SERIES CORRELATED WITH DEPOSITS 201 
TABLE 123 
RATIOS OF NET EARNINGS TO EARNING Assets, ALL MEMBER BANKS 
IN FEDERAL RESERVE DISTRICT 1, CLASSIFIED BY RATIOS OF 
TiME T0 GRrOSs (TotaL) DEPOSITS, 1923-1925¥ 
RATIOS: Time 
Deposits to 
3ross (Total) 
Deposits 
Np 
LE 
“od 
"ATIOS: hat 
ane ta 
102% 
Number 
RATIOS: Net 
“arnings to 
ming Aceats 
Total . 
No Time Dep 
25 and less. . 
26—50..... 
SI=75...... 
Over 7¢...... 
‘Taken from the 1923, 1924, and 1925 reports on “Operating Costs and Profits, based on the Exper- 
iences of all Member Banks in Federal Reserve District L” prepared by Frederic H. Curtiss. Chair- 
man and Federal Reserve Agent, Federal Reserve Bank of Boston. 
ratios of time deposits to gross (total) deposits and ratios of net 
earnings to loans and investments (earning assets). Our findings 
are of the same type! for the member banks in the entire Sys- 
tem for the years 1919 to 1925—“bank” being used in the sense 
given above. His data for 1923, 1924, and 1925 are given in 
Table 123. 
In explaining the reasons for net earnings, in terms of earning 
assets, declining with increasing time deposits relative to gross 
(total) deposits, Mr. Curtiss says: “ . . . . net earnings de- 
cline as the proportion of time deposits rise on account of the 
greater cost of handling savings deposits in banks equipped to 
do a commercial banking business. Chief among these heavy 
expenses is interest paid on deposits.’ Such charges are neg- 
ligible in banks doing exclusively a commercial business, but con- 
sume two-thirds of all current expenses in banks handling pri- 
marily savings accounts. The clerical cost of an organization 
intended to handle commercial deposits is so heavy that, when 
added to the interest costs incidental to handling savings deposits, 
14 Similar relations for 1923 and 1924 are shown by member banks in the Second 
District. These are presented in Circular No. 674 of the Federal Reserve Bank of 
New York, May 29, 1925. 
15 See Table 121, page 108, in which it is shown for the country as a whole, and 
in keeping with the form of analysis already presented, that, relative to the several 
district levels, when time deposits as percentages of total deposits are high, interest 
on deposits in relation to earning assets is also high. Contrariwise, when time de- 
posits are low, interest on deposits is low. Moreover, percentage variations from 
‘ype in the two series are positively correlated