Ottumwa tri-weekly courier. [volume] (Ottumwa, Iowa) 1903-1916, 1904-06-11

for in installments of $1.33 per month
While all OF this stock was issued
upon certificates of the same kind and
the rights and liabilities of the stock
holders were the same, there were in
fact two classes of stockholders Those
who purchased stock and paid for it in
monthly installments were known as
investment stockholders while those
who borrowed money were known as
borrowing stockholders. Both classes
paid the same amount of money upon
their stock but the borrowing stock
holders paid interest upon their loans
at the rate of 10 per cent per annum
up to 1891 and at the rate of per
cent after that time. This interest
was divided into twelve parts and was
paid monthly at the same time as the
stock payments were made.
This association like all others of its
kind was based upon the theory that
the interest payable monthly and the
monthly dues upon the stock could be
loaned out so as to earn profit enough
to mature stock when payments to
the amount of S120 to $3.50 had been
made. To illustrate:
The owner of five shares of stock
which when matured would be of the
value of 81 900 might borrow upon real
estate security, $1,000. Each month
he paid SIS upon his stock and $S.33
upon his loan. The SIS which he paid
upon his stock amounted in the end to
a payment upon the loan, so that while
the borrower paid 10 per cent inter
est upon $1,000 for ten years, at the
end of the first year he had in effect
paid $50 upon the principal and an ad-
ditional $50 at the end of each succeed
ing year.
The effect of this was that some Of
the money of the association was in
fact drawing interest from several per-
sons at the same time and not only
did it have the monthly payments of
interest with which to make new loans
but it also had part of the principal
OF the loan on which one stakeholder
was paying interest to loan to another.
The interest collected constituted
the profits and while it would appear
that the borrower was paying a large
rate OF interest he in fact got back
part of it as his share in the profits
In other words the money paid in by
the stakeholder on stock was credited
to the stock and with it was credited
his share of the net profits of the con-
corn. So that when he had paid in
say S625 upon his five shares of stock
his stock was worth $1,000 and that
paid his loan for the borrowing stock
holder received dividends at the same
rot a nc e,+n 81
This association did larger bust
ness than any other Loan and Building
association ever organized in Ottumwa.
Most. of its business was done within
the city OF Ottumwa Ii is said that
it never made a loan outside of Wapel-
10 county and only made one or two
loans outside of Ottumwa 1t issued
very nearly its authorized $1,000, 600
stock and during it's most prosperous
years from 1887 to 1891 had nearly
three hundred thousand dollars Of loans
in force.
While the original plan of the asso-
citation was to loan it's own money. its
board of directors thought that by Dor
rowing money at current rates and re-
loaning on its plan of compromising
monthly it could make additional prof
it's 1t began to borrow money in 1879
but for the first few years it only Dor
rowed small amounts as they became
necessary TO supply existing stock
holders with loans which they applied
for. In 1888 it borrowed $4,000 for
the purpose of making loans and from
that time until 1888 it borrowed other
amounts until at the end of the fiscal
year in 1888 it had borrowed 100000
which was loaned TO it's stockholders
In June, 1888, The stock which had ben
issued in 1878 was declared ma
tured. At that time 24S shares of
stock was matured and as a large part
OF it was investment stock it required
considerable money to retire it, 1t
will be understood that borrowing
stock did not require the payment of
money by the association to retire it
for the stock and loans upon it were
equal in amount and such stock was re-
tired by cancellation of the loan. The
borrowing stocllholder procured his
money when his loan was made and
when his stock had matured his loan
was paid and his mortgage cancelled,
by cancellation of the stock. The
investment stockholder. however. was
entitled on maturity to $500 for each