NET EARNINGS IN DISTRICT I 321
1924 and 1925.!1° In short, the two bodies of data agree in in-
dicating that net earnings ratios, different as they are by districts
and by banks within a given district, and dependent as they are
upon the relations between variable gross earnings and variable
total expense ratios, tend to come to an equilibrium through
~hanges following a well-defined pattern.
3. SERIES CORRELATED WITH RATIOS OF NET EARNINGS
TO EARNING ASSETS
In Chapter XV it was shown, for the member banks in the
First district, that if gross earnings ratios are high or low, net
earnings ratios tend to be high or low.!? That is, the two series
are positively correlated. In Chapter XVI, it was found that if
total expense ratios are high or low, net earnings ratios are low
or high.!? In this case, the two series are negatively correlated.
By considering, as is the case, that the series are causually related
in the manner indicated, these facts are to be interpreted as fol-
lows: other things being equal, net earnings ratios are high or
low when ratios of gross earnings are high or low; and, other
things being equal, net earnings ratios are high or low when ratios
of total expenses are low or high. But the other things are not
equal, for the following reasons:
1. It is generally true that banks having ratios of gross earn-
ings larger or smaller than the average have ratios of total expense
larger or smaller than the average, and that those having ratios
of total expense larger or smaller than the average have ratios
of gross earnings larger or smaller than the average. These facts,
summarized in Table 159, are graphically illustrated in Chart
49, which shows the distribution of the paired ratios for the 408
member banks in 1924 and for the 410 in 19235, in the Boston
district, which had positive net earnings in these years. The
area enclosed by the horizontal parallel lines is drawn opposite
to the average gross earnings ratio for the two years; that en-
closed by the vertical parallel lines is drawn opposite to the
average ratio of total expense for the combined years. The area
10 See Tables 187 and 188.
11 See Table 160.
12Gee Tables 182 and 184.
