With the holiday season upon us, banks are continuing to go above and beyond the letter of the law to fulfill their charitable mission – and using a diversity of methods to do so.
Creating foundations, writing checks, offering volunteer hours or providing vehicles for others to give are just some of the ways banks are giving back to their communities. Banks all across Massachusetts give away a total of $30 million in charity each year, according to the Massachusetts Bankers Association.
“Some donate through charitable foundations; some simply write checks. That doesn’t even include the thousands of volunteer hours employees give across the state,” said Bruce E. Spitzer, MBA’s director of communications.
In terms of financial contributions, charitable foundations are one of the more popular ways for banks to administer their donations. Foundations provide guidelines, goals and tax advantages that more straightforward donations lack.
“A lot of banks just write checks. Having a foundation provides guidelines, discipline – and allows a bank to interface easily with nonprofits,” Spitzer said. “It sets up a scenario where it becomes easier to manage donations, because there are specific goals – not just financial goals, but gifting goals.”
Some foundations only give to social service organizations; others deal only with those involving family, education or youth programs. Setting such parameters helps foundations respond appropriately to the various nonprofits that may apply for funding, Spitzer said. And if one bank with particular guidelines can’t help, sometimes the bank down the street can.
The MBA recently announced the work of its own charitable foundation, which has dispersed more than $300,000 in awards and supporting activities to nonprofit organizations since its inception in 1996. The Massachusetts Bankers Association Charitable Foundation reached the milestone of $100,000 in donations this year via the voluntary support of its more than 230 member banks. Grants were awarded to 15 nonprofit agencies over eight geographic regions in Massachusetts.
“It’s symbolic of what so many institutions do on their own,” said Spitzer.
For example, the Middlesex Savings Charitable Foundation also recently awarded grants to 11 local nonprofits totaling $100,000. Natick-based Middlesex Savings Bank, the largest mutual savings bank in Central Massachusetts, began its foundation a few years ago with an initial contribution of $2 million. The bank then put an additional $1 million into the foundation each of the following two years.
“The main reason the idea of a foundation appealed to us is, if we contributed to a foundation, no matter what state the economy is in, we would always have that amount as an endowment,” said bank President and Chief Executive Officer A. James Lavoie.
“Otherwise, some years are better than others, and if you’re not having a typical good year, you would have to cut back, when these are often the times these organizations need funding the most,” Lavoie added. “It makes us less concerned about year-to-year fluctuations.”
‘Good Business’
Each year the foundation establishes different criteria for grants. One year’s focus was education; this past year it was capacity building.
“Capacity building is sometimes not so glamorous,” said Lavoie. “But these are the things that help these organizations be more effective.”
For example, one of the awards went to the Center for Arts in Natick to purchase two software programs to help the agency better track and manage funds.
At Middlesex, writing checks and giving grants through the foundation are the two main methods of monetary donations. Having at least two methods offers funding flexibility, helping ensure various sectors of the community are served. All financial donation decisions have to be approved by vote by either of the two separate boards running the bank and the foundation; each board’s members represent a cross-section of the communities the bank serves, Lavoie said.
“If we only had a foundation, and were only contributing from the foundation, we would have some limitations in terms of taxes – IRS regulations – and only being able to contribute to 501(c)(3)s or similar [nonprofit] organizations, while a lot of times we’re contributing to organizations that are not really tax-exempt,” Lavoie said.
Lavoie noted that many banks establish foundations when they go public, using some of the money raised to do so. Middlesex, however, as a mutual bank, used its earnings to start its foundation.
Eastern Bank, the largest independent mutually owned bank in New England, also understands the benefits of having a foundation. The Eastern Bank Charitable Foundation has been in existence for more than a decade and currently has about $15 million in its endowment. Three years ago, the bank decided to aggressively grow the foundation by contributing 10 percent of its net income to the foundation annually. In turn, the foundation donates about $1 million yearly to various organizations across Massachusetts, largely those that operate within the footprint of the bank.
“Our decision to donate 10 percent of our earnings to the foundation reflects that we realize, as a lending organization in Greater Boston, that we have an obligation to serve the community in many ways,” said Joe Bartolotta, Eastern Bank’s public relations director.
Such charitable giving occurs at all sizes of banks, not just the largest ones, Spitzer pointed out. For example, though much smaller than Eastern or Middlesex, Wainwright Bank & Trust Co. in Boston has also taken that idea of responsibility to heart. The bank donates 3 percent of its pre-tax earnings to an internal charitable giving program. And for five years in a row, Wainwright has received an award from the Community Development Financial Institutions Fund of the U.S. Treasury in recognition of its aid to underserved communities.
“We’ve received more money than all Massachusetts banks combined, though we’re much smaller,” said Steven Young, senior vice president at Wainwright.
Rather than adding the award to the bottom line, the bank put the funds toward creating CommunityRoom.net, which provides free hosted Web sites with online donation capabilities to nonprofit clients of the bank.
Wainwright also has a real-world version of CommunityRoom.net at its branches: a meeting room accessible from the street 24 hours a day via a PIN, or personal identification number. That feature is especially popular at Wainwright’s Central Square, Jamaica Plain and Back Bay locations, according to Young. Thus, another way of donating to the community is allowing the community to donate to the causes closest to its heart.
“The fact [clients’] deposits are being lent into the community follows their missions and extends their own practices,” said Young.
Spitzer emphasized that, for the most part, such charitable donations are not motivated by Community Reinvestment Act purposes, but by an increased culture of corporate responsibility a community dependence on bank generosity and the simple fact that giving is good for business.
“Are some of these activities tangentially related to CRA? Maybe in terms of service, in an extended way, perhaps if the recipient is an economic development organization or a housing organization,” Spitzer said. But even under those circumstances, such donations aren’t considered lending, but gifts.
“Do regulators take such activities into consideration on some level? Yes, they do, but it’s not at the core of these activities,” said Spitzer.
“CRA has become more of a business model as opposed to a regulatory model for banks,” Spitzer added. “Modern-day banking has become very competitive, and the issue becomes not fulfilling CRA requirements, but going the extra mile. Doing what’s best for the community turns out to be good business.”
