UNAPPORTIONED PROFITS.

The Local Associations report a total of $446,523 54 unearned and unapportioned profits. This averages $3,515 93 to the association, and $1 67 per share.

The National Associations report unapportioned profits $30,037 23. This averages $3,754 65 to the association, and 34 cents per share.

The Cooperative Banks report unearned and unapportioned profits $5,749 02. This averages $2,874 51 to the association, and 12 cents per share.

Recurring to the average book values previously ascertained, we find that these reserve profits should be added to them to show the average net asset per share to stockholders.

The Local Associations report total liabilities for overdrafts and bills payable amounting to $1,499,202 50, which is an average indebtedness to each association of $11,804 74, and averages to each share $5 60. The National Associations report a similar indebtedness of $62,520 21. This averages $7,815 03 to each association, and 74 cents per share. The Coöperative Banks report a like liability of $48,016 01, which averages $24,008 01 to each association, and 98 cents per share.

There has been a disposition on the part of some associations, we think, to go into debt more than was for their good. There is really a danger line in this matter for Building and Loan Associations, as there is for other corporations and for individuals. We would advise that an association should not borrow at bank or on bills payable more than it can repay with three months of its current revenues. Then there is little danger of being seriously inconvenienced if the obligation is pressed to a short settlement.

During this fiscal year the Local Associations have increased their outside indebtedness by $1,593,990 09, and have decreased them by the payment of $1,566,065 22, leaving a net increase of $27,924 87.

Our next annual report will probably show a considerable diminution in this class of liability.

During the year the National Associations have increased their outside indebtedness by $52,394 34, and have decreased them by $59,283 72, showing a net decrease of $6,889 38.

The Coöperative Banks have increased their outside indebtedness by $82,516 01, and decreased them by $103,533 47, showing a net decrease of $21,017 46.

* Unapportioned.

SALARIES.

The Local Associations report a total expense for salaries amounting to $129,489 24. This averages $1,019 61 to each association, and 49 cents per share ($200 shares). It is also equal to 1.46 per cent of total receipts.

The National Associations report salaries amounting to $36,385 46. This is an average of $4,548 18 to each association, and 43 cents per share ($100 shares). It is also 3.8 per cent of the total receipts.

The Cooperative Banks report salaries $14,952 50, which is an average of $7,476 25 per association, and 30 cents per share ($100 shares). It is also 0.56 per cent of total receipts.

A comparison shows:

Local Associations report taxes paid to the amount of $171,300 47. This is an average of $1,348 82 for each association, and average expense to each share of 64 cents. It amounts to 1.45 per cent on the present worth or taxable value of loans.

The National Associations report taxes paid $9,652 35, which is an average expense per share of 11 cents. It amounts to 0.91 per cent on the taxable value of loans.

The Coöperative Banks report taxes $7,396 54, which is an average to each association of $3,698 27, and an average expense to each share of 15 cents. It amounts to 0.8 per cent on the average loaning capital of the year.

MISCELLANEOUS EXPENSES.

The Local Associations report $42,604 93, which is an average of $335 47 for each association, and 16 cents per share. It is 0.48 per cent of total receipts.

The National Associations report $29,778 78, which is an average of $3,772 35 per association, and 35 cents per share. It is 3.12 per cent of the total receipts.

The Cooperative Banks report $29,260 04, which is an average of $14,630 02 per association, and 60 cents per share. It is 1.11 per cent of the total receipts.

TOTAL EXPENSES.

Items of expense, including salaries, taxes, and miscellaneous expenditures, are reported by the Local Associations $343,394 64. This averages to each share $1 29 ($200 shares). The ratio to total receipts of the year is 3.89 per cent.

All expenses, as above reported by the National Associations, are $75,816, which is an average of $9,477 07 per association, and 90 cents

per share ($100 shares). It is also 7.94 per cent on the total receipts of

the year.

All expenses as above reported by the Coöperative Banks, $51,609 08, which is an average to each association of $25,804 54, and to each share (of $100) of $1 06. It is also 1.96 per cent of the total receipts of the year. This low percentage is due to the large volume of business in deposits added to the current Building and Loan Association receipts.

COMPARISON OF EXPENSES.

On the basis of stock we have the following comparison, the figures showing the average expense per share:

On the basis of total receipts we have the following comparisons, the figures showing the percentage of expense to total receipts, except in the case of taxes, when the percentage is shown on the present worth of mortgages (taxable value):

While the Local Building and Loan Associations are quite similar in their general outlines, there still exists a wide divergence between them in their methods of transacting business and their systems of bookkeeping, and in their plans of apportioning profits. In fact, it would be difficult to find any two that are alike in all of these respects.

This dissimilarity is due to the fact that there has been no generally accepted model for the formation of these organizations. The organizers of each have pursued such plan as they had in mind, often following the lines of some Eastern association with which one or more of them may have been connected at a previous time. In some instances an expert has been called in, who has formulated a system of his own. Or, several features of different neighborhood organizations have been borrowed and incorporated in the plan. Thus has grown up this great variety of methods in transacting the business of Building and Loan Associations, while all are striving for practically the same ends.

The most thoughtful and most experienced of the Secretaries have deprecated this lack of uniformity, and have expressed the hope that this Commission might be able to bring about something like a general concurrence in the systems. This desirable end we are willing to promote by any means in our power; but it should be borne in mind that we

have no arbitrary authority in the premises. We cannot prescribe any particular system of bookkeeping and say that all Secretaries must conform to it. Our powers of interference are limited to cases where we find errors in accounts, or the pursuance of methods which will result in injustice to stockholders. Nevertheless we have exerted our influence in a purely advisory way for the adoption of what we deem the best system, and in time, no doubt, this influence, if consistently maintained by subsequent Boards, will result in greater uniformity of methods.

There can be no better way of furthering this reform than for the Secretaries and other officers of the Building and Loan Associations to meet at stated intervals and discuss these matters. They are thus enabled to compare different systems, and draw conclusions as to which is best. To this end we indorse the plan of the State League of Building and Loan Associations, and urge the Presidents and Secretaries of associations to affiliate with it. Boards of Directors can well afford to grant their Secretaries the requisite leave of absence, and defray all necessary expenses while they are attending the annual meeting of this League.

In order to place in the hands of Secretaries and those who are forming new associations an outline of a safe and desirable system, we discuss the principal books which should be kept for a Building and Loan Association, and enter somewhat into details concerning methods of distribution, etc.

THE STOCK BOOKS.

These constitute a separate and distinct system, which should be devoted to the transactions of the corporation, and the stock accounts should never be confounded or intermingled with the commercial accounts of the association.

The Record Book is that in which the Secretary records the proceedings of the annual and special meetings of stockholders, and the meetings of the Directors.

The Certificate Book contains the certificates of stock. Each certificate should have its stub, showing the number of certificate, the date of issuance, the party to whom issued, and such memoranda as may be desirable to trace the stock back to a former certificate, in place of which this one may have been issued.

In every instance the Secretary should require the signature of the party to whom stock is issued, or his authorized attorney, attesting the receipt of same. This receipt is the Secretary's protection against a possible charge of false or irregular issue of stock, and he should never allow a certificate to be taken from the book without the proper signature on the stub.

The certificates and stubs should be numbered consecutively from the beginning to the end of the book, each stub bearing the same number as its accompanying certificate. It is best to have this numbering done by the binder's machine when the book is made. Some associations have a way of beginning each series with No. 1, and thus they have a different set of numbers for each series. This is wrong, and it leads to great confusion when several series are out. An association should never issue two or more certificates of stock bearing the same number; let the numbers run from unity up to as high a figure as may be required, the progression being continuous through the life of the association. When a certificate is transferred from one holder to another, it should be

surrendered to the Secretary, properly indorsed with the name of the original holder. It should be canceled by the Secretary, and a new certificate, bearing a new number, should be issued to the party purchasing the same. It is a great mistake to issue the new certificate under the number of the old one; it is also a mistake to recognize any transfer of stock unless it had been made on the books of the association, as above outlined. When certificates are surrendered and canceled by proper indorsement across the face, each should be pasted back upon its proper stub in the certificate book. When a certificate is lost, and cannot be returned for cancellation, the owner should file an indemnity bond with the Secretary guaranteeing the association against loss in the event that the certificate should ever appear in the hands of a third party. This indemnity bond should be filed, and the Board of Directors should declare such certificate void. The Secretary should make a proper indorsement of these proceedings on the stub of the lost certificate; the stock may then be redeemed or reissued under a new number, as the owner desires. Some Secretaries paste the indemnity bond to the stub of the lost certificate, just as they would paste in the stock, if returned and canceled. This is a very good plan. If a certificate should be spoiled in filling it out, or not taken by the intending purchaser, let it be canceled, both on the face and by proper entry on the stub, and let it remain in the book; or, if it should have been torn out, paste it back; never attempt to make erasures and issue such certificates. Never allow a certificate to be removed from the book without an entry on the stub accounting for it in a legitimate way.

We urge upon Secretaries the importance of keeping the Certificate Book with scrupulous care, as it is the book of original entry in all stock transactions, and may be introduced in Court as evidence. It is the book by which this Commission checks up all statements of outstanding stock.

The Stock Journal is a book in which the Secretary first enters all stock issued and all the stock withdrawn, with the name of purchaser or holder, number of certificate, number of shares, the series, etc. Books properly ruled and printed for this purpose may be purchased from any stationer, and an accountant will readily understand the form in which entries should be made.

The Stock Ledger is the book into which the entries in the Journal are to be posted. Stock Ledgers of accepted form may also be purchased from a stationer. In this book there is an account with each stockholder, showing on one side all stock issued to him, and on the other side all stock surrendered by him. This book may, with advantage, be kept in double entry form, with a Capital Stock Account, in which all transactions are entered as an offset to the individual debits and credits, thus balancing the Ledger at all times when correctly posted.

Stock Index.-Some Secretaries of large associations keep a Stock Index Book, in which the names of all stockholders are alphabetically arranged and accompanied with references to their places in other books. But if the Journal and Ledger are properly kept, and the Ledger carefully indexed, we see no necessity of keeping this last named book. Secretaries should study to simplify the system as much as possible, keeping the least number of books consistent with a correct and easily accessible record of their business.