61.9 66.6 45.1 50.7 53.4 58.1 8 1948 1947 ft48 12‘>^19 — --r— 22.6 JH .4 6.3 U.7 58.3115.4 22 70 67 13.3 2.3 75.4 34.1 16.0 3.2 71.1 29.1 17.9 4.7 67.4 30.3 21.2 7.4 6.3 9.7 7.3 8.6 7.1 10.4 7.7 14.7 43.3 14.3 35.2 10.4 40.0 9.8 33.7 7.7 38.9 44,7 45.0 49.9 21 All Groups 1947 214 1947 122 $5,000 - $9,999 $10,000-$24,999 $25,000449,999 $50,000499,999 $100,000 and over RATIOS TO TOTAL EARNINGS 1. Interest and dividends on: a. Government securities........................— b. Other securities.............-...........-............. 2. Interest and discount on loans..................... 3. Salaries and wages....................................... RATIOS TO TOTAL CAPITAL ACCOUNTS 4. Net current earnings before income taxes.— 5. Net profits after income taxes...................... RATIOS TO TOTAL DEPOSITS 6. Cash assets'"'......................-......................... 7. Total capital accounts................................. RATIOS TO TOTAL EARNING ASSETS 8. U. S. Government securities........................ 'M inim um primary reserve requirements (required legal reserve plus necessary 12.3 3.9 76.4 32.7 8.7 7.8 43.0 __ ________________________________ 6.9 60.6 29.8 50.8 - 45.1 . _ — till money) for all member banks in tlie Eleventh District prd^iverage between 14 and 18 percent of total deposits. EXPLANATION The basic data used in the compilation of the ratios were taken from reports fu r nished by member banks. The asset and liability items were taken from condition^ reports o f June 30, 1948, and June 30, 1947. Earnings and expense items are the amounts reported by member banks for the first six months o f each year. Banks were grouped according to the amount o f their total deposits at the end of June o f each o f the two years. Group ratios are expressed m percentages and are aveia^es of the ratios of the individual banks. This procedure prevents the data banks in a group from exercising an undue influence on the ratios o f the gioup and on the ratios for all banks. Inasmuch as there should be about as many banks abo/e the average as there are below it, the group averages should not be considered as stand ards” of performance. It is not important that the ratios o f your bank conform to the average, but it is important to know the reasons for the differences. Ratio No. la— Interest on Government securities to total earnings The ratio is computed by dividing total earnings into earnings from interest on Government securities and shows the percentage o f total earnings denved from that source o f income. Ratio No. lb— Interest and dividends on other securities to total earnings The ratio is computed by dividing total earnings into earnings from interest and dividends on other securities and shows the percentage of total earnings derived fiom other security holdings. Ratio No. 2— Interest and discount on loans to total earnings The ratio is computed by dividing total earnings into earnings from interest and discount on loans and shows the percentage of total earnings derived from interest and discount on loans. Ratio No. 4— Net current operating earnings to total capital accounts The ratio is computed by dividing total capital accounts (capital, surplus, undivided profits and reserves, including retirement account for preferred capital) into net current operating earnings and shows the rate o f earnings on total capital accounts. Because this report covers earnings for a half year only and because total capital accounts o f most banks remain relatively fixed through the year, the ratio of net current operating earn ings to total capital accounts shown in this report is smaller than for the full year 1947. Ratio No. 5— Net profits after income taxes to total capital accounts The ratio is computed by dividing total capital accounts into net profits after income taxes. It is similar to ratio No. 4, above, except that adjustment has been made for losses and recoveries and for the payment o f income taxes. Ratio No. 6— Cash assets to total deposits The ratio is call report which and cash items in held in the form computed by dividing total deposits into cash assets (item 1 in the includes cash, balances with other banks including reserve balances, process o f collection). The ratio shows the percentage o f total deposits o f cash assets. Ratio No. 7— Total capital accounts to total deposits ' The ratio is computed by dividing total deposits into total capital accounts and shows total capital accounts as a percentage of total deposits. During the war years, the rapid growth of deposits resulting from heavy bank purchases o f Government securities was not accompanied by a proportionate increase in total capital accounts, and conse quently the ratio declined substantially during that period. Since the end of the war, the percentage has shown a slight rising trend. Ratio No. 3— Salaries and wages to total earnings Ratio No. 8— United States Government securities to total earning assets The ratio is computed by dividing total earnings into the amount spent on salaries and wao-es o f officers and employees and shows the percentage of total earnings absorbed by the payment of all salaries and wages. Ordinarily, this is the largest item o f expense at member banks. The ratio tends to decline as the size o f the bank increases. The ratio is computed by dividing total earning assets into holdings o f United States Government securities. In this study, total earning assets include all loans and all types of security holdings. 1 a. b. 2 3
