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TRIP to the Pacific Coast affords a splendid opportunity for comprehending the vastness of our western country, the strength and diversity of its resources, and the courage and enterprise of its people. The further one travels from the "moist and murky atmosphere of the eastern seaboard," as one Colorado enthusiast puts it, the more one is impressed with the fact that despite recurring periods of recession, the general trend of the development of our cities is, and must continue to be, steadily upward. This is particularly true of those cities which are strategically located as distributing centers, either by rail or water; those which are favorably situated as to manufacturing; and those which are the natural centers of our vast agricultural and stock-raising domain.

The conditions of life in these cities, particularly on the Coast, are undeniably more favorable than in many of the older and more congested centers of the East. There is a freedom and sweep about theman almost entire absence of slums and outworn conditions- an alert readiness to adopt the latest conveniences and labor-saving devices-more teamwork and enthusiasm, whether in co-operative business activities, or in "putting over" civic enterprises. As an illustration, the citizens of Seattle have recently subscribed $3,000,000 for the erection of a new hotel in that city, which will be larger and finer than anything they now have.

The old rivalries as to size and growth

are being lost sight of. When Los Angeles springs forward at a tremendous rate, Seattle is pleased, realizing that they sell the Los Angeles district a billion and a half feet of lumber each year. California, in turn, glories in the continued development of the Northwest, appreciating that the rainy season suggests to many thousands of people from that section a visit to her cities, with the consequent swelling of her coffers..

Climatic conditions permit out-of-door life to a great extent. The easterner may complain of the rainy season on the West Coast, but the inhabitants pay very little attention to it, and rarely carry umbrellas or wear -overshoes. One receives the impression that it is not a case of "dog eat dog" to any considerable extent.

The annual production of new wealth from the soil, the mines and the sea, is such that it becomes more a question of good organization and proper methods to care for new business, than of keen competition in securing it. A Los Angeles banker told me a few weeks ago that at present buildings were being erected in his city at the rate of $1,000,000 a day. This seems almost incredible, but it is the truth nevertheless.

Influence of the Automobile

The almost universal use of the automobile is having a decentralizing effect upon cities. Congestion in the centers is creating sub-centers of business at strategic points throughout the residential districts. These centers contain all the units necessary for the conduct of business, such as banks, chain stores, branch post offices, etc., and the down

town sections are visited by the people on increasingly rare occasions.

The use of the automobile is also constantly tending to increase the area of cities, and a situation is rapidly arising whereby miles of outlying territory are becoming thickly settled and, whether in the political limits of the city or not, these sections form economically a part of it. Los Angeles now has an area of 366.17 square miles; Seattle, 94.46 square miles, and these figures do not tell the entire story, for the reason stated.

Progress made in the electrical transmission of water power has meant much to the West, but only a beginning has been made in this respect. What was formerly considered merely a dream-factories located near the production of raw material, but driven by power generated many hundreds of miles away-is rapidly becoming a reality. Great power companies are constantly experimenting and steadily developing the transmission of power with the least possible loss of electrical energy.

Higher Standards of Living

The scale of living is an ascending one. Comforts, and conveniences known only to the few twenty years ago are the essentials of the average family today. Individual units in hotels, office buildings and apartment houses are many times larger and more substantial than at any time in the past. In private homes, however, the tendency, by reason of the difficulty of securing domestic servants, is towards a smaller type of bungalow. Very few pretentious residences

are being built.

As to amusements, the moving picture theatres of ten years ago have been scrapped in favor of elaborate palaces of entertainment, seating thousands of people. Almost every city has its stadium. Fraternal societies, such as the Masons, the Elks, the Odd Fellows and others have built homes, the cost of which runs into the hundreds of thousands of dollars.

People are generally happy and always hopeful. In times of depression they are continually thinking of the period when conditions are certain to improve. They place no limits upon their ultimate possibilities, thus paying an unconscious tribute to a recent visitor to our shores. As an illustration of practical idealism and provision for the future with respect to American cities, the case of Cleveland, in the Middle West. is an outstanding one. Far

sighted citizens, some years ago, joined in the formation of what is known as the Cleveland Foundation, to which gifts under wills and living trusts aggregating more than $200,000,000 have already been pledged. What possibilities for civic betterment, beautification and general improvement along charitable and educational lines are possible with the income from a sum of this magnitude! The well-to-do are placing a sounder estimate upon the real value of money and what it will accomplish, and are putting their surplus funds to more intelligent and useful purposes than in the past.

A Danger to Be Guarded Against In all of this splendid development and progress, there is an element of danger which must be guarded against. The fundamental principles of right conduct and proper business methods will be found not to have been waived. The consequences of unwise policies and poor business methods must still be recognized.

Aside from the tremendous increase in local wealth which has made possible this excellent growth, money has poured into these cities in the millions from life insurance sources and from a group of mortgage bond houses whose activities largely date from the close of the war. Twenty years ago the great life insurance companies of the East confined their investments in western cities to central downtown real estate, if indeed they made any investments there at all. At the present time they are all competing with one another for even the smaller class of residence loans at rates which have hitherto been unknown in any of these units.

The mortgage bond houses, some of them with but a shallow background of knowledge or experience, are lending up to 75 per cent. or 80 per cent., and sometimes more, of present-day costs. These costs conservative people believe to be excessive and of doubtful continuance. The lenders justify themselves by requiring amortization, monthly deposits of rents, etc., but the fear is that unless fundamental essentials of safety have been entirely revised by the extraordinary development referred to, the safeguards required will be insufficient to protect loans properly when these are made for too high a percentage of the actual value. It is more than ever necessary, while retaining an open mind and facing the future with confidence, to keep one's feet on the ground and to profit by the experience of the past.

M

UCH has been written about systems or methods of analyzing customers' accounts. Nearly all have merit. Some, however, are too complex for the smaller banks to use requiring too much work in determining the various factors and in applying them to the individual accounts. When we read of a new plan for doing a certain kind of work we naturally wish to know how it will be applied, how long it will take to do it and what the results will be and whether these results will warrant the time and effort spent to obtain them.

We will endeavor to describe an analysis system which can be used profitably and easily by the smaller banks as well as the larger ones. We will also show the practical application of it and, what is perhaps most important, the results obtained.

The institution with which the writer is connected commenced analyzing its commercial department accounts in 1911 because we felt that only by an analysis could we detect and prevent losses. In addition it has been a valuable aid in extending credit, not only by giving us the comparative value of each account, but an accurate history of each account over a lengthy period. For instance: Does the balance fluctuate more than we think it should? Does the average balance compare favorably or not with the average loans and is the activity increasing or diminishing, and, of course, are we making or losing money on the account and how much?

The method of analysis which we have been using since 1919 is explained in a little booklet issued by the Federal Reserve Bank

of New York, entitled, "Analysis of Depositors' Accounts-Short Method." It is this method, its use and the results obtained from its use that we wish to explain.

Four General Factors

In order to apply this method there are four general factors which must be considered and ascertained:

The amount of the depositor's balance that can be loaned or invested.

The amount of income that such a balance when loaned produces at the average net rate on loans and investments.

The amounts of all disbursements directly traceable to the account and

The amount of the bank's general expense that should be equitably apportioned to the account.

We will take these in order.
First Factor:

The amount of balance that can be loaned or invested, we get from our interest slips. (See Front Side, Fig. 1.) Interest is computed quarterly and so we make our analysis period coincide. These slips provide space for three months' credit balances. They also allow for three months' debit balances or totals in transit. Most banks, in figuring outstandings, use a four or more column form and distribute the amounts between the different columns according to days outstanding. However, we use calculating machines, which find the total outstanding for one day much quicker, just as accurately and with considerable saving of stationery. The average daily outstanding deducted from the average daily ledger balance, of course,