NET EARNINGS IN DISTRICT I 323
enclosed by the zigzag lines represents, for variable ratios of gross
earnings and of total expense, the average ratio of net earnings
to earning assets—1.9. The distribution of the dots shows posi-
tive correlation between ratios of gross earnings and of total
expense.
2. It is generally true that banks having ratios of gross earn-
ings larger or smaller than the average have ratios of net earn-
ings larger or smaller than the average.!* This fact is shown
graphically by the distribution and the frequency of the dots on
Chart 49. It will be observed that for banks with ratios of
gross earnings above the average the net earnings ratios tend
to be to the right and above the zigzag lines—the area showing
average net earnings ratios. Similarly, banks with ratios of gross
earnings below the average, as indicated by the distribution below
the parallel horizontal lines, had net earnings falling below and
to the left of the zigzag lines. That is, they tended to be lower
than the average.
While net earnings ratios are positively correlated with ratios
of gross earnings, this condition does not tend to obtain when the
order of the variables is reversed.!* If net earnings tend to be
higher or lower than the average, gross earnings tend to be lower
than the average for all banks except those having exceptionally
high net earnings. That is, relatively low gross earnings are some-
times associated with relatively high net earnings. This fact
is shown in Tables 189 and 190. Moreover, it is generally ap-
parent from Chart 49, from which it is seen that relatively high
net earnings ratios—those above the zigzag lines—and relatively
low ratios of net earnings—those below these lines—fall in areas
of relatively high and of relatively low gross earnings ratios, the
average amounts being indicated by the space between the
parallel horizontal lines.
3. It is generally true that banks having ratios of total expense
larger or smaller than the average have ratios of net earnings
smaller or larger than the average.!® This condition tends to
obtain when the order of the variables is reversed. Both facts are
illustrated by the distribution of the dots in Chart 49. The space
“13 Gee Table 160.
14 See Table 190, in which the deviations of the respective ratios are taken from
their yearly volume-group averages.
15 See Table 182.