This shows the general average percentage of profits to dues to be 16.54 per cent.

SURRENDER VALUE OF STOCK.

The Local Associations report a total surrender value of stock amounting to $14,467,507 80.

This should be compared with the total of book values, which are ascertained as follows:

This shows the gross amount which would be retained by the associations in the event of withdrawal of the stock.

It thus appears that the Local Associations, on the average, pay back to withdrawing members the full amount of dues paid in plus 59.11 per cent of apportioned earnings.

The National Associations report surrender value of all stock, $1,022,324 89. Comparing with total of book values we find:

This shows the gross amount which would be covered into Profit and Loss Account if all shares were withdrawn.

The amount is unduly swollen by reason of the fact that the National Associations generally do not allow withdrawals during the first year,

Strictly, the advance payment of dues should be deducted from this item; but the amount is so small in aggregate that it may be neglected in this calculation, as with those which follow.

and fix no withdrawal value for stock until it is one year old or over. The same practice is followed by a few Local Associations.

From the foregoing statements it appears that the National Associations, on the average, pay back to withdrawing members the dues paid in plus 17.27 per cent of the apportioned profits.

The Coöperative Banks report a total surrender value of $883,200 25. Total dues paid in...

Add apportioned profits..

Total book values

Deduct total surrender value...

Profits to associations on withdrawals.......

$834,894 22

91,861 19

$926,755 41

883,200 25

$43,555 16

Thus it appears that the Coöperative Banks, on the average, pay back to withdrawing members the dues paid in plus 52.58 per cent of apportioned profits.

All associations together report:

Total surrender value of

This shows a general average for all associations of dues refunded, plus 56.81 per cent of the apportioned profits.

In no branch of Building and Loan Association work is there less concurrence of system than in the matter of withdrawals. While all allow the withdrawal of stock, with or without limitation as to the time it has run, the amount paid back varies with different associations, and there seems to be no general established rule.

Section 19 of the law of 1893 provides as follows: "Stockholders desiring to withdraw from any association, or to surrender a part or all of their stock, shall have power to do so by giving thirty days' notice, in writing, of such intention to withdraw. On the expiration of such notice, the stockholder so withdrawing shall be entitled to receive the full amount paid in by him or her, together with such proportion of the earnings thereon as the by-laws may provide, or as may have been fixed by the Board of Directors; provided, that no more than half of the monthly receipts in any one month shall be applied to withdrawals for that month without the consent of the Board of Directors, and no shareholder shall be permitted to withdraw whose stock is pledged as security to the association for a loan until such loan is fully paid. Such with

drawals shall be paid in succession, in the order that the notices are given."

This establishes a minimum basis for the withdrawal of shares. The association is obliged to refund the full amount paid in as dues. As to the proportion of profits apportioned to such shares which the association pays to the withdrawing member, that is left to the decision of the Board of Directors, or to the by-laws of each association. This prerogative is exercised in various ways-so various, indeed, that a classification according to methods is impossible.

THE NATIONAL RULE.

The Nationals construe the law in one way and the Locals in another. The Nationals hold that the term "the full amount paid in," as specified in the law, means the full amount paid into the Loan Fund only, and not the amounts paid on premium stock or the proportion on borrowing stock which goes into the Expense Fund. On each share of stock upon which the stockholder pays 60 cents per month, the reservation for Expense Fund amounts to 8 or 10 cents per share, as the case may be. This amounts to 133 and 163 per cent, respectively, on the total amount paid in. This percentage of the total payment by members the National Associations do not hold themselves liable to refund. They do refund all amounts paid into the Loan Fund, plus such proportion of accrued profits as their by-laws provide for.

Of the two Cooperative Banks, one follows the rule of the Nationals, as above outlined, and one pays back the full amount of dues, including the proportion covered into the Expense Fund.

Whether the National rule, if put to the test of the courts, would hold, is yet undetermined. Only a member who has subscribed to stock since the law of 1893 went into effect would be competent to maintain an action to test this question, and thus far no such contesting member has appeared.

With respect to to withdrawals from associations following the National plan, it may be stated generally that, if they retire within a period of three or four years after the commencement, their profits on the transaction are small or nothing, or they may even sustain a loss. As a rule, it requires in such associations a membership of about three years before the accrued profits equal the amount covered into the Expense Fund. When such profits equal the Expense Fund deductions, they can, on withdrawal, receive back the whole amount paid in.

From their methods of securing new business through solicitors, who operate in outside localities, and in many places where there are no Local Associations, it results that National Associations, and those operating on similar lines, secure a large proportion of the floating and unstable investors. This is shown by the high percentage of cancellations in such associations. Such people should understand that the form of investment offered them is not one of a temporary kind, but that it requires long and faithful performance of their part of the contract if they are to derive any pecuniary benefit therefrom.

It should be stated in this connection that some Local Associations do business outside of their immediate locality. Some of them also have no fixed withdrawal value for stock until after the lapse of one or two

years, and allow no withdrawals within that period. Many of them pay to withdrawing members during the first year or two only a small proportion of accrued profits. Most members of such associations who withdraw at an early date, realize but small returns on their investment. In general the full advantages of a Building and Loan Association are only to be secured by long and faithful membership.

THE THEORY OF WITHDRAWALS.

The accepted theory of withdrawals is that an association shall not take advantage of a member who has paid a certain amount on his stock and then finds that he is unable to continue his payments. After notice of withdrawal is served, and pending liquidation of stock, no fines are to be laid against it for non-payment of dues. As soon as the requisite time prescribed in the by-laws has run, or as soon thereafter as the association has funds available for the purpose, it is required to take up the withdrawing shares at their determined withdrawal value. Just what proportion of the apportioned earnings may be paid to shares withdrawn in justice to the association seems not to have been reduced to a mathematical principle, and every association follows a rule of its own. Doubtless some associations that have made a practice of treating gross premiums as accrued earnings have paid to withdrawing members a larger proportion of profits than they could afford. The result in such cases is an injustice to the persistent members, and a consequent delay in the maturity of stock.

It would be very difficult to say just what proportion of apportioned profits such an association should pay to withdrawals. A sort of hitand-miss practice seems to have been adopted, scaling down the profits. according to the age of the series; but whether the amount thus retained is sufficient to make the association good for the proportion of bad debts and unearned premiums that have figured in fixing the value of shares, the Secretaries themselves could not state with any degree of confidence. If the scaling down has been too heroic, then undoubtedly an injustice is done to the retiring member.

For this reason we have advocated, in another place, the adoption of the Unearned Premium plan of treating premiums, or what is still better, the installment system of premiums and the establishment of a Reserve Fund. Under these systems the unearned premiums, and a certain percentage of profits, do not enter into the calculation for determining the book or withdrawal value of shares, and hence all danger of an over-payment of profits to withdrawing members is averted. In such case an association can afford to pay very nearly its book value to retiring members. Whatever it deducts from such book value is in the nature of a penalty for failure on the part of the stockholder to carry out his original contract, and to make the association good for the loss of his membership. Where a retiring member receives nearly the full book value of his shares, he is far more apt to be content with his bargain than he would be if scaled down by an apparently unmerciful percentage. If he goes out feeling that he has been fairly treated, he may affiliate again when circumstances permit, or he may encourage friends to join the association. If he goes out dissatisfied, he is likely to be inimical, not only to that association, but to all Building and Loan

Associations for the rest of his life. It is the best of policies for Building and Loan Associations to let their retiring members go in a satisfied frame of mind.

NATIONALS VS. LOCALS.

There exists in this State, as elsewhere, much hostility between the ultra advocates of the Local system of Building and Loan Associations and those who maintain the National plan; and, in the journals devoted to the opposing interests, there are charges of a grave character. We deemed it expedient, in entering upon the duties of our office, to ignore this controversy entirely, and prosecute our investigations without bias or prejudice on either side. It became our duty to see that the laws of the State, so far as they relate to such organizations, are impartially enforced, to the end that stockholders may be protected from fraud and mismanagement. This we have attempted to do in every case, irrespective of plans of organization, bringing all to the same standard of requirements. For the rest, it seemed to us the best service we could render the State was to make a searching investigation of all plans which we should find in operation, to collate statistics thereon and analyze the returns in such a way as to throw light on their operations, and make it possible to institute intelligent and unbiased comparisons between the several systems. The highest advantage to be gained by the public lies in their thorough acquaintance with the plans and operations of the many associations seeking their patronage; and the best criterion by which to judge such associations is an intelligent comparison of results

achieved.

In order to bring such comparisons to the same basis, and make them absolutely fair, we have required associations to report all of their receipts and expenditures, together with such other statistical information as was deemed essential. Objection was raised on the part of some of the Nationals against reporting on their Expense Fund, which they claimed did not constitute a part of the capital of the association, being contributed for the express purpose of defraying the expense of management. Our ruling on this, however, was that all funds handled by the associations should be reported upon, and in this they all finally acquiesced. Statements of amounts collected and expended on account of the Expense Fund will be found in the summaries of all associations, National as well as Local, and such items have entered into our calculations of percentages and averages.

FINES.

The law of 1891 (Section 634) provides a maximum rate of fines for delinquencies in Building and Loan Associations, as follows:

"Any such corporation shall have power by its by-laws to impose and collect a fine from each stockholder not exceeding 10 per cent of the defaulted amount, for every neglect or refusal to make his payments of dues, or premium, or interest, when due, and to impose and collect a like fine successively on every regular pay-day during such default."

This is construed by some associations to mean that a fine of 10 per cent may be imposed on the total delinquency each month, and fines are enforced at that rate. Let us see what such procedure leads to.

Suppose a member whose dues amount to $10 per month becomes