NET EARNINGS IN DISTRICT 1 329
ratios also regress to type. If these ratios are high, they tend
to fall; and if they are low they tend to rise, the former tendency,
other things being equal, operating to increase, and the latter,
other things being equal, to decrease net earnings. But again,
the other things are not equal, inasmuch as net earnings them-
selves regress to type, those which were high in 1924 tending to
be lower, and those which were low in 1924 tending to be higher
in 1925. Accordingly, merely to take account of the actual net
earnings ratios for banks having ratios of gross earnings and of
total expense differently placed relative to their average levels
at a given time, as is done in Table 191, or to take account only
of the fact of regression to type, without at the same time observ-
ing the amounts at different levels, is not fully to consider all of
the influences, latent in gross earnings and in total expense ratios,
which determine ratios of net earnings.
Between 1924 and 1925, the average ratios of net earnings to
earning assets for the 408 member banks in the Boston district
increased from 1.82 to 1.92, or by one-tenth of a point.2” When
the ratios in 1924 are grouped, as in Table 188, the largest in-
crease was one-half of a point, and the largest decrease one and
one-half points.?® In determining these changes, however, no
account is taken of the positions of the gross earnings and of the
total expense ratios of the banks relative to their average levels
in 1924. This is done in Table 192, the result being that (1)
for banks with gross earnings ratios above the average in 1924,
ratios of net earnings fell, and for those with gross earnings below
the average in 1924 they rose between 1924 and 1925; (2) for
banks with total expense ratios above or below the average in
[924, net earnings increased between 1924 and 1925; (3) the
greatest fall in net earnings occurred in banks with gross earnings
above and total expense ratios below their average level in 1924
—it was these which were highest in 1924;2° and (4) the great-
est rise in net earnings characterized the banks with gross earn-
ings below and total expense ratios above their average levels in
1924—it was these which were lowest in 1924.29
Other features of Table 192 are of interest. When gross earn-
Ings and total expense ratios were both above their respective
average levels in 1924, net earnings ratios declined slightly be-
iween 1924 and 1925; when they were both below these levels, the
27 See Table 18s. 28 See Table 188. 29 Gee Table 1071.
