Small banks in Massachusetts are thinking big. Apparently they have to.
When the Great Recession deflated the economy in one giant gaseous sigh a few years back, it not only took out small businesses and overall hiring, it decimated the nonprofit sector. Companies, at least, could try to dream up new products or services. Nonprofits often only do one thing – help the blind, or provide food for the hungry or aid children in need. They rely on donations, especially bigger donations from big business. And those all dried up faster than you can say “executive bonuses.”
At many of the nation’s largest banking chains, what corporate giving there was got parceled out more to national charities than to local ones (one argument being that many of the national charities had local chapters that benefited in turn). That trend seemed to accelerate as the bucket of discretionary dollars dropped.
But the shift of national dollars to national charities wasn’t caused by the recession. In fact, a 2007 study by the National Committee for Responsible Philanthropy had already identified that big shift, caused more by banks merging into behemoths that have a hard time seeing the little local charities. Think of it this way: When you’re down near the ground, everything looks big. But when you stand up tall, everything that seemed so big before hardly becomes noticeable.
And that’s why all those local charities need someone who’s down here at ground level with them. They need someone who can see them, and can see their need, and the need of those they serve. They need local community banks.
Community Bank Heroes
Banker & Tradesman just finished up a project where it identified a handful of “community bank heroes” — individuals at smaller banks who are champions of philanthropy. The stories of those financiers are compelling. But one point that should be stressed is this: If the banks themselves didn’t have a culture of giving, of being important contributors to their regions, then no individual at the bank could have won anything. An individual employee can only excel in a culture that accepts and promotes excellence.
One story that’s being told in a different way is how community banks have undergone a metamorphosis during this most recent crisis. For many people, the thought of banks being involved in the community turns to sponsorship of Little League teams and Girl Scout jamborees. But the fiscal crisis that swept through our state was serious, and community banks here got serious about making every dollar count.
Claire Greene is a senior communications specialist for the Federal Reserve Bank of Boston. She’s penned a cover piece for the most recent issue of the Boston Fed’s quarterly outreach magazine, in which she takes a look at how community banks and nonprofits are working together.
What she found is that bank giving has gotten a lot more focused, a lot more disciplined, as bankers have been besieged by calls for help.
“Executives of small banks and bank foundations in Massachusetts … [said] they want to know how many individuals will benefit from a gift, which charitable opportunity will have the best long-term effect, and whether the nonprofit has a tangible goal. They want proposals with specific objectives,” Greene wrote.
Moreover, “particularly at financial institutions serving low- and moderate-income communities, leaders mention the importance of choosing charities that will have the greatest impact. These institutions generally focus their giving on education, health care, and social services. They talk less about sponsoring a baseball team or contributing a savings bond to a school raffle, worthy as those activities are,” she wrote.
Bankers can’t fund every possible nonprofit. They can’t even fund most of the requests they get, with some reports saying that, even with a state economy on the mend, applications for charitable giving from Massachusetts banks is running at two or three times available funds.
Which is why it’s gratifying to see bankers tune up their criteria for who gets what. They want to see organizations that can help the most people get the money they need. They want to see organizations that have the strongest connection to the communities served by the bank get the money they need. And they want to see the nonprofits that have the best structure, the best chance of making the best use of the funds, get the money they need.
Of course, banks get other benefits from such philanthropy. Financial institutions that put their weight behind worthy causes often get good PR play. They make the bank’s employees feel good about their company. And they make potential customers see the bank in the best light – no small feat these days.
But while community banks may be getting more strategic about how they fund the neediest in their towns, it’s important to remember that most of these institutions have been funneling money into local charities – as well as local ball fields – for their entire history.
That’s because the best investment a community bank can have is a healthy community. And the best friend a community in need can have is a community bank.
Vincent Valvo is CEO of Agility Resources Group LLC. He can be reached at vvalvo@agilityresourcesgroup.com.
