Micro Cap Profile

Franklin Insight
By Patrick McVeigh

March, 1998

Micro Cap' Profiles are not recommendations for investment action. They are intended to provide social and financial information on micro-cap companies with positive social characteristics

Summary
A small, conventional bank based in Boston, Wainwright Bank & Trust Company has thrived, as it says, by "doing unconventional things." The bank has incorporated a socially responsible business philosophy and a deep commitment to social justice throughout its operations. Wainwright recently entered a new arena of the socially responsible financial world with a recent investment in Franklin Research & Development Corporation (FRDC), the largest independent firm concentrating solely on socially responsible investing. (FRDC is also the publisher of this newsletter.) While high insider ownership and subsequent lack of takeover appeal has kept the stock's valuation considerably below that of its peers, growth has been quite healthy at the bank. Two key areas to watch that may lead to an improvement in valuation are efforts to increase the bank's marketplace beyond the Boston area and growth in investment products. (Due to our relationship with Wainwright, we offer no recommendation on the stock.)

Business Profile
Founded in 1987, Wainwright has become the twelfth largest commercial bank in Massachusetts, with 1997 year-end assets of $325 million. Its Tier I capital is 9.6%, one of the highest capital ratios of any commercial bank in Boston. Wainwright attributes much of its success to its three-part "banking on values" strategy: providing customers with outstanding service, offering highly competitive rates, and maintaining a commitment to social responsibility. The Bank has committed a substantial percentage of its loan portfolio to local community development projects, small business lending, and mortgages for low and moderate income residents. Women and minorities comprise nearly 50% of the Bank's directors and officers.

Social Profile
One learns of the true character of an individual and an institution not so much in their words, but in the words of others. I was reminded of this truism once again as Robert Glassman, Co-Chairman of Wainwright Bank, was honored this week by the American Jewish Committee with its 1998 Institute of Human Relations Award. Stirring tributes came not only those who have worked closely with Mr. Glassman, but also from those in need who have been helped by the Bank. Befitting the reach of this small Boston-area bank, tributes were received from President Clinton, the National Organization for Women, the Puerto Rico Federal Affairs Administration, the AIDS Action Committee, and Gay & Lesbian Advocates & Defenders. While larger companies such as Chase Manhattan Corp. and American Express Co. are placing ads in major gay publications, most community banks are shunning such attention.

There are many clear signs that Wainwright is a different kind of bank. There is the annual report, which makes clear the bank's commitment to affordable housing, community development, women's rights and the gay and lesbian community. There is its newsletter, Creative Economy, which details examples of its community loans and services. There is the fact its two co-chairmen, Robert Glassman and John Plukas have shared the same office for the more than twenty years they have been in business together. And most importantly from my experience, there is the awareness among all employees of the bank's unique mission.

Wainwright has been an innovator, particularly in the Boston area, for financing non-profit organizations and low-income housing. Despite having less than 1% of the loan activity in Greater Boston, Wainwright has financed over 50% of the local housing projects for people with AIDS. It has also been involved with creating over 500 units of affordable and special needs housing in Boston and Cambridge. Over 20% of the Bank's entire loan commitments are to socially responsible community development projects.

Examples of recent socially responsible lending activities include the International Institute of Boston (an organization providing comprehensive services to refugees and immigrants from over 100 countries), Rockport Elder Housing (to provide housing for 31 elderly tenants), the Trust for Public Land (to acquire inner city land for open space), and CAB Health and Recovery Services (to allow this not-for-profit to build an 80 bed drug and alcohol treatment center). Due to loans such as these that support underserved communities, Wainwright recently received a Department of the Treasury Bank Enterprise Award of $60,000. In the words of Larry Kessler, Executive Director of the AIDS Action Committee, "If there were a Nobel Prize for business involvement in the needs of the community, Wainwright would be up there as a top nominee."

In addition to seeking out community needs to support, Wainwright has also been clear in the types of investments it will not support. The Bank has a policy of holding no investments in tobacco, nuclear power, or alcohol related industries. Wainwright Bank has been a member of the Social Investment Forum since 1994

Wainwright has also been a leader in the area of employee diversity. Nearly 50% of the Bank's officers are women and 50% of its directors are minorities or women. One board member is a lesbian. In August, 1996, Wainwright became one of the first corporations in the country to endorse the Employers' Women-Friendly Workplace Pledge of the National Organization for Women (NOW). Its employment policy forbids discrimination on the basis of race, sex, religion or sexual orientation. In 1995, it became the first bank in Massachusetts to offer same-sex domestic partner benefits to its employees. As a result of its lobbying of the Massachusetts Bankers Group Health Insurance Corporation, the 180 member banks representing 10,000 employees can now provide same-sex domestic partner benefits. These efforts earned Wainwright the Association of Affirmative Action Professionals' 1996 "Ray Frost Award."

Wainwright is one of only three banks that have endorsed the CERES Principles, an environmental code of conduct. It did so in September, 1997. Recycled paper is used throughout the organization, including the annual report. The cover of its annual report was printed on "environment tortilla"-a new paper made from 50% reclaimed sugar cane fiber and 20% pre- and 30% post-consumer wastepaper.

Of prime interest to customers, Wainwright is known for its low-cost accounts and high interest rate offerings. On February 23, 1998, Wainwright offered the highest interest rates among Boston-area banks on savings and NOW accounts, as well as on 6-month, 1 year, and 2-year certificates of deposits. (The survey included Bank Boston, Citizens, Fleet, US Trust, Cambridgeport, and Cambridge Savings.) Checking and savings accounts free of monthly service charges are offered for persons 18 years old and under or older than 65 years.

The bank gives 3% of pretax profits to charity each year. It also offers a Community Card MasterCard, a credit card that donates 1% of purchases to organizations promoting gay and lesbian equity, AIDS services and women's rights.

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