Fines are imposed for a default in the payment of dues or interest when payable.

The security required is a bond secured by first mortgage upon unencumbered real estate, or a pledge of the stock of the association, upon which the dues already paid and the dividends which have been added thereto make their value greater than the amount of the loan, and also further secured by a pledge of the shares borrowed upon. The profits of the association are derived wholly from interest paid upon its loans, premiums paid for loans, fines collected from stockholders defaulting in the payment of dues or interest, entrance fees required upon issuing stock, transfer fees required when the stock is assigned, and profits left by withdrawing stockholders. These profits are divided, annually or oftener, among the shares of stock outstanding at the time of distribution, each share having a dividend added to it in distributing the profits, and such dividend being the same proportionate part of the total profits divided as the value of the share to which it is added bears to the total value of the shares among which the distribution is made.

Whenever a share upon which no loans have been made (called a free share) has reached its matured value, the share of stock is surrendered, and the association pays to the shareholder the matured value. Whenever a share matures which has been borrowed upon (called a borrowed share), the share of stock cancels the loan. There may be a single series of stock issued, in which case members coming into the association after the first issuing of stock must pay back-dues, to place them in the same condition they would have been had their stock been taken at the first meeting, all shares at all times being of the same value. When the stock reaches its matured value, all stockholders will be borrowers to the amount of their stock. The stock cancels the loans, and the association ends. This is called the "terminating plan." Or the association may be so organized that it may issue its stock in series yearly, semi-annually, or oftener, in which case the association may be perpetual, and is known as the "permanent or serial plan." Stockholders may withdraw at any time upon giving a certain notice, whenever there are funds applicable for such purpose. They surrender their stock, and receive the dues paid by them and a certain percentage of the profits.

There are a great many variations in the detail of this general outline among different associations. These variations consist

largely in the value of the matured share,—such as $100, $105, . $125, $200, $250,- variations in the rate of interest charged, in the frequency of the payment of dues and the amount paid, and the manner of receiving them by the association (whether by some officer at his office or by the board of directors or its committee at a regular stated meeting); also, in the matter of the premium charged and the time of its payment.

The number of associations of this class in this State at the present time there is no mode of ascertaining with absolute accuracy, except by a canvass of each locality in the State; but the number approximates 275 very closely. Of this number, about 100 are located in Buffalo, 83 in Rochester and the immediate vicinity, 30 in the city of New York, 18 in Brooklyn, 4 in Westchester County, I in Albany, 2 or 3 in Syracuse, 1 in Utica, and 2 in Elmira.

There are at present two general acts upon the statute books of the State under which these associations may incorporate. The first is chapter 122 of the Laws of 1851, entitled "An Act for the Incorporation of Building, Mutual Loan, and Accumulating Funds Association." The second is chapter 556 of the Laws of 1887, and is entitled "An Act for the Formation of Co-operative, Savings, and Loan Associations." The act of 1851 outlines no definite scheme for conducting the business of the association. One must be acquainted with these associations before he examines the statute, to form a correct idea of the nature of the associations of which the statute authorizes the incorporation. It is so broad and general in its terms that it permits of the incorporation of an association upon any scheme heretofore devised or which may be hereafter devised for conducting the business of this class of financial corporations, whether the scheme be good or bad. No provision was made for State supervision. It provides that those who unite to form such associations shall adopt articles of association which, in fact, constitute the charter of the corporation, and describe the scheme upon which its business shall be conducted, but does not even require that these articles of association shall be filed in any other office than the clerk's office of the county in which its business shall be conducted.

In 1875, an act was passed placing them under the supervision of the superintendent of the banking department and requiring annual reports, and that the superintendent should examine them or cause them to be examined by some person appointed by him once in two years. In 1878, however, the last provision was

amended by simply making it his duty to make examination when. requested by the stockholders so to do. Notwithstanding that annual reports are required by the statute, and have been ever since 1875, in such form and by such officers as the superintendent shall require, they have not, as a rule, been made. The present superintendent wrote me recently that not over twenty-five associations had reported in 1888 and a less number in 1887.

The act of 1887 outlines a definite scheme, corresponding very closely with the co-operative bank scheme of Massachusetts, thẹ statute itself taking the place of the articles of association under the act of 1851. Eighteen associations have been organized under these provisions, located in various parts of the State.

In regard to the success of such associations as a class, until we come down to those organized quite recently, reliable data are not obtainable, except by going into each locality where associations have existed and making investigations. I am informed upon what seems credible authority that the first association organized in Buffalo was about twenty-five years ago,— that there was a greater number in Buffalo ten years ago than to-day. The first association in Rochester was organized in March, 1852. Its success did not meet the expectations of its members; and, after a short time, it was closed up, and ceased to do business. The second was not formed until April, 1871. For some years after this, their numbers increased rapidly; and they were comparatively successful. But, during 1871 and 1872, some "building lot asso. ciations" were incorporated under the same act of 1851, which were speculative, to some degree at least, in character, and which, in many cases, proved disastrous to the shareholders. These were confounded in the public mind with the true Building and Loan Association, and chilled for a time their growth and prosperityIt was not until 1882 that they began to increase again, since which time their growth and seeming success in Rochester have been phenomenal. Charles W. Mead, of Albany, writes me: "There is but one association in our city, organized in May last. When I first came to Albany, in 1871, there were two or three savings and building associations — so called — in the last stages of existence. One of them, I have since been told, terminated, and its accumulations were distributed; and the results were fairly satisfactory to its members. The others suffered from improper and unfortunate investments (not being limited to first mortgage investments), and, as a consequence, lost heavily; and the members have now a natural distrust of this class of associations."

An association was organized about 1870 at Elmira, N.Y., upon the terminating plan, which continued fairly prosperous for six or seven years, when many of the borrowers of the association became dissatisfied with it, and its affairs were wound up by mutual agreement between the shareholders. Another association, not long after 1870, was organized at Waverly, which was closed up by mutual agreement of its stockholders before its shares had reached their natural value.

So far as we have been able to learn in our investigations, all the early associations in this State, and nearly all down to the present decade, were organized upon the "terminating plan," as to the manner of issuing their stock, and upon the "gross premium plan," with a system of rebates in the premium paid, on the payment of a loan. As a rule, these associations, before the time was reached for the maturity of their stock, ceased to be popular with the shareholders. Yet, when well managed, and borrowers were not influenced to bid too large a premium in their competition for money, they were successful and of benefit to the shareholders. In theory, a loan to a shareholder was an advance to him upon the matured value of his share,— that is, he received, at the time he made his loan, the matured value of his share of stock borrowed upon; while the shareholder who did not make a loan had to wait for the accumulations of his savings until his share matured. And it was held right and proper that the shareholder who had thus the matured value of his share advanced to him at the beginning of the association should pay, besides interest, a premium therefor; and that such premium should be regulated by the number of years in which he was to enjoy the use of the money so advanced to him, before the shares of stock upon which the loan was matured. Generally, before the stock matured, the early borrowers clearly perceived that the premiums they paid simply amounted to paying a large interest for the money borrowed, or, as it was then called, advanced to them; and, if the real estate in which they usually invested the money did not advance in value, they became dissatisfied, and the association ceased to be popular with them or their friends.

Another fact is pertinent. In this class of associations, the "gross plan," with a system of rebates, is too complex for the ordinary shareholder to comprehend at first; and when at last he comes to clearly understand it, if he is a borrower, he is apt to go to the other extreme, and regard himself as robbed by the share

holder who does not borrow. These influences caused the associations working upon the scheme then in vogue, for the first thirty years of their existence in this State, usually to fall into disrepute by the time they were five or six years of age; and, as an association matured its stock or was closed up by mutual arrangement among its stockholders, no new one was organized to take its place. Buffalo and Rochester may be fairly counted as exceptions to this rule. The formation of associations was sporadic in character during this period. The act of 1851 furnished no guide. There was no current literature circulating in regard to them, and no books obtainable that were of service. As a rule, they were only formed as some person favorably interested in one, in a certain place, moved to another place where there was none, and became interested in the formation of a new association with reference to some pecuniary benefit to himself.

In 1882, the Homestead Loan Association of Rochester (organized in 1881 on the "terminating plan ") made such changes in its articles of association as to place it upon the "permanent plan," with the matured value of its shares $105; weekly dues, twentyfive cents, ten cents a week interest on each share loaned upon (being a fraction less than 5 per cent. interest); the premium bid for loans was deducted from the amount loaned, and no rebate allowed if the loan was paid before the stock matured. It adopted one feature which does not properly belong to such associations; viz., of allowing stock when it has matured to remain unpaid, when the association deems it advisable so to do and the shareholder does not elect to withdraw it, and paying to the holder a cash dividend semi-annually. This association has been eminently successful; and according to its sixth annual report, issued Oct. 7, 1887, it had 1,506 shareholders, of whom 261 were borrowers. It had outstanding 17,512 unmatured and 502 matured shares. Its assets amounted to $270,266.51, and it claimed to be the largest association in the State. In several cases, new associations, formed along the line of the New York Central Railway, have adopted this association as a model.

One of the oldest, if not the oldest association now doing business in this State, was formed at the city of Elmira in 1875, and called "The Chemung Valley Mutual Loan Association." It was organized upon the scheme of issuing a yearly series of stock ; the matured value of shares, $200; dues, $1 a month; interest at 6 per cent. In the matter of premium, it adopted the " gross