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FEDERAL RESERVE BANK
OF NEW YORK
Reports
["Circular No. 7301
L July 26, 1926 J
Department
A Comparison of the
Operations of Representative Member Banks
in the Second Federal Reserve District
For the Year 1925
OLLOWING the procedure of the past two years the accompanying tables have been prepared to make available to member banks in the second district some of the bank operating data which they report currently to the Reserve Bank. The tables are so arranged
that each bank may compare its own operating figures with the figures for banks of the same
size, or with those of banks having about the same proportion of time deposits to gross
deposits.
The operating figures for the calendar year 1925 show no very striking changes as compared with 1924. The general tendency toward an increase in time deposits as compared with
demand deposits has been continued and is reflected in somewhat larger interest payments.
Accompanying the greater business activity of the year 1925 the larger banks increased their
loans relative to their investments, but this tendency was not noticeable in the smaller banks.
F
Earnings
Gross earnings in 1925 were in general larger than in 1924 in relation to total loans and
investments. The increase may be accounted for in part by a somewhat higher interest rate
level and in part by larger earnings from sources other than interest and discount.
For most of the groups of banks, expenses consumed a somewhat smaller proportion of
gross earnings than in 1924 and as a consequence of this and of somewhat larger gross earnings net earnings were better. Losses charged off were smaller and hence net additions to
profits were in general well above 1924. These favorable results of the year's operations in
banking coincided with profitable operations in most fields of business.
Table 1—Average Operating Ratios of Representative Member Banks in Seven Croups a
^
(40 Selected banks in each group)
Read the table as follows: In the banks of Group I (banks with Ioan3 and investments under $500,000) capital funds
averaged 22.3 per cent of gross deposits in 1924 and 20.1 per cent in 1925.
Size of groups divided according to amount of loans and investments indicated
II
Ratios expressed in percentages
Under
$500,000
$500,000
to
$999,999
VI
VII
III
IV
V
$1,000,000 $2,000,000 $5,000,000 $10,000,000 $10,000,000
to
and up, out- and up
to
$1,999,999 $4,999,999 $9,999,999 side N.Y.C
N.Y.C.
General
Average
1924 1925 1924 1925 1924 1925 1924 1925 1924 1925 1924 1925 1924 1925 1923 1924 1925
CAPITAL
1. Capital funds b to gross deposits
22. 20.1 22.: 21.
Your figures
LOANS
2. Loans and investments to total available 84.184.0 86.1
funds c
14.8 14.5 11.6 11.8 13.1 13.8 12.7 12.2 12.6 13.6 16.1 15.615.3
87.. 86.7 87.388.6 86.787.4
83.'
85.9 75.1 74.8 85.:184 .484.8
Your figures
3. Loans to loans and investments
47.846.7 48.' 49. 50.: 47.9 56.855.9 59.562.1 62.762.9 72.773.5 56."9 56 .956.0
Your figures
DEPOSITS
4. Demand deposits to gross deposits
Your figures
5. Interest paid on deposits to gross deposits
58.4 56.3 50.650.940.140.2 41.5 42.0 48.845.8 61.160.5 86.185.4 57.255.254.4
2.0 2.C 2.0 2.1 2..
2.5 2.6 2.6 2.6 2.6 2.4 2.4 1.5
l.i
2.1 2.2 2.3
Your figures
EARNINGS
6. Gross earnings to loans and investments 6. 6.4 6.1 6.1 6.2 6.4 6.1 6.0 6.3 6.3 6.2 5.9 5.9 6.0 6.2 6.1 6.2
Your figures
5. 5.: 5.2 5. 5.4 5.5 5.3 5.4 5.5 5.5 5.2 5.1 4.4 4.6 5.2 5.2 5.2
7. Gross earnings to total available funds c
Your figures
I.I 1.8 1.7 1.6 1.5 1.7 1.3 1.5 1.6 1.6 1.5 1.5 1.4 1.5 1.6 1.5 1.6
8. Net earnings to total available funds c
10.3 11.6 11.911.2 13.7 14.7 13.8 15.6 16.0 15.0 14.4 14.4 13.5 13.4 13. 6 13.413.7
Your figures
9. Net earnings to capital fundsb
Your figures
10. Earnings other than interest and discount 8.411.8 8.1 7.6 9.411.2 10.1 10.6 11.2 12.3 13.4 11.5 20.1 20.7 9.6 11.512.2
to gross earnings
figuresEARNINGS
DISPOSITION OF Your
GROSS
Ratio of the following items to gross earnings
11. Salaries and wages
23.8 22.3 20.4 20.3 18.217.1 17.4 17.3 16.4 16.1 16.7 16.3 20.820.1 18.8 19.1 18.5
Your figures
12. Interest paid on borrowed money
Your figures
13. Interest paid on deposits
14. Taxes
15. Other expenses
Your figures
Your figures
1.2 1.0 1.3 1.2 0.8 0.7 0.8 0.8 0.6 0.8 0.9 1.2 0.4 1.2 l . l
0.9 1.0
29.330.3 29.932.238.637.8 42.942.4 40.540.8 39.440.5 30.529.6 34.3 35
5.2 4.7 6.4 5.8 4.9 4.7 4.2 3.5 4.4 4.3 4.2 3.7 4.7 5.0 4.7 4.9 4.5
12.4 12.410.810.8 9.5 9.1 10.2 9.3 8.8 9.0 10.2 9.9 12.512.7 11.2 10.610.6
Your figure*
16. Total expenses
71.8 70.7 68.9 70.3 72.0 69.5 75.5 73.3 70.671.1 71.571.6 69.068.5 70.(6 71 .370.7
Your figures
17. Net earnings (before recoveries on previous charge-offs, current charge-offs,
28.2 29.331.1 29.728.030.5 24.5 26.7 29.4 28.9 28.528.4 31.031.5 29.528.729.3
and dividends)
Your figures
LOSSES
18. Losses charged off on loans and discounts
to gross earnings
2.5 2.2 2.5 3.0 3.3 2 .8
Your figures
4.6 3.9 5.0 2.6 5.6 5.7 6.5 5.7 4.0 4.3 3.7
19. Losses charged off on securities to gross
3.1 1.4 2.2 2.6 2.2 2.7 3.3 1.8 2.8 1.4 2.5 2.2 2.2 1.7 4.4 2.6 2.0
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 1 of section one of the two semi-annual
earnings reports. The same banks were used in each year, except for a very few substitutions for 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 averaged 38.9 per cent of gross deposits in 1924
and 36.9 per cent in 1925; in banks with time deposits equal to less than 25 per cent of their gross deposits capital funds averaged
14.8 per cent of gross deposits in 1924 and 15.3 per cent in 1925.
Ratios expressed in percentages
Groups of Banks divided according to the percentage
of time deposits to gross deposits
Under 25 25-49.9 50-74.9 75 and up
1924 1925 19241925 1924b 925 1924 1925 1924 1925
CAPITAL
1. Capita! funds b to gross deposits
38.9 36.9 14.S 15.3 15.614.9 13.8 14.013.1 13.4
Your figures
LOANS
2. Loans and investments to total available funds c
Your figures
3.
Loans to loans and investments
81.0 79.3 77.479.1 84.983. 5 86.888.088.087.9
53.2 52. 9 60 .567. 9 60 .660.7 53.852.7 38.S 42.4
Your figures
DEPOSITS
4. Demand deposits to gross deposits
Your figures
5.
Interest paid on deposits to gross deposits
100. 0 100 .0 91.788.S 59.559.0 38.8 38.7 21.920.8
0.9
0.9 1.5
2.2 2.1 2.5 2.6 3.1 3.0
Your figures
EARNINGS
6. Gross earnings to loans and invesfments
Your figures
7.
Gross earnings to total available funds c
Your figures
5.9
5.8 5.9 5.9 6.2
4.8
4.8 4.6 4.7 5.2 5.3 5.4 5.5 5.6 5.4
6.2 6.2 6.4 6.2
8.
Net earnings to total available funds c
1.7
1.8 1.5 1.5 1.5 1.6 1.5 1.5 1.5 1.6
ft
XT *
8.7
8.8 12.9 12.8 13.2 14.4 13.9 14.1 14.1 14.7
9.
Net earnings to capital funds b
7.8
15.9 14.6 11.0 13.7 10.1 10.7 12.3 12.8
Your figures
•
-i. 1 t
J
J.
Your figures
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.
15.
Taxes
27.6 26.6 21.320.5 19.8 19.8 17.8 17.1 14.2 14.1
1.9
1.4 0.7 1.2 1.0 0.9 0.9 1.0 0.3 0.4
12.4 13.9 29.1 30.2 34.8 33.7 39.840.4 47.0 45.6
9.8
7.9 5.2 5.1 4.8 4.4 4.3 4.2 4.3 4.0
Your figures
12.5 12.3 11.8 11.5 11.3 11.3 10.1 9.8 7.4 7.9
Your figures
64.1 62.068.568.671.6 70.4 72.972.4 73.1 72.0
Other expenses
16.
Total expenses
17.
Net earnings (before recoveries on previous charge-offs,
current charge-off3, and dividends)
Your figures
35.9 38.031.531.428.429.7 27.1 27.6 26.9 28.0
Your figures
LOSSES
18. Losses charged off on loans and discounts to gross earnings
1.3
1.5 6.5 5.3 4.5 3.9 4.1 3.3 1.6 2.5
3.5
0.9 2.3 1.8 3.1 1.8 2.3 1.9 3.6 3.5
Your figures
19.
Losses charged off on securities to gross earnings
Your figures
Number of banks in group
11 56 60 55 57 129 128 25 24
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 1 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 note*
in circulation.
Ratio of Capital to Deposits
One feature of bank operations which deserves attention is the change in recent years, in
the ratios of capital funds to gross deposits. For some years past bank deposits have grown
more rapidly than capital funds (that is, capital, surplus, and undivided profits) and as a
consequence the ratio of capital funds to gross deposits has been steadily diminishing. As
table I indicates, the average ratio of capital funds to gross deposits in the 280 banks included
in the studies was 16.1 per cent in 1923, 15.6 per cent in 1924, and 15.3 per cent in 1925.
A decline in the capital ratios of banks is not a new thing but has been going on for 50
years here and abroad. A considerable part of this decline undoubtedly reflects the greater
safety in conducting banking today than in previous decades. The ratio of a bank's capital
funds to its deposits continues, however, to be one of the important indexes of sound management and one to which careful bankers are giving close attention.
In order to give a comprehensive view of the relation of capital funds to deposits in the
banks of this district a study has been made of the capital ratios of 850 member banks. The
results are presented in the following diagram, which gives a classification of the member
banks of the district according to their capital ratios. The figures at the top of each of the
black columns show how many banks had a ratio of 4 per cent, how many 5 per cent, etc.
The diagram indicates that a large majority, in fact 84 per cent, of the banks of the district have a capital ratio of 10 per cent or more and the average ratio for the banks of the
district is 16 per cent. In the past five years more than 200 banks in the district have increased
their capital other than through mergers.
«
79
Gfie tietgkt of eack column sfiows
ifie TTUtnDer of banks having the tano
of Catn-tal funds h Deposits i n ciicated af tfie foo-{- of ffie column.
(for example 5 banks had a
capital ratio of 4%)
72.
v ^55 54
50
36
36
30
25
24
26
18
10
ll
5%6% 7% 6
Illl l lM.il
6
7
50BANKS
HAVE RATIO
OVER,
30%
<~
@FedFRASER