Omaha daily bee., 1892-06-05
COOPERATIVE
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Explanation Of Che System in General
Operation.
THE SERIAL AND THE PERMANENT
modus operandi OF the Local Associations
In Omaha -Itensrkabic Economy
of Managem ent-Com-
parntiye Expenses.


PART ~.
The experience of fifty years reduces CO.
operative loan ana building associations to
two distinct forms-the serial and the perma-
nent plans.
The serial plan is in general operation in
Nebraska Stock Is issued atstated periods,
three or six months apart, at the option OF
the association. Eacn series Is distinct
While the income goes into common fund,
shares in each series are credited with pro-
rata on the profits. Loans are also made
from the common fund, regardless OF tho
series the borrower may hold. The chief
advantage OF the serial system Is That 1t pre-
vents all stock from maturing at the same
time. The system is a modification OF the
old terminating plan under which an asso-
citation ceased when the stock, issued in
lump, matured. Then each association was
series. The present system concentrates
several into one makes 1t stron ger, effects a
great saving IN clerical holp ana reduces ex-
penses 10 minimum.
The permanent system is an Ohio idea
which Is rapidly spreading throughout the
country. Associations are organized under
perpetual charters. Stock may DO issued at
any time until the limit authorized is reached,
when the capital may be Increased Ii neces-
sary. Thus the business of associations runs
along from year to year, and when stock be-
gins to mature no large ''sinking funds" are
required to meet the unpledged shares. An
Ohio authority says that under this system
members have the same privileges OF with
drawal as OF entry. They may withdraw at
any time by complying with the rules Of the
association, receiving their equitable share
Of the assets. Experience has shown that IL
Is possibl so to work out the plans for the
calculations Of dividends, premiums, inter-
est, ETC., and so to arrange oil other details
OF the operations of an association as to be
able to treat each share equitably upon its
merits without in any way interfering with
the interest OF any other share"
Both systems are in operation in Omaha.
The Omaha, Mutual, Nebraska, Bohemian
of Omaha South Omaha and Bohemian of
South Omaha are distinctively local
in character and operate on the
serial plan. They are practically alike
value OF shares, monthly payments, with
drawing and borrowing terms. The Occi-
dental, Provident and Conservative are na-
tional in character. seek business outside the
plan. The Central National Is about to become
atrust company, having applied to the state
board for time In which to wind up its affairs
as building and loan association.
Plan of Operation.
The Omaha was, organized in 1888 and the
| Mutual in 1885. The remaining locals are in
| their infancy. An illustration Of the methods
Of one applies to all.s Suppose 200 people agree
| to take five shares Of stock each, par value
| $500; monthly payments, 81 per share. The
| monthly payments produco 81 900. Prudence
| suggests prompt, ginxestment. The purpose
| of the enterprisejs the accumulation OF suf-
| ficient means for tho purchase of homes for
members There 49, competition for the
| money. 1t is auctiotted and the highest bid
| der secures the whole or any portion thereof
! from 500 up. There will be an eanal amount
| the following ,months and that too is sold,
| thirty days, delivery Most associations in
the east loan their money at a regular prem
| ium, first come fifstserged. Hers competi-
| tion is keen and premiums range from IL
| to 80 per- cent The premium, is deducted
| from the loan. II, for instance 20 per cent
premium is paid the borrower receives $500
cash and pays interest on $1,000, generally
| per cent per annum, until the total pay
ments and profits place tue stock at par
value, when his mortgage Is Cancelled. The
| local associations whose systems are
commended by the state banking board as
| models have in vogue a method of prorating
| the premiums. IT Is estimated a share will
| reach par value, 500, in eight years. The
| premium is divided into eighths. II Dor
| par, one-5ighth Of the premium Is retained
| for every year or fractlen OF year he has
had the money, the balance is repaid. So i
| shareholder borrows during any OF the sub
|
| part of the premium. biu based on the mum
| ber of years he may have the loan. Th
| profits not only wipe out the premium paid
| but actually reduces the interest rate on thu
loan to less than per cent per annum, as i
| shown by the experience OF the Omaha, which
| was first TO mature series OF snares
As an Investment.
The receipts from all sources go into G
common fund, and the expenses are paid on
| of that fund. The initiation is nominal.
| non borrower may al any time Withdraw hi
| payments, less the initiation fee, and receiv
5, 6. and ia some instances 10 per cent pei
annum, according to the age OF his share
Some local associations pay fractional par
| of the profits TO withdrawing shareholders
| 1t will DO noticed that both borrower ant
| nonborrower are on ap even financial status
| The borrower, being the source of profit, hi
interests are vigiiantly guarded. This
why the nonproducer, though treated lioel
ally in interest rate. is subordinated to tn
welfare OF the borrowers should occasion ue
mand their forced withdrawal.
| The greatest difficulty in the path OF tn
three older associations Is to make provisio
for the payment OF nonborrowers IN the frs
series Lack OF experience at the outset per
mitted an undue proportion OF subscription
by investors. As the shares approached pa
value the problem of providing means to mee
matured stock caused the adoption OF tenn
porary expedients which partially sur
mounted the difficulty. With these dispose
OI tne LOCALS Will nave SmOOlh Saliiup, as SUI
scrptions in subsequent series of shares al
limited and can be readily taken care OF Q
4 maturity.
Economy and Mutuality.
Association profits are derived from tw
sources-interest and premium on loans. i
these must be added the very important itei
of low cost OF management. The repor,
filed with the state board at the close Of ISL
| illustrates this fact. The Omaha handle
S242, ll6,0S at tota pense Of sS,2l4.70. Q
.033 per cent; the fdItnal handled sl59 942 .
| at total expense OF SB330. 92, or .039 pe
, | cent, and tho Nebraska Sl29, S9l. 90 at a tot,
, Of S,020.9l, or .05f per cent. Herein Is III
, key OF success aB well as proof OF genuir
cooperation. When the expcnse OF an ass
citation handling trom $4,000 TO 1000
year is within SL,0Otl per annum, inciudin
, salaries, rents, ,ltikIures, printing an
[ stationery, II is conclusive evidence that u
. managers interesL is DO greater than that
tie humblest member Of the association.
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