The rapid expansion in demand deposits paralleled the growth in total loans and emphasized the sensitivity of demand deposits to changes in business activity. Time deposits, on the other hand, failed to follow the general upward trend; rather, they showed a net decrease during the last six months of the year. This was the first time in many years that these deposits were lower at the end of the year than at mid-year. This deviation from trend was probably caused by the heavy scare buying of durable goods on the part of both individuals and businesses following the outbreak of war. To finance these purchases savings accounts were drawn on and borrowings expanded.

CAPITAL

Total capital accounts of all insured commercial banks in the United States and possessions rose during 1950 to $11.3 billion, an increase of $0.6 billion. Each year since the Corporation was organized there has been an increase in total capital accounts of insured banks. However, the increase in capital has not kept pace with the increase in total assets and deposits.

Table 24 gives a summary of the capital accounts and capital ratios of all insured commercial banks in the United States and possessions from 1934 to 1950.

Table 24. Capital AccounTS OF INSURED COMMERCIAL BANKS IN THE UNITED STATES AND POSSESSIONS, DECEMBER, 1934-1950

1 Preferred stock, capital notes, and debentures included with common stock.

From 1934 to 1950, total capital of insured commercial banks increased from $6.2 billion to $11.3 billion, an increase of 83 percent. During this same period the ratio of capital accounts to total assets declined from 13.2 percent to 6.8 percent. The ratio of capital accounts to assets other than cash and United States Government obligations declined from 26.1 percent in 1934 to 17.1 percent in 1950. This latter ratio, sometimes called the risk asset ratio, is at the lowest level ever reached since the Corporation was organized. In fact, it is necessary to go back to 1928 to find a year when this ratio, for all commercial banks, was as low as it was at the end of 1950.

The distribution of insured commercial banks according to their ratio of total capital accounts to total assets on December 30, 1950, is shown in Chart G. Chart H shows the ratio of total capital accounts to total assets, by State.

Chart G. BANKS GROUPED BY RATIO OF TOTAL CAPITAL ACCOUNTS TO TOTAL ASSETS, INSURED COMMERCIAL BANKS, DECEMBER 30, 1950

Chart H. RATIO OF TOTAL CAPITAL ACCOUNTS TO TOTAL ASSETS,
INSURED COMMERCIAL BANKS, DECEMBER 30, 1950

Chart I shows, by State, the ratio of total capital accounts to assets other than cash and United States Government securities.

Chart I. RATIO OF TOTAL CAPITAL ACCOUNTS TO RISK ASSETS,
INSURED COMMERCIAL BANKS, DECEMBER 30, 1950

A noticeable regional pattern is found in the distribution of bot the capital ratios. The highest capital ratios are in the New Eng and Middle Atlantic States while the lowest ratios are in the West. risk asset ratios follow the same regional pattern in all sections of country except the South where the average ratios are about as lo in the West.

Insured commercial banks continued to retire the preferred st capital notes, and debentures held chiefly by the Reconstruction Fina Corporation. From 1945 to the end of 1950 the total par value of th investments was reduced from $195 million to $82 million, a reduct of $113 million. The remaining capital investments of the Reconstruct Finance Corporation in banks are concentrated in a relatively few ban

EARNINGS OF INSURED COMMERCIAL BANKS

Net profits after taxes of insured commercial banks advanced percent during 1950 to the highest level on record. Dividend paymer to stockholders were likewise greater than any previous disbursemen while profits retained in the bank continued to provide the princip increment to their capital accounts.

The sources and disposition of total income of insured commerci banks from 1945 to 1950 are summarized in Table 25.

Table 25. SOURCES AND DISPOSITION OF TOTAL INCOME,
INSURED COMMERCIAL BANKS, 1945-1950

The major sources of income of insured commercial banks and the i

disposition of this income in 1950 are shown in Chart J. Almost three

fourths of the income came from loans and United States Government obligations, while the largest expenditure consisted of salaries and wages. After deducting all expenses, charge-offs and taxes, about a fifth of total income remained as net profits.

Chart J. SOURCES AND DISPOSITION OF TOTAL INCOME,
INSURED COMMERCIAL BANKS, 1950

Total current operating earnings. Total current operating earnings of $3,931 million in 1950 exceeded the previous peak of 1949 by 9 percent. Most of the increase in current earnings, and over half the total earnings, came from the record volume of loans. Interest on United States Government obligations was practically the same as in 1949. Income from other securities increased by 12 percent and service charges on deposit accounts by 9 percent, but together these two sources provided only about a tenth of total current earnings. A summary of earnings, expense, and profit data of insured commercial banks for each year since 1934 is given in Table 26.

Income from loans has steadily risen in relative importance since World War II. At the end of 1945 loan income constituted only 29 percent of total income. Since that time income from loans has almost