XVII 
NORMS, TRENDS, AND CORRELATIONS IN NET 
EARNING RATIOS 
I. INTRODUCTION 
THE following analysis of ratios of net earnings to earning 
assets is restricted to the member banks in the Boston district 
for the years 1924 and 1925. Amounts of net earnings, as used 
in Chapter VII, are the differences between gross earnings and 
total expense, and are to be distinguished from “net addition to 
profits,” the latter expression being net earnings less “net losses’? 
—that is, “total losses less recoveries on assets previously charged 
off.” The term is used in the same sense in this chapter. 
The data for each bank, expressed as percentages of earning 
assets, refer to the calendar years, the base amounts used in 
computing the ratios each year being the average earning assets 
reported by the banks for five calls, two of which are in Decem- 
ber—one for December 31 of the preceding year and the other 
for December 31 of the calendar year in question. 
2. NORMS AND TRENDS IN NET EARNINGS RATIOS 
The average? ratios of net earnings to earning assets for 408 
member banks in 1924 and for 410 member banks in 1925 were, 
respectively, 1.82 and 1.92. For the combined years the ratio 
was 1.87. But these amounts, while characteristic of the banks 
as a whole, do not represent those of different size and location. 
This fact is shown in Table 185, from which two tendencies are 
apparent. First, the ratios for banks classified by city groups 
tended to increase between 1924 and 1925; second, those each 
vear tend to decrease as the cities increase in size. Moreover, 
the ratios for banks classified by volume groups increased between 
1See page 127. 
* Obtained by taking an arithmetic mean of the ratios themselves. 
2 
?