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 Experiences
 of all Member Banks in Federal Reserve District L” prepared by Frederic H. Curtiss. Chairman
 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 System
 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 decline
 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 negligible
 in banks doing exclusively a commercial business, but consume
 two-thirds of all current expenses in banks handling primarily
 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 deposits
 are low, interest on deposits is low. Moreover, percentage variations from
‘ype in the two series are positively correlated