until the shares reach a value equal to the amount of the security given by the borrower. No part of the premium paid in advance is returned to the borrower in case of the repayment of the loan before the maturity of the shares. Illustration I: A member secures a loan on five shares of a maturing value of $100 each, at a premium of 10 per cent. He receives $450, but gives security for $500, on which he pays dues and interest. Illustration II: In this case the borrower receives $500, but gives security for $550, on which he pays dues and interest until the shares reach the value of $550, unless previously repaid. The number of associations operating under this plan is as follows: LOCAL.-Alabama, 1; total local associations, 1. PLAN 68. Loans are awarded to shareholders bidding the highest premium. The premium is either deducted from the loan in advance or the borrower receives the full amount as may be agreed upon. If the premium is deducted, the borrower receives the remainder, but gives security for the gross amount and pays interest thereon. If the borrower receives the full amount of the loan, he gives security on both loan and premium and pays interest on the same. In either case the principal is reduced periodically by the amount of dues paid in on the shares borrowed on, and interest is charged on the remainder. No rebate of premium is allowed in case of the repayment of the loan before the maturity of the shares. Illustration I: A member secures a loan on five shares of a maturing value of $200 each, at a premium of 10 per cent. He receives $900, but gives security for $1,000. His monthly payments for the first three months are as follows: Dues, $5; interest on $1,000 at 6 per cent, $5; total, $10. At the end of three months the principal is credited with $15, the dues paid in, leaving $985 principal, on which interest is charged. Monthly payments during the second quarter are: Dues, $5; interest on $985 at 6 per cent per annum, $4.921; and so on, reducing the principal each quarter until the loan is discharged. Illustration II: In this case the borrower receives $1,000, but gives security for $1,100, on which he pays interest at 6 per cent per annum. His monthly payments for the first quarter are as follows: Dues, $5; interest on $1,100 at 6 per cent per annum, $5.50; total, $10.50. At the end of three months the principal is reduced by $15, leaving $1,085 principal, on which interest is charged. Monthly payments during the second quarter are as follows: Dues, $5; interest on $1,085 at 6 per cent per annum, $5.42; total, $10.42; and so on, reducing the prin cipal each succeeding quarter until the loan is discharged. The number of associations operating under this plan is as follows: CHAPTER IV. PLANS OF DISTRIBUTION OF PROFITS. While a great variety of plans are in vogue for the payment of premiums, it is also true that there are many plans for the distribution of profits. The investigation discloses twenty-five different rules or methods of distribution of profits. The amount of interest which a member has in a building and loan association is indicated by the number of shares which he holds, the age of the shares, and their maturing value. Shares are of three kinds, called-instalment or running shares, prepaid shares, and paid-up shares. When a member desires to make weekly, monthly, or other periodical payments, he subscribes for instalment shares and indicates the amount of the periodical payments he desires to make by the number of shares for which he subscribes. These payments are continued until the instalments and the profits on the shares have caused them to reach their maturing or par value, when they are wound up by returning to the non-borrowing members the value of their shares in cash, and to the borrowing members their mortgages and cancelled obligations. Prepaid shares, known also as partly paid-up shares, are issued by some associations at a fixed price per share in advance; such shares usually participate as fully in the profits as the regular instalment shares, and when the amount originally paid for such shares, together with the dividends credited thereon, reaches the maturing or par value then such shares are matured, and are disposed of in the same manner as regular instalment shares. A few associations, however, instead of crediting all the profits made on this class of shares, allow a fixed rate of interest on the amount paid therefor at each dividend period, which is paid in cash to the holders thereof. This interest is then deducted from the profits to which the shares are entitled, and the remainder is credited to the shares until such unpaid portion of the profits, added to the amount originally paid, equals the maturing or par value. Some associations allow their members to pay in the full maturity or par value of their shares at any time, and a certificate of paid-up stock is then issued, and the owners thereof are entitled to receive in cash the amount of all dividends declared thereon, subject to such conditions or limitations as the board of directors of each particular association may have adopted. In some instances these shares participate as fully in the profits as the regular instalment shares; but in most cases a fixed rate of interest only is allowed, the holders of the shares usually assigning to the association all right to profits above that amount. In some cases the holders of regular instalment shares that have arrived at maturity value do not desire to draw out their money, but prefer to leave it with the association as an investment. Associations allowing this to be done issue to holders of matured shares what are known as certificates of matured shares, which are usually governed by the same conditions as are attached to paid-up shares. In the descriptions of the various plans for distributing profits which follow, only the regular instalment shares have been considered. The most common as well as the most important difference between the methods of distributing profits employed in national associations and those employed in local associations is the following: In local associations the total amount of dues paid in by the shareholders forms the basis for such distribution; while in nearly all national associations only a portion of the dues paid in by the shareholders figures in the distribution. For instance, in national associations the dues are gener ally 60 cents a share per month, out of which either 8 or 10 cents are carried to an expense fund, the remainder being credited to the loan fund. The expense fund thus created is lost to the shareholders, except in the case of a few associations which carry the unexpended balances to the profit and loss account, and whatever profits are made are apportioned on the amount of dues credited to the loan fund only. The tables following give a general summary of the situation in respect to the twenty-five plans in use: |