Full text of Federal Reserve Bank of New York Circulars : 674. A Comparison of the Operations of Representative Member Banks in the Second Federal Reserve District for the Year 1924

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

Circular No. 674
May 29, 1925

A Comparison of the Operations of
Representative Member Banks in the Second Federal Reserve District
For the Year 1924




Federal Reserve Agent
FEDERAL RESERVE BANK OF NEW YORK

A

An appreciation in security values.
YEAR ago a first and experimental report was
prepared making available to member banks in the
A heavy volume of new financing and other banking underSecond District a summary of some of the bank
takings facilitated by easy money conditions.
operating data which they currently report to the ReA rise in interest rates from September through the end of
serve Bank. This summary was so arranged that each
the year, reflecting business and financial activity and a
bank might be able to compare its own operations with
turn in the gold movement.
those of other banks of similar size or similar kind of
A study of the following tables will reveal the way
business. The first report proved sufficiently useful to
in
which the operating ratios of the member banks have
a large number of bankers to justify the preparation of
reflected
these tendencies. The following may be listed
a similar report for the year 1924.
as interesting illustrations:
The 1924 report contains the same operating ratios as
The continued rise in time deposits reduced the ratio of
were published last year with the addition of several
demand to gross deposits and increased the amounts of
interest payments.
new ones to show a division of earnings between interest
and discount and other sources, and to show losses
Larger interest payments reduced net earnings in the
smaller banks in spite of better gross earnings.
written off. The report this year also gains added value
from the fact that it is now possible to give comparative
Earnings other than interest and discount, largely security
profits, were larger than in 1923 in all groups of banks.
figures for two years.
With large increases in deposits, interest on borrowed
A year ago bankers were generally apprehensive conmoney was much reduced except in the smaller banks.
cerning the prospect for earnings for the year 1924.
The
business recession, in most cases, increased the amount
Interest rates had reached the lowest levels since the
of
losses charged off against the loans and discounts.
war. The continued flood of gold imports indicated
Eising
security prices diminished in most cases the amount
possible further rate recessions. After a temporary imof
losses
charged off against securities.
provement in the early months of the year business
resumed the decline in activity which had begun early
in 1923. The final figures for the full year of 1924 Capital Funds
showed, however, that the early apprehensions regarding
One of the results of the growth in bank deposits durbank earnings were not realized. As it turned out, all ing 1924 was to diminish the ratio of capital funds to
groups of banks, except the large banks in New York deposits. For all banks combined this ratio was reCity, showed a ratio of gross earnings to loans and in- duced during the year from 16.1 per cent to 15.6 per
vestments as high as in 1923, or in some cases higher. cent. Capital represents a margin of protection for
Net earnings on capital were slightly lower in banks bank depositors. Because of a considerable number of
with less than $5,000,000 of loans and investments, but bank failures in the past few years and close bank comslightly higher in the three groups of larger banks. petition bankers and the public generally are paying
When the smaller volume of losses charged off is taken closer attention to the maintenance of a proper ratio
into consideration, every group of banks except one between capital and deposits. The ratio of capital to
medium sized group shows, in the net, a better earning deposits which is generally regarded as the minimum for
year than in 1923.
prudent banking is a ratio of 1 to 10. In recent months
Among the factors in the banking situation which bore a large number of banks in the district have taken steps
most directly on earnings during 1924 may be listed the to increase their capital in keeping with increases in
deposits.
following:
Continuous and rapid recovery in business activity in the
second half year.
A large increase in bank deposits amounting for all member
banks in the United States to nearly 3 billion dollars in
the course of the year, and including an increase of over
1 billion dollars in time deposits.




Space for Each Bank's Figures
In the following tables a space has been left for each
member bank, if it so desires, to enter its own figures
under the group figures in the appropriate columns.

Table 1—Average Operating Ratios of Representative Member Banks in Seven Size Groups a
(40 Selected banks in each group)
Read the table as follows: In the banks of Group I (banks with loans and investments under $500,000) capital funds
average 22.7 per cent of gross deposits in 1923 and 22.3 per cent in 1924, etc.
Size of groups divided according to amount of loans and investments indicated

Ratios expressed in percentages

Under
$500,000

II
$500,000
to
$999,999

III
IV
V
VI
VII
$1,000,000 $2,000,000 $5,000,000 $10,000,000 $10,000,000
to
to
to
and up, out- and up
$1,999,999 $4,999,999 $9,999,999 side N.Y.C
N.Y.C.

General
Average

1923 1924 1923 1924 1923 1924 1923 1924 1923 1924 1923 1924 1923 1924 1923 1924

CAPITAL
1. Capital funds b to gross deposits
Your figures

22.722.3 23.5 22.2 14.3 14.8 11.7 11.6 13.1 13.1 13. 12. 14.3 12.6 16.1 15.6

LOANS
2. Loans and investments to total available 84., 84.186.9 86.
funds c
Your figures

3. Loans to loans and investments

87. 87.987.3 87.6 86.7 83.183.7 77.275.1 85.184.4

47. 47.847.548. 48.950.2 56.456.858.859.5 65.7 62.7 73.672.7 56.956.9

Your figures

DEPOSITS
4. Demand deposits to gross deposits
Your figures

59.3 58453.3 50.6 42.440.143.241.5 50.648.864.461.1 87.186.1 57.255.2

5. Interest paid on deposits to gross deposits 1.8 2.0 1.9 2.0 2.4 2.5 2.5 2.6 2.5 2.6 2.3 2.4 1.6 1.5 2.1 2.2
Your figures

EARNINGS
6. Gross earnings to loans and investments 6.2 6.2 6.1 6.1 6.1 6.2
Your figures
5.2 5.2 5.3 5.3 5.4 5.4
7. Gross earnings to total available funds
Your figures
1.8 1. 1.6 1.5
1.6
8. Net earnings to total available funds c
12.
10.3
10.,
11.9 14.7 13.7
Your figures
9. Net earnings to capital fundsb

6.1 6.1 6.2 6.3 6.2 6.2 6.2 5.9 6.2 6.1
5.4 5.3 5.4 5.

5.1 5.2 4.8 4.4 5.2 5.2

1.5 1.3 1.5 1.6 1.4 1.5 1.5 1.4 1.6 1.5
15.7 13.8 15.216.0 13.414.4 13.3 13.5 13.613.4

Your figures
10. Earnings other than interest and discount 7.3 8.4 7.6 8.1 7.7 9.4 8.210.1 10.211 210 413.415.720.1 9.611.5
to gross earnings
figuresEARNINGS
DISPOSITION OF Your
GROSS
Ratio of the following items to gross earnings
11. Salaries and wages
23.223.8 19.6 20.4 18.4 18.216.8 17.4 16.316.4 16.616.7 20.620.8 18.819.1
Your figures

12. Interest paid on borrowed money
Your figures

13. Interest paid on deposits

1.1 1.2

1.4 1.3 1.2 0.8 1.3 0.8 1.7 0.6 2.5 0.9 2.0 0.4 1.6 0.9

27.2 29.3 28.1 29.936.938.640842.9 39.940.538.1 39.4 29.3 30.5 34.3 35.9

Your figures

5.2 5.2 5.6 6.4 4.1 4.9 3.6 4.2 4.6 4.4 4.6 4.2 5.2 4.7 4.7 4.9

Your figures

13.8 12.411.4 10.8 9.8 9.5 10.4 10.2 9.5 8.8 10.8 10.2 12.612.5 11.210.6

Your figures

70.6 71.866.1 68.9 70.2 '2.0 2.975.5 1.970.672.671.569.769.0 70.671.3

14. Taxes
15. Other expenses
16. Total expenses
Your figures

17. Net earnings (before recoveries on pre- 29.428.2 34.231.1 29.8 28.0 27.1 24.5 28.1 29.4 27.4 28.5 30.3 31.0 29.5287
vious charge-offs, losses charged off, and
dividends)
Your figures
LOSSES
18. Losses charged off on loans and discounts
to gross earnings
2.5 1.9 2.5 2.8 3.3 4.3 4.6 3.5 5 0 6.4 5.6 7.3 6.5 4.0 4.3
Your figures

19. Losses charged off on securities to gross
6.5 3.1 7.3 2.2 4.6 2.2 3.4! 3.3 4.5 2.8 2.4 2.5 1.9 2.2 4.4 2.6
earnings
Your figures

a—Ratios 1 to 9 are computed from the average figures of 4 condition reports and from the total figures of section one of the
two semi-annual earnings reports; ratios 10 to 17 are taken from section one of the two semi-annual earnings reports;
ratios 18 and 19 are taken from items 5 (a) and 5 (b) of section two and item one of section one of the two semi-annual
earnings reports. The same banks were used for both 1923 and 1924, except for a very few substitutions for closed bank s
and those which changed their classes.
b—Capital, surplus, and undivided profits, c—Capital, surplus, undivided profits, deposits, borrowed money, and notes in
circulation.




Table 2—Average Operating Ratios of Representative Member Banks Grouped According to Amount
of Time Deposits a
Read the table as follows: In banks with no time deposits capital funds average 35.8 per cent of gross deposits in 1923
and 38.9 per cent in 1924; in banks with time deposits equal to less than 25 per cent of their gross deposits, capital funds average
15.7 per cent of gross deposits in 1923 and 14.8 per cent in 1924, etc.

Ratios expressed in percentages

CAPITAL
1. Capita1 funds b to gross deposits

Groups of Banks divided according to the percentage
of time deposits to gross deposits
0
Under 25 25-49.9 50-74.9 75 and up
1923} 1924 1923 1924 1923b924 1923 1924 1923 1924
35.8 38.9 15.7 14.8 15.9 15.6 14.2 13.8 12.5 13.1

Your figures

LOANS
2. Loans and investments to total available funds c
Your figures

3. Loans to loans and investments

83.3 81.0 78.777. 4 85 ,084..9 87 7 86.8 89 .788.0
53.7 53.2 72.8 69. 5 57 960.16 51 9 53. 8 37. 2 38.8

Your figures

DEPOSITS
4. Demand deposits to gross deposits
Your figures

5. Interest paid on deposits to gross deposits

100.0 100.0 92.391.759.159.538.238.8 20.721.9
0.8

0.9 1.7 1.5 2.1 2.2 2.5 2.5 3 0 3.1

5.9

5.9 6.1 5.9 6.1 6.2 6.2 6.2 6.3 6.4
4.8 4.8 4.6 5.2 5.2 5.4 5.4 5.7 5.6
1.7 1.5 1.5 1.5 1.5 1.5 1.5 1.6 1.5
8.7 12.612.913.313.2 14.3 13.9 16.3 14.1
7.8 12.3 15.9 9.4 11.0 8.810.1 9.5 12.3

Your figures

EARNINGS
6. Gross earnings to loans and investments
Your figures

7. Gross earnings to total available funds c
Your figures

8. Net earnings to total available funds c
Your figures

9. Net earnings to capital funds b
Your figures

4.9
2.0
10.2
7.5

10. Earnings other than interest and discount to gross earnings
Your figures

DISPOSITION OF GROSS EARNINGS
Ratio of the following items to gross earnings
11. Salaries and wages
Your figures

12. Interest paid on borrowed money
Your figures

13. Interest paid on deposits
Your figures

14. Taxes
Your figures

15. Other expenses
Your figures

16. Total expenses
Your figures

17. Net earnings (before recoveries on previous charge-offs,
LOSSESlosses charged off, and dividends)
18. Losses charged off on loans
and
discounts to gross earnings
Your
figures
Your figures

19. Losses charged off on securities to gross earnings
Your figures

26.2 27.6 20.121.320.2 19.8 17.017.8 13.3 14.2
2.0 1 2.5 0.7 1.5 1.0 1.4 0.9 0.3 0.3
11.4 12.4 29.1 29.1 32.9 34.8 39.3 39.8 46.547.0
7.7

9.8 5.4 5.2 4.7 4.8 4.0 4.3 3.9 4.3
12.4 12.5 12.4 11.8 12.8 11.3 10.010.1 7.4 7.4
59.7 64.1 69.5 68.5 72.0 71.6 71.6 72.9 71.5 73.1
40.3

35.9 30.531.528.1 28.4 28.4 27.1 28.526.9

2.5
4.3

1.3 5.9 6.5 4.9 4.5 3.5 4.1 1.4 1.6
3.5 2.6 2.3 4.2 3.1 5.1 2.3 4.9 3.6

Number of banks in group
15 57 56 70 55 120 129 16 25
a—Ratios 1 to 9 are computed from the average figures of 4 condition reports and from the total figures of section one of the
two semi-annual earnings reports; ratios 10 to 17 are taken from section one of the two semi-annual earnings reports;
ratios 18 and 19 are taken from items 5 (a) and 5 (b) of section two and item one of section one of the two semi-annual
earnings reports.
b—Capital, surplus, and undivided profits, e—Capital, surplus, undivided profits, deposits, borrowed money, and notes
in circulation.