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442

BUILDING

SOCIETIES

have reached maturing value. There is also a great variety of plans for the distribution of profits, something like twenty-fi ve such plans being in existence. The methods of calculating interest and profits are somewhat complicated, but they are all found in the books to which reference will be made. The various plans for the payment of premiums, distribution of. profits, and withdrawals, and the calculations under each, are given in full m the Ninth Annual Report of U.S.A. Commissioner of Labour. Most building and loan associations confine, their operations to a small community, usually to the county in which they are an situated ; but some of them operate on a large scale, extending like sum each month until the aggregate of sums paid, increased their enterprises even beyond the borders of their own by the profits and all other sources of income, amounts to the State. business national associations are ready to make loans on maturing value of the stock, usually $200, when the stockholder propertyThese anywhere, and sell their shares to any person without is entitled to the full maturing value of the share and surrenders reference to residence. In local associations the total amount the same. Shares are usually issued in series. When a second of dues paidhis in by the shareholders forms the basis for the disseries is issued the issue of the stock of the first series ceases. tribution of profits, while in most national associations only a Profits are distribued and losses apportioned before a new series portion of the dues paid in by the shareholders is considered in the can be issued. The term during which a series is open for sub- distribution. For instance, in a national association the dues are scription differs, but it usually extends over three or six months, generally 60 cents a share per out of which either 8 or 10 and sometimes a year. Some associations, usually known as per- cents are carried to an expense month, the remainder being credited petual associations, issue a new series of stock without regard to on the loan fund. The expensefund, fund thus created is lost to the the time of maturity of previous issues. It is the practice in such shareholders, except in the case of associations which carry associations to issue a new series of stock every yeai Instead of the unexpended balances to the profita few and loss account, and whatshares that are paid in instalments, some associations issue prepaid ever profits are made are apportioned on the amount of dues shares and paid-up shares. Prepaid shares, known also as partly credited to the loan fund only. The creation of an expense fund paid-up shares, are issued at a fixed price per share in advance. in the nationals has sometimes been the source of Safety They usually participate as fully in the profits as the regulai in- or security in both local and national associationsdisastei. princistalment shares, and when the amount originally paid for such pally upon the integrity with which their affairs depends are conducted, shares, together with the dividends accrued thereon, reaches the and not so much upon the form of organization or the method of maturing or par value, they are disposed of in the same manner as distribution. Some of the States—New York, Massachusetts, regular instalment shares. Some associations, instead of crediting New Jersey, Ohio, Illinois, California, and others—bring building all the profits made on this class of shares, allow a fixed rate of and loan associations under the same general supervision of law interest on the amount paid therefor at each dividend period, thrown around savings banks. In some States nothing is ofnciwhich is paid in cash to the holder thereof. This interest is then ally known of them beyond the formalities of their incorporation. deducted from the profits to which the shares are entitled, and the the business of the associations is conducted by men not "remainder is credited to the shares until such unpaid portion ot Though trained as bankers, it yet meets with rare success. Associations disthe profits, added to the amount orginally paid, equals the matur- band not successful, but when they disband great loss does not ing or par value. Paid-np shares are issued upon the payment ot occur when the whole business of the association consists of its the full maturity or par value, when a certificate of paid-up stock loans, because and these loans are to its own shareholders, as a rule, who is issued, the owners being entitled to receive in cash the amount hold the securities in their associated forms. The amount ot money of all dividends declared thereon, subject to such conditions or hand is always small, because it is sold or lent as fast as paid limitations as may be agreed upon. These shares sometimes parti- on A disbanded association, therefore, simply returns to its ov n cipate as fully in the profits as the regular instalment shares, but in. their own property, and but few real losses occur. Inin most cases a fixed rate of interest only is allowed, the holders ot members in a building and loan association is as nearly absolutely the shares usually assigning to the association all right to profits vestment as it can be, for the monthly dues and the accumulated above that amount. Certificates of matured shares are also issued safe which give the actual capital of the association, are lent to holders of regular instalment shares, who prefer to leave their profits or sold, as it is termed, by the association as fast as they, accumumoney with the association as an investment. and upon real estate or upon the stock of the association itself. Prior to the maturing of a share it has two values, the late, opportunities for embezzlement, therefore, or for shrinkage oi holding or book value and the withdrawal value. The book The are reduced to the minimum, and an almost absolute value is ascertained by adding all the dues that have _ been securities, paid to the profits that have accrued ; that is to say, it is the safety of the investment is secured. The growth of these associations has been very rapid actual value of a share at any particular time. The withdrawal value is that amount of the book value which the association is since 1840. In 1900 they numbered 5838, and occur in willing to pay to a shareholder who desires to sever his connexion forty-eight States and territories. Pennsylvania statisticSi with the association before his share is matured. Some associations has the greatest number, 1079. The next in do not permit their members to withdraw prior to the maturing of their shares. Then the only way a shareholder can realize upon order are—Ohio, 721; Illinois, 669 ; Indiana, 445 ; New his shares is by selling them to some other person at whatever price York, 418; Missouri, 366; New Jersey, 288; Maryland, he can obtain. There are twelve or more plans for the withdrawal 240; Kentucky, 148; California, 133; Massachusetts, of funds. Every association has full regulations on all such 115; Minnesota, 97. Their accummulated assets have matters. The purchase of a share binds the shareholder to the necessity increased to an enormous amount. The Federal Governof keeping up his dues, and thus secures to him not only the benefits ment, through the Department of Labour, made an of a savings bank but the benefit of constantly accruing compound investigation of building and loan associations, and pubinterest. This accomplishes the first feature of the motive of a lished its report in 1893, with the results given in the building and loan association. The second is accomplished by en. abling a man to borrow money for building purposes. It is a moot table on the next page. question whether this method of obtaining money for the building The total dues paid in on instalment shares, according of homes is more or less economical than that of obtaining it from, to the following statement, amounted to $450,667,594 the ordinary savings banks or from other sources. Sometimes the premium which must be paid to secure a loan increases the regular The business represented by this great sum, conducted interest to such an amount as to make the building and loan quietly, with little or no advertising, and without the method more expensive than the ordinary method of borrowing experienced banker in charge, shows that the common money but a building and loan association has a moral influence people, in their own ways, are quite competent to take upon its members, in that it encourages a regular payment of in- care of their savings, especially when it was shown by the stalments. Some associations have a fixed or established premium report cited that but thirty-five of the associations then m rate and under such circumstances loans are awarded to the existence met with a net loss at the end of their latest ’ members of their applications or by lot. Varlaqjie pi.emiinuinthemaorder y consist of the amount which the fiscal year, and that this loss amounted to only a little tioos in borroWer pays in excess of the legal interest, or it may methods. consist 0f a certain number of payments of dues or ot over $23,000. In addition to the statistics of a general interest to be made in advance. There are very many plans for character quoted in the table, Bulletin No. 10 (May 189/) the payment of premiums, nearly seventy relating to real estate of the United States Department of Labour contains loans being in vogue in different associations m different parts ot a calculation of the business at that date, based upon the United States ; but in nearly all cases the borrower makes Ins such States’ reports as were available. That calcularegular payments of dues and interest until the shares pledged

he holds, the age of the shares, and their maturing value. The difference between a stockholder in such an association and one in an ordinary corporation for usual business purposes lies in the fact that in the latter the member or stockholder buys his stock and pays for it at once, and as a rule is not called upon for further payment ; all profits on such stocks are received through dividends, the va’lue of shares depending upon the successful operation of the business. In the former the stockholder or member pays a stipuwhenHe he continues takes his memberShares. lated g^ip minimum d buys asum, sharesay of $1, stock. to pay a