V. 
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1 
NORMS AND TRENDS IN NET EARNINGS 
I. INTRODUCTION 
THaE Federal Reserve Board publishes the net earnings of all 
member banks by years and by districts for years ending June 30. 
It is these amounts which constitute the basic data for the fol- 
lowing analysis. But to study the amounts alone is unsatisfactory 
for our purpose, because of the changing number of banks in the 
respective districts over the period 1919 to 1925, and further 
because of the fact that the data in this form do not meet our 
needs. Accordingly, the amounts are expressed as ratios (1) of 
earning assets,! and (2) of gross earnings. In this form the ratios 
are comparable from year to year and from district to district, 
and may be analyzed in any way thought desirable. 
Net earnings, as reported by the Board, are the differences be- 
tween gross earnings and operating expenses. They are distin- 
guished from “net addition to profits,” the latter expression being 
net earnings less “net losses.”? While, undoubtedly, some of the 
banks in the respective districts experienced gross losses—that 
is, had higher operating expenses than gross earnings—this is not, 
of course. the case for member banks as a whole. 
2. THE RELATION OF NET EARNINGS TO EARNING ASSETS 
The average net earnings for all member banks, for the years 
1919 to 1925 taken as a unit, was 1.99% of their earning assets. 
That is, for every $100 of earning assets during this seven-year 
period, member banks earned $2 over and above their operating 
expenses. For the combined districts, the lowest percentage was 
1.81, in 1925; the highest 2.25, in 1921. When the individual dis- 
tricts for the period 1919 to 1925 are considered, the lowest per- 
1 For the manner of securing the earning assets, see discussion, page 13. 
2¢Total losses less recoveries on assets previously charged off.” 
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