SERIES CORRELATED WITH NET EARNINGS 250
TABLE 153
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. ..............
Net Earnings to Earning Asast


Net Earnings to Earning
Assets. .............u...
Loans and Discounts to Earning
 Assets

Total Deposits to Earning
Assets. . oouvwiiomiionisg
Net Earnings to Earning Astets


Net Earnings to Earning As-SES.
 itera
Total Deposits to Earning

NATURE oF CORRELATION

Differences

from
Jistrict
Averages

Changes ,
{rom
Year
to
Vaap

Differences

from
Tountry’s
Yearly
Average

Positive

Positive

Positive
Positive

Negative
None

——

Negative
Negative

Negative
Positive®

Negative
Negative

iw.

ratios of loans and discounts to earning assets larger than the
average will tend to raise the ratio of gross earnings to something
 more than 6%. But, as already found, loans and discounts
are also positively correlated with total expense. Accordingly,
if average ratios of loans and discounts are associated with average
 ratios of total expense, ratios of loans and discounts higher
than the average will tend to be associated with ratios of total
expense in excess of the average. That is, if the total expense
ratio is 4% under average conditions, it will tend to be in excess
of 4% for series with ratios of loans and discounts in excess
of the average. If both ratios, 6 and 4—gross earnings and total
expense—tend to be high under these conditions, then their
effect on net earnings remains in doubt. It is only when it is
learned that ratios of loans and discounts to earning assets are
also positively correlated with ratios of net earnings to earning
assets, that it becomes apparent that their effect upon gross
earnings is greater than upon total expense, thus making the
ratios of net earnings something above 29% —the amount found,
for purpose of illustration, to characterize average conditions in
respect to loans and discounts.
But forces other than those associated with variable loans and
discounts are tending to influence gross earnings, total expense,
and net earnings. These, among other things, have been found
to be the relative size and type of change in the amounts of total
deposits. Their influences, too, acting simultaneously with those