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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 asso ciations 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 cent's 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:
LOCAL ASSOCIATIONS OPERATING UNDER THE VARIOUS PLANS FOR THE DIS.
TRIBUTION OF PROFITS.
States and terri.
Associations operating under plan
Not asso6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25! re: cia.
port. tions. ed.
3 1 Arkansas 1 2 3
45 32 1 13 Colorado 14
3! Dist. of Columbia 13
248 34 38 71 20 29 21 27 71 Indiana
631 28 6 39 5 191 53 Iowa. 24 3
13 Kansas 22 6 10
20 Kentucky 13 5 70
27 Louisiana 1 8
51 14 Maryland
93 211 12 15
65/ 47 Michigan
8 11 11'. Minnesota. 38 2 10
1 Mississippi 11 2
149 9 10 9 6 24 1 9 1081 Montana
1 3 Nebraska
6 Nevada New Hampshiro.
1 4 New Jersey 100 41 6 13 18 171
37' New Mexico 2
2 New York
347 39 81 76 101 48 23
3' Pennsylvania 338 63 42 16 40 51' 10 5' 294 3 2 Rhode Island 1
3 South Carolina 6
37 South Dakota 10
3 Tennessee. 24 15 3!
4 6 Texas 12
1 Virginia. 2 1 18! 2
38 2 Washington. 2
3 West Virginia 12 ] 2
131 26 29 237 115 72 82 30 349
1 16 286
5 390 24
1 70 21
862 5, 598
NATIONAL ASSOCIATIONS OPERATING UNDER THE VARIOCS PLANS FOR THE
DISTRIBUTION OF PROFITS.
States and territories.
Associations operating under plan
Sot asso2 3
port- tions. ed.
10 : re- ' cia
The twenty-five principal plans and their modifications with illustrations showing the various methods of applying each are given in the pages immediately following:
This plan apportions the profits among series just as profits among partners are apportioned in a firm where the partners enter at different dates, each series representing a partner.
1. Multiply the dues paid in on the shares in force in each series by the equated time of investment.
2. Take the sum of these products and then find what fractional part each product is of the sum.
3. These fractions are the parts of the total net profits belonging to each series.
To illustrate the rule, let us suppose that an association whose monthly dues are $1 per share had three series in force at the end of the third year, and that the number of shares in each series and their
share were as follows: