Mascoma Savings Bank created the Mascoma Savings Bank Foundation out of a profound commitment to community.


What is the MSB Foundation

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.