26 
BANKING STANDARDS 
TABLE 150 
NATURE OF CORRELATION IN PERCENTAGE DEVIATIONS AND YEAR-TO- 
YEAR CHANGES IN DIFFERENT SERIES PAIRED 
SERIES CORRELATED 
Independent Variables 
Dependent Variables 
Loans and Discounts to Earning! 
Assets................... 
Total Expense to Earning Assets| 
Total Expense to Earnins 
P30 0 
Loans and Discounts to Earn 
ing Assets... ... .. .. 
Total Deposits to Earning 
Assets................... 
Total Expense to Earning Assets 
Total Expense to Earning 
ASSES. ... oe vunigs engi] 
Total Deposits to Earning 
Assets. 
NATURE OF CORRELATION 
Differ- | Changes | 
ences from 
from Year 
District , to 
Averages Year 
Differ- 
ences 
from 
Country’s 
Yearly 
Averages 
Positive 
Positive 
Positive 
Positive 
Negative | Negative® 
Neezative*! Positive® 
Positive* 
Positive* 
*Low. 
propriately measured. In general, therefore, relatively large 
loans and discounts seemingly operate to produce relatively large 
gross earnings, while relatively large total deposits operate to re- 
duce them. Accordingly, gross earnings are functions of at least 
two conflicting variables. 
If no account is taken of conditions other than variable ratios 
of loans and discounts and of total deposits, then the amount of 
average gross earnings for the member banks in a given year and 
district depends upon the relative influence of each of these fac- 
tors. It is of little avail to attempt to measure, other than in 
general terms, their respective causal effects. Indeed, it is prob- 
able that they are related, both being effects of causes latent in 
the state of business at given times and places. Accordingly, we 
shall not attempt a separate appraisal of the causal influences of 
either of them upon ratios of gross earnings.® 
If other things, as respects total expense, are held to be con- 
stant, then relatively large ratios of loans and discounts to earn- 
ing assets and relatively small ratios of total deposits to earning 
assets should be associated with relatively large net earnings. 
Whether operating expenses do remain constant with variable 
conditions respecting loans and discounts and deposit items, there- 
fore, is pertinent to the subject matter of this chapter. The rela- 
tions discovered, and developed at length in previous chapters, 
are summarized in Table 150. 
"2 See. however, Table 107, page 177, and the accompanying discussion.