Our recent contest topic in the quest for presidency for a day of Schmidlap National Bank-How should community banks handle the overwhelming number of requests for charitable contributions?-drew far more responses than we could cover in one column.

For lack of space we eliminated discussion of the foundation set up by Ocean Federal Savings Bank of Toms River, N.J. When the bank converted from mutual to stock form, it put 8% of its newly issued stock in the foundation. President John R. Garbarino said he would be glad to tell other bankers how this can be done, as part of a conversion or not. His phone number is 908-240-4500.

Frank Koch, loan review officer of American Trust Bank of Dubuque, Iowa, bemoaned the fact that charity policies are often based not on what is "charitable, useful, and important" but on what looks good and can augment profits. He particularly criticized new acquirers of community banks.

But I want want to highlight a thoughtful letter received quite a while back from Clifford N. Hogan, who identifies himself only as a resident of New York City.

"Dear Mr. Nadler,

"This month's problem in American Banker raises the conundrum a bank faces each time it receives a request for a corporate contribution. Banks, as focal points of local economic activity, bear some responsibility for the economic well-being of the communities they serve. Moreover, they derive a benefit from the investment and lending opportunities and stable employment pool that are byproducts of that continued economic health. However, the dual objectives of protecting depositors' funds and rewarding shareholders for the use of their capital provide banks with competing responsibilities.

"As president of Schmidlap National, I would resolve this dilemma with a four-part program:

"1. Volunteer. I would join a board and become active in a community activity. From the inside, I expect to get a better idea of how to detect which groups are committed to service and which to their patrons' egos. I would also encourage Schmidlap's employees to volunteer in other groups at any level from board membership to lot clearing or selling Girl Scout cookies. Within reasonable boundaries, I would provide bank resources (meeting space or photocopiers) to assist volunteers in their activities. I might also ask Schmidlap's employees to pick a community project they would like to accomplish. When a project is chosen, Schmidlap would sponsor it fully.

"2. Tithe. I would propose to Schmidlap's board a formula for contributions to fund a charity 'kitty.' This places a reasonable, predictable cap on all such spending. I would then invite Schmidlap's employees, depositors, shareholders, and even borrowers, to register their personal contributions with the kitty by submitting photocopies of the appropriate canceled checks. Schmidlap would match their contributions on a percentage basis. This is about as close as you can get to letting the marketplace make these difficult decisions.

"3. Budget. I would designate a portion of Schmidlap's ads in programs of local not-for-profit activities. These programs, targeted to a like- minded audience, are good vehicles for name recognition advertising and an excellent place to explain all the ways Schmidlap, its employees, depositors, and shareholders contribute to the community.

"4. Lend. Finally, I would review Schmidlap's lending policies and procedures to make certain that loan requests from not-for profit community groups get reasonable hearings. Loans are not grants, and the distinction must be clearly made. A properly underwritten loan to a community-based not-for-profit-at a reasonable rate of interest-not only benefits the community but also creates an earning asset for the bank, its depositors, and shareholders.

"One final note: The power to contribute is the power to destroy by denying subsequent grants. The decision to stop contributing can thus be more difficult than the initial one to give."

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