SOUTHLAND BUILDING AND INVESTMENT SOCIETY AND BANK OF DEPOSIT.

NZ Truth, Issue 730, 14 June 1919, Page 4

SOUTHLAND BUILDING AND INVESTMENT SOCIETY AND BANK OF DEPOSIT.

Jubilee Report and Balance Sheet

"Cambist" is pleased to have at hand :.he balance sheet of the. above co-oper-itive society, backed up by a spleniid historical account of its doings for the past fifty years. It is about four years since the affairs of the society were first noticed ill these columns. JYom the very first article that appeared this writer has always stressed, the co-operative character of the society, and has pointed to the great social service the society was performing m the districts covered by its operations. Looking over the record for the fifty years just completed -by the society, on© finds -a very £al? summary e£ the growth of Invarcargill for that period. Many worthy faces and ; figures are brought to remembrance, while at the ■tame time, the growth of the district :-.i eleAv]y set forth m the early pictures j£ invorcargill compared with the modern conditions that have evolved. The wooden shanties of fifty years ago are only a happy memory. In their places handsome structures of brick and stone make one realise that the early settlement has grown into a city, tnvercargill has developed through its natural resources.' Its timber mills provided constant employment and the busy plough has turned over wealth L'rom the soil. Broadly speaking, it is Lo the products of the land that the whole district owes ITS SOUND FINANCIAL POSITION to-day. There is still an enormous prosperity before this part of the Dominion, for of no other portion can it be said that it is fully developed. "Cambist" makes no apology for these remarks for they are necessary. New Zealanders are very local m their ideas, and the inhabitants of the different provinces are often quite ignorant of the conditions obtaining m other districts. Our people should love New Zealand from the North Cape to the Bluff and their thoughts should clothe the East and West Coasts of both islands with the wannest affection. In i this spirit, co-operation finds its opportunity to draw all together so that "cut-throat competition" ceases, and m its stead the latent forces of welldirected energy "lightens the load by pulling together." Now for some lessons from the history of the society. Readers of this column may have noticed that "Cambist" does not favor the Starr- Bo wkett form of building society. It came as a surprise to him to find that this society started on Starr-Bowkett lines. For the three years 1870-72, the loans were put up to auction, and from the prem^ iums thus obtained a total sum of £1557 was gathered m to the profit and loss account. In the period mentioned the dividends paid on the shares ran from eig-ht to ten per cent., but as the society was then a terminating one, the directors recognised the UNSTABIL.ITY OF THE SYSTEM and took steps to change the constitution to the permanent form of building society. It has remained as a permanent building society ever since. Nothing better proves how enlightened these directors were. It is good to find the board of a society is endowed with so much financial wisdom. The board of the early days have builded wisely, for they moved from the shifting sands of Starr-Bowkett opportunism to the solid rock of permanent thrift rules, the latter imposing so many safe- guards for sound management that It inspires confidence and stability. | In. 1873 the first report was Issued with the balance sheet, as a consequence of the change m the rules. Formerly statements were issued annually to ' the shareholders, and these only set forth the profits from loanssold by auction. Under the permanent building society rules very full statements have to be given, and also a report from the directors. In the latter case the management is made to feel its responsibilities, not only to the society, but also to the members. This lis a feature strongly marked m all co-operative societies. It may be i avoided by ordinary companies whose j rules or articles for management are j FRAMED FOR THAT PURPOSE. | Here we get a distinction which proves how much better served are those who work upon co-operative principles. [ It is a pity that the people do not understand the difference between an ordinary company and a co-operative society. We might then see some wholesome amendments made m our company laws that are sadly needed at i the present time. In the year 1877 | the society was incorporated under the Building Societies Act. 1876, and it is from that time the committee of manj agement was done away with, and the same' offices were attended to by directors. A feature m the year 1878 was the issue of debentures for small sums payable on demand. This was done m the interests of economy. It was cheaper than working a bank of deposit, which the powers of the sociey entitled it to do. It might be mentioned ! that rates of interest, both to borrowers and lenders, were much higher than they are at present. The reserve fund, v/as divided amongst the shareholders m 1881, and gave these grasping persons an "extra two per cent, to those who participated." The directors of those days concluded that the "operation of the rules which create this fund acts prejudicially to the interests of a large proportion of the shareholders." There was evidently an intention to abolish the reserve fund, a course which, fortunately, has not been followed. Considering THE PRUDENCE AND ABILITY displayed by the directors, one stands agrhast at the notion. But more of this i anon. It is time to consider the balance sheet for the year ended April 29. The paid m capital amounted to £242,042 which totals the payments made upon 22,263 shares, leaving a balance to be paid m of £314,533. This information is not given m the balance sheet; it has been extracted from the Jubilee Record. "Cambist" considers that now that the society has given the information, it should for the future be set out m every balance sheet. It is indeed a most important item. The amount raised upon debentures is £122,518, and the persons lending the society that sum are very well secured by the paid m capital. Practically the shareholders'have £2 invested for every £1 borrowed on debentures,, but if the liability on the shares viz., £314,533 is taken into consideration, the security, on the face of things, is increased by

nearly £3 more per pound. In other Words, there is nearly £ 5 worth of cash security for each pound borrowed. However, this is not quite upon the lines of the' society's Borrowing powers ] but it gives, nevertheless, such an indication of the general strength of the position that it should not be passed over. Credit is based upon sound borrowing powers backed up by worthy shareholding; This society has both right to ftand, with the ever-growing contributions flowing m from the liabilities of the shareholders at the rate of nearly £2600 -per fortnight, and the large sums that flow into its coffers from the repayments of- loans. The loans totalled (on mortgages) £355,900. Advances on shares £4749, and advances on debentures £5, making m all <£380,G64 at -data of thd balance sheet. , The reserve fund is one per cent, upon the advances on mortgages, or £8517 as shown m the balance sheet. "Cambist" has always drawn attention to the smallness of this provision, and he again desires to point it out. Looking "at the ■ statement made m the Jubilee Record, it is found that m the course of the fifty years covering the history of the society, £ 11,361 was put aside to meet losses, and that the actual losses made m that time came to £3*59, leaving a balance m favor of the society of £7402. Deducting from the latter sum £ 3517 (the amount now m reserve) we find that the sum of £3885 has been returned to the shareholders, and this has swelled the return of their profits. What this writer contends for is A PERMANENT AND GROWING RESERVE to be . and to remain the property of the society. This is a vital doctrine of true co-operation. Had this been followed, the reserve fund to-day would have been £7402, and that is only a little over two per cent, on the total advances on mortgages. If there are no serious losses made, the earning on the reserves could be allowed to go to the shareholders, but not onepenny of the principal sum should ever be allowed to reach their grasping hands* It is quite possible that severe fluctuations m Values may take place at any time. The' reserve fund should be large enough to more than meet them when they come. The experience of the society goes to show how near the reserves were of extinction m the years' when* adversity struck them. Heavy payments, to meet losses,, brought the reserve fund down to so low a limit, as £209 m the period of 1890-94. The loans then current were £61;690, so that even the small one per cent, of reserves did not eventuate as the reserves were about one third of that amount. To be quite candid about this matter, "Cambist" holds to the opinion based upon the detailed statement given as the Jubilee Record of the society, that his insistence on a, i growing permanent reserve IS SOUND IN FAOT, and altogehter m the direction of bene-. fit to the society. It is needless to say more about the matter. On the assets side of the balance sheet, deposit account stands at £5500, and the balance m bank is £5150. This' gives ah easy appearance -to the cash department. It proves that the society is ready for any good business that may arise. All that need be remarked about the other accounts furnished m the usual manner, is that they are excellent m the set out, and sufficient for practical | criticism, the only improvement that this writer can suggest is that connected with the capital account above noticed. VThe report issued by the directors is a cheery one, as well as a complete document. The society has made a record m every direction. It has more shareholders, more debentures and j bigger loans. Every department rings with business on sound lines, and this writer is glad to admit the fact. As regards the splendid Jubilee Record, this -is a very full and convincing piece of honest work. There is only one feature that "Cambist" has looked for m vain, namely, the number of loans granted during the fifty years passed over. He thinks that a summary giving particulars of loans on mortgages, and on shares, would have rounded everything off and (made for completeness. Nevertheless, the whole achievement is worthy of praise. The Southland Building and Investment Society and Bank of Deposit has given grand service m the district it works m. The pity is that there are so few societies of the same kind at work m other places.