00

BANKING STANDARDS
TABLE 122 °

RATIOS OF ToTAL EXPENSE TO GROSS EARNINGS, ALL MEMBER BANKS
IN FEDERAL RESERVE DistrICT 1, CLASSIFIED BY RATIOS
oF TiME To Gross (ToraL) Deposits, 1923-1925*

RATIOS: Time
Deposits to
Gross (Total)
Deposits

Total. ..

No time Deposit.
as and less......
316-50... c00en.
1gS ye
Ver 75...000n.

Number
of
Ranks

1023

RATIOS: Total
Expense to
I»oss Earninc

5 7

1924

Number
“a

RATIOS: Total
- “<pense to
-3ss Earnin<

c
3.0

1925
RATIOS: Total
Expense to
Gross Earnings

Number
of
Banks

H

70.8

4 . QO
IC4 | 66.0
97 73.0
I x16 74.0
47 24.0

*Taken from the 1923, 1924, and 1925 reports on ‘Operating Costs and Profits, based on the Experiences
 of all Member Banks in Federal Reserve District I,” prepared by Frederic H. Curtiss, Chairman
 and Federal Reserve Agent, Federal Reserve Bank of Boston.

classified according to percentage amounts of time to gross
(total) deposits. Concerning a chart illustrating the ratios for
1925, Mr. Frederic H. Curtiss, Chairman and Federal Reserve
Agent of the Federal Reserve Bank of Boston, writes as follows:
“Tt [the chart] indicates that banks having less than 14 of their
gross deposits in the form of time deposits are the cheapest to
operate, and therefore [sic] the most profitable. As soon as the
ratio of time deposits to gross deposits rises appreciably above
25% the operating costs rise above 70% of gross earnings—
70%! being the typical operating ratio for all banks in Federal
Reserve District 1.”12 Similar explanations are given for the
charts applying to the years 1923 and 1924.
That is, for 1923, 1924, and 1925, for member banks in the
Boston district, Mr. Curtiss found that amounts of time deposits,
as ratios of gross (total) deposits, were positively correlated with
amounts of total expense as ratios of gross earnings. We find
a like correlation between these ratios for member banks in the
entire Federal Reserve system for the years 1919-192 5—*“bank,”
in our analysis, being the combined member banks in each district.!3
 Mr. Curtiss found inverse or negative correlation between

11 The arithmetic means computed by us for 1923, 1924, and 1925, are respectively
 42.00, 72.80, and 91.10. For the seven years, 1919-1925, the average percentage
 is 69.60.
12 Curtiss, 0p. cit., Report for 1925, p. 3.
18 Gee Table 121.