The decision to establish
the Mascoma Savings Bank Foundation must be viewed against a backdrop
of complex circumstances and events. The first and most significant
was the acquisition/merger of the National Bank of Lebanon by First
NH Banks on May 31, 1985. Over a period of many years, Mascoma had
been the owner of about 14% of the stock of NBL. The cost of this
holding was about $16,500. This was a stable and reasonable investment,
enjoying
steady growth in value during the past decade or two. Occasionally,
gifts of the stock were made to charities as an advantageous way
to fulfill the obligation of the Mascoma Savings Bank in its role as
a
good and responsible corporate citizen. The merger/acquisition resulted
in a windfall of unrealized gain in the stock of First NH Banks.
It was realized early-on by Mascoma's management that, even though the
concentration of the Bank's assets in this stock was more fortuitous
than planned, there was an obligation of trusteeship to manage this
asset as prudently as any others of the Bank. The most obvious strategy
was to protect the windfall by shifting its value to a more diversified
set of assets. The problem here, however, was to make the shift without
the shift itself resulting in a substantial depreciation of the asset.
The fact that Mascoma's cost basis in the stock was only eleven cents
per share, would in the absence of losses to offset gains, result
in
the payment of about one-third of the proceeds of any sale being
paid in taxes.
In the fall of 1986 when there existed about $3.5 million of appreciation
in the stock, the trustees explored various possible courses of action
including distribution of the stock to the depositors; sale of the
stock and a special dividend of the after tax proceeds; and the
creation of
a charitable trust of which a tax deductible gift of some of the
stock could be made. After consideration of the matter over several months,
it was concluded that distribution of the stock to depositors would
be impractical and the sale/special dividend route would not be
an
economic
solution when considering the interests of the bank, its depositors
and the interests of the community taken as a whole.
Discussion resulted in a position being taken by the trustees that
the Mascoma Savings Bank has a constituency larger than the individuals
who
may at any moment, by accident or convenience, be the depositors
of the Bank. The position acknowledged that the Mascoma Savings
Bank had
played
an important role in the well-being of the Upper Valley, but at
the same time the economic well-being of the Bank was in no small part
a result
of its environment. This being so, it was the decision of the board
that the interests of the Bank and its depositors, present and
future,
would
be best served by the good things that could be achieved via a
charitable trust funded with some of the profits of the National Bank
of Lebanon
investment. The trustees were aware of the advantages of goodwill
that could accrue to the Bank from the existence of a foundation
bearing
the Bank's name, and mindful that such a foundation could relieve
the Bank
of management attention to and operating expenses in connection
with charitable contributions which could otherwise be made by the foundation.
The decision to establish the Mascoma Savings Bank Foundation was
made by the Board on April 16, 1987. Initial funding of the foundation
had
to await the approval of tax-exempt status by the IRS.
During all of this, scenes were being painted and repainted on
the backdrop. These included a rash of conversions by mutual
savings banks to stock
form, with the promise of magnificent rewards to depositors
and management;
also the jockeying of various interest to gain or defeat laws
authorizing interstate banking, having promise of increasing
the value of the
stock of New Hampshire banks. Adding to these was a decision
by the Supreme
Court of the State of New Hampshire (Portsmouth Savings Bank/Amoskeag
Banks) which sent confusing signals about the rights of depositors
in a mutual savings bank and raised the possibility that parties
other than
trustees could initiate action to force conversion from mutual
to stock form. Then came the disenchantment of investors with
bank stocks
(and
other stocks) which led the First NH Banks' stock to drop in
1987 from a high of $28 to a low of $11 and most, if not all,
the stocks
of converted
mutuals to fall from heady heights to substantial discounts
below original issue prices.
By March of 1988, the picture had become more stable: the General
Court had passed a law that removed the threat of a forced
conversion, conversions
seemed much less attractive, the stock of First New Hampshire
had climbed back to the 18-19 range (perhaps all an investor
could
expect in view
of its 13% book value), and the Bank had IRS approval of
its foundation. Substantial financial advantage was still available
in the gifting
of First NH Banks stock to the foundation. It appeared that
a time appropriate
to again consider the matter of the Bank's holdings of First
NH Bank stock had come.
Running throughout the deliberations on this matter was the
theme that the first and subsequent mutual savings banks
had had their
origins
in philanthropy, defined as love of mankind and the practice
of doing good
to one's fellow men. In short, it was the decision of the
Board of Trustees, made on March 17, 1988, to fund the
Mascoma Savings
Bank
Foundation with
a gift of First NH Banks stock to the value of approximately
Two Hundred Fifty Thousand Dollars, based upon the belief
that the
gift was a reasonable
and prudent amount considering the size of the Bank and
its favorable capital position, and that to do so would be in
the best long-term
interests of the Bank and its depositors. It was also the
expressed consensus of
the meeting that similar action be considered from time
to time in the future.
THE FOUNDATION COMMITTEE
MARCH 1988
Post Script to the
1988 Foundation Committee’s Statement Relative
to the Establishment of and Funding of the Mascoma Savings Bank Foundation:
With the acquisition
of Green Mountain Bank offices in 1996 and New London Trust offices
in
1999 the bank’s market area was substantially
expanded. The bank’s management and Board determined that earnings
and investment growth alone would not sustain the Foundation and that
additional capital was needed to keep the Foundation economically meaningful
for this larger community. Beginning in 1996 the bank began contributing
5% of its after tax earnings to the Foundation’s corpus.FNDN/HISTORY-Foundation
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