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FEDERAL RESERVE BANK
OF NEW YORK
r Circular No. 2 7 7 2 1
L
March 6, 1944
J

Operating Ratios of Member Banks in the Second Federal
Reserve District for the Year 1943
To all Member Banks in the
Second Federal Reserve

District:

There was a considerable increase in profits realized by member banks in this District during 1943
following a decrease in 1942. As in the previous year, profits were largely used to strengthen the capital
structure of the banks. All groups of banks shown in the table on the following pages participated in varying degrees in the increase in profits during 1943. For all banks the average rate on net profit after income
taxes was 7.2 per cent of total capital funds, compared with 4.4 per cent in 1942, 5.5 per cent in 1941, and
a maximum for any year since the late 1920's of 8.9 per cent in 1936.
Dividends paid to stockholders were not materially increased as the banks generally followed the
policy of adding a large part of their net profits to capital accounts (72 per cent on the average), in
view of the continued growth in their total assets and liabilities and their expectation that they will
be called upon to assume larger credit risks in the postwar period. For all member banks covered by
the study, cash dividends declared in 1943 averaged 2.0 per cent of their total capital, compared with 1.8
per cent in 1942, and 1.9 per cent in the three preceding years. The large New York City banks, which for
some years have been paying out larger proportions of their net earnings in dividends, reduced their dividends slightly in 1943, in proportion to capital funds, while some of the medium sized banks outside New
York increased their dividend distributions moderately.
Total capital funds were increased by more than 5 per cent through the retention of undistributed
profits. Nevertheless, the average ratio of capital funds to total deposits declined further to less than 11
per cent in 1943, compared with nearly 14 per cent in 1942, over 15 per cent in 1941, and 16 per cent in
1940. The ratio of capital to assets other than cash assets and Government securities, however, increased
from less than 29 per cent in 1942 to 34 per cent in 1943, reflecting in some small degree the moderate
increase in capital funds out of earnings, but more largely the wartime shrinkage in loans (except at the
large New York City banks) and the expansion in Government security holdings.
The principal cause of the increase in net profits of banks in this District in 1943 was an excess of •
profits and recoveries on securities sold during the year over chargeoffs on other assets. It was not due so
largely, as might have been supposed, to increased income resulting from the banks' substantially increased
holdings of Government securities; for the average bank net current earnings before income taxes were
only moderately larger than in 1942, and probably somewhat smaller than in 1941.* Investments in
Government securities, it is true, increased substantially, and for the year averaged 47 per cent of total
assets compared with about 31 per cent in 1942. The average yield on bank investments declined, however,
owing to a shortening of the average maturity of Government security holdings, and to a reduction in holdings of higher yielding securities. Meanwhile loans, which for most banks yield a considerably higher rate
of income than investments, declined from nearly 29 per cent of total assets in 1942, to less than 1 9 ^ per
cent in 1943.
In general, expenses absorbed nearly the same percentage of total current earnings in 1943 as in the
previous year. Salaries took a slightly larger percentage of current earnings than in 1942 in the smaller
banks, and a somewhat smaller percentage in the larger banks, but for the District as a whole there was
no change. Interest on deposits and other expenses were slightly reduced in relation to current earnings
in most banks.
Income taxes took about 22 per cent of the net earnings after expenses of the large New York City
banks in 1943, as compared with less than 16 per cent in 1942 (about 10 per cent of total earnings in 1943
and 6 per cent in 1942). The large banks in other cities of the District also had marked increases in their
income taxes during the past year, but the percentage of earnings required for tax payments remained substantially less than for the large New York City banks. Other groups of banks had not yet reached the
point in 1943 where they were subject to material increases in income taxes. It is expected, however, that
income taxes will become a factor of increasing importance to many banks during 1944.
The ratios for your bank have been inserted in the last column of the table in order that you may
readily compare your figures with the average ratios for banks whose size and operations are similar to
yours—the group cheeked in red.
A L L A N SPROUL,

President.

* In the compilations published prior to 1943, taxes on net income were included in total expenses, thereby reducing
net current earnings. For 1943 net current earnings were computed before deduction of taxes on net income which are shown
as a separate item (with revised figures for 1942 for all banks combined), and a new item ( # 2 ) "Profits before income t a x e s "
to total capital accounts has been added.




Average

Operating

Ratios

of

M e m b e r

Banks

Grouped

Accor

A l l ratios are expressed in percentages and are arithmetical averages of the r

MEMBE
ALL BANKS
1943

1942

Number of Banks.

SUMMARY RATIOS
Percentage of Total Capital Accounts

Loans

to

Total

dual b a n k s in e a c h group, rather than ratios based

on

Assets —

aggregate

1 9 4 3

dollar

figures

!A T E D OUTSIDE G R E A T E R NEW
YORK
MEMBER BANKS IN
"I—Deposits §2,000,000 to §5,000,000 GROUP IV—Deposits $5,000,000 to §20,000,000 GROUP V§ GREATER NEW YORK
Deposits
Loans to Total Assets, Per cent
GROUP VI GROUP VII
Loana to Total Assets, Per cent
Group
over
Deposits under
Under 10 10-19.9 20-29.9 30 and up Average Under 10 10-19.9 20-29.9 30 and up §20,000,000 §100,000,000 Deposits over
§100,000,000

128

60

34

84

163

17

42

earnings
earnings

(included in item

ll)2

14. Salaries and wages

9.6

8.2

6.2

7.3

9.7

11.5

9.8

7.3

9.1

8.5

9.5

8.9

7.1

8.7

9.6

10.2

8.9

9.1

10.4

7.2

3.3

6.3

5.6

6.5

8.3

7.8

8.2

8.1

6.7

8.0

8.8

8.4

7.9

7.5

8.5

2.0

1.1

1.7

1.6

1.7

1.9

2.1

2.4

2.4

1.7

2.3

2.3

4.1

2.4

1.5

3.6

2.4

2.5

2.5

2.2

2.3

2.3

2.6

3.0

2.4

2.0

2.3

2.6

2.9

2.2

2.3

1.6

0.6

0.5

0.6

0.5

0.6

0.6

0.7

0.8

0.7

0.6

0.6

0.7

0.8

0.7

0.5

0.7

0.6

0.4

0.7

0.6

0.7

0.7

0.7

0.7

0.7

0.6

0.7

0.7

0.6

0.6

0.5

0.6

45.0

48.2

44.5

68.5

51.6

48.6

37.7

22.7

45.7

63.3

49.2

37.4

26.8

47.5

37.8

50.5

39.5

39.8

42.9

20.5

35.5

35.5

47.7

59.9

36.1

19.6

32.1

45.1

55.0

32.8

39.6

27.4

7.0

6.3

6.3

5.4

6.5

7.6

6.9

8.2

7.7

7.1

7.6

8.4

7.6

5.1

12.4

2.4

8.5

5.7

6.3

5.6

6.4

8.3

7.7

9.2

10.5

10.0

11.1

9.1

10.6

14.6

10.2

19.7

100.0

11. All other earnings

8.0

6.9

8.4

10. Service charges on deposit accounts

5.9

5.9

7.0

9. Earnings on loans 1

4.8

6.8

48.5

8. Interest and dividends on securities

6.2

3.5

36.1

SOURCES AND DISPOSITION OF EARNINGS
Percentage of Total Earnings

3.7

7.9

0.5

6. Net current earnings
7. Net profits after income taxes

7.3

0.7*

earnings

YOUR
FIGURES

19

2.9

declared

13. Trust department

of

1.8

Percentage of Total Assets

Total

Proportion

4.4

3. Net profits after income taxes

12.

and

5.1

2. Profits before income taxes

5. Total

Deposits

6.7*

1. Net current earnings

4. Cash dividends

34

17

796

786

GROUP I§ GROUP II—Deposits $500,000 to $
Deposits
Loans to Total Assets,
Group
under
Average Under 10 10-19.9
§500,000

of

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

3.8

3.7

2.8

2.6

3.1

i.e

1.9

1.7

3.7

3.2

4.2

3.3

2.6

4.8

9.4

12.8

31.5

31.5

31.8

34.1

32.1

31.3

30.9

30.4

30.7

30.2

31.5

30.3

28.1

29.5

38.9

30.4

36.4

15. Interest on time and savings deposits

15.1

14.8

15.3

16.2

16.2

16.3

15.4

15.5

13.7

15.0

18.3

14.8

14.6

13.0

11.3

6.1

1.0

16. All other expenses

28.4

27.2

30.4

26.7

26.3

26.1

27.0

27.2

30.7

26.7

24.6

26.8

26.4

29.4

27.1

32.4

24.6

75.0*

73.5

82.1

74.7

76.6

74.5

73.7

73.6

74.8

72.4

73.1

73.1

71.3

70.5

67.9

77.4

56.0

25.0*

26.5

17.9

25.3

23.4

25.5

26.3

26.4

25.2

27.6

26.9

26.9

28.7

29.5

32.1

22.6

44.0

19. Net charge-offs 3 (net recoveries + )

5.7

+2.9

+0.1

+2.8

+5.8

+4.9

+5.2

+2.8

+0.2

+3.6

+5.3

+5.1

+1.8

1.4

0.4

+4.5

+6.9

20. Taxes on net income

2.4

2.5

1.2

2.0

1.2

1.7

1.7

2.2

3.3

2.6

1.8

2.5

2.4

4.3

3.5

4.7

9.7

16.9

26.9

26.1

28.0

28.7

29.8

28.6

30.4

28.1

23.8

28.2

22. Interest and dividends on securities

2.3

1.9

2.2

2.0

2.3

2.0

1.9

1.8

1.6

1.8

1.8

1.8

1.8

1.7

1.7

1.7

1.3

23. Net losses on securities (or recoveries and profits + )

0.1

+0.2

+0.1

+0.2

+0.2

+0.2

+0.2

+0.2

+0.1

+0.2

+0.1

+0.3

+0.2

+0.3

+0.2

+0.3

+0.3

24. Earnings on loans 1

5.1

5.1

5.9

5.6

5.9

5.6

5.4

5.2

5.1

4.8

5.1

4.9

4.7

4.4

4.1

4.4

2.1

25. Net losses on loans ( o r recoveries + )

0.1

0

0.3

+0.1

+0.9

0

+0.1

0

0

0

+0.4

0

0

0.1

0.4

0

0.2

26. U. S. Government securities

30.8

47.0

41.7

43.8

50.1

47.7

50.2

43.1

34.8

50.3

60.2

53.7

43.5

37.8

53.0

47.7

53.4

27. Other

13.2

9.6

13.1

11.1

16.6

12.6

10.6

9.1

6.5

8.7

9.8

8.9

9.2

5.5

6.0

3.9

4.5

28. Loans

28.7

19.4

17.3

20.0

7.6

14.9

15.4

23.4

35.9

18.5

7.6

15.0

24.3

35.8

17.7

21.5

19.7

29. Cash assets

24.6

22.0

25.9

23.4

24.1

23.2

21.6

22.1

20.3

20.1

20.8

20.0

20.5

18.9

20.8

25.3

21.1

2.5

1.8

1.9

1.6

1.5

1.5

2.1

2.2

2.3

2.1

1.6

2.2

2.1

1.7

2.1

1.2

0.9

31. Capital accounts to total assets, less Gov'ts and cash assets

28.7

34.1

42.9

37.0

52.7

41.1

33.6

27.2

18.9

32.4

50.6

35.1

23.4

17.9

29.8

30.8

10.8

15.9

12.7

13.3

31.0

32. Capital accounts to total deposits

13.9

13.0

9.9

10.3

9.2

9.5

9.8

9.0

8.4

7.9

8.2

48.9

43.0

39.4

45.4

40.2

8.5

33. Time deposits to total deposits

44.9

45.7

48.4

51.2

43.3

42.8

42.6

43.7

31.8

21.9

4.2

17.

Total

expenses

18. Net current earnings

21.

Net profits after income taxes

RATES OF EARNINGS ON SECURITIES AND ON LOANS
Percentage of Total Securities

Percentage of Total Loans

DISTRIBUTION OF ASSETS

Percentage of Total Assets
securities

30. Real estate assets
CAPITAL AND DEPOSIT RATIOS — I n Percentage




§ Because of the small number of banks in Groups I and V the
subgrouping "Loans to Total Assets" has been omitted.
* Revised to agree with 1943 when taxes on net income were excluded from
expenses and were shown as a separate item after net current earnings.

1 Interest and discount on loans pi
2 Banks not reporting this item
this average, and figures are not
3 All charge-offs other than recurri
less profits on securities sold or r

other fees on loans,
ounts were excluded in computing
ere fewer than 3 banks in a group,
nking house, furniture, and fixtures,

46.5

Note: Balance sheet figures used as a basis for the ratios are averages of amounts
reported for December 31, 1942, June 30, 1943, and October 18, 1943.




Prepared by
F I N A N C I A L STATISTICS DIVISION
RESEARCH D E P A R T M E N T
FEDERAL RESERVE B A N K
OF N E W Y O R K

FEDERAL RESERVE

BANK

OF NEW YORK

March 6, 1944.

To all Banking Institutions in the
Second Federal Reserve District:

We are pleased to announce that Great Neck Trust Company, Great Neck Plaza (P.O., Great Neck, N. Y.), New York,
has become a member of the Federal Reserve System effective
March 6, 1944.




ALLAN

SPROUL,

President.

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