Financial History Issue 114 (Summer 2015) | Page 17

Collection of the Museum of American Finance

Stock certificate for four shares of The National Union Bank of Boston issued to John Brooks on June 22, 1895.
The black and white certificate features an engraving of the state capitol.

Cents Savings Bank (1854), Charlestown
Five Cents Savings Bank (1854), Franklin
Savings Bank (1861), Brighton Five Cents
Savings Bank (1861), South Boston Savings
Bank (1863), Eliot Five Cents Savings Bank
(1864), Boston Penny Savings Bank (1864),
Home Savings Bank (1869), North End Savings Bank (1870) and the Wildey Savings
Bank (1892), many of them surviving until
relatively recent times.
The idea of savings banks became so
popular that by 1892, there were 184 savings banks and institutions for savings in
the commonwealth, with combined assets
of $416 million, and 16 such banks in Boston, with combined assets of over $125 million at that time. Like these and other early
savings banks, the Provident was set up to
help the less fortunate members of Boston
society, the “frugal poor,” to save their
money rather than wastefully spend it.
In addition, and unlike Boston commercial banks, customers received regular dividends on their accounts. In many
ways, this type of banking was an outgrowth of mutual benefit societies, part of a
movement that transformed New England

charity from the 1780s through the 1820s.
While inspired by charitable impulses
to become “the Interest Bankers for the
poor,” and with its first advertising broadside focused on “seamen bound on a voyage” as the kind of customers it sought, the
founders nevertheless opened the Provident to all Bostonians on the theory that
such a policy would help to provide the
confidence needed to build the institution.
This open door led to almost immediate
success among all classes of Boston society,
but soon forced the founders to impose
various limitations on wealthier depositors
to dampen their interest in the bank.
Among other restrictions was a weekly
limit on the size of deposits that customers could make, while another cut off
the payment of dividends to balances of
more than $500. The latter reservation
was meant to encourage wealthier depositors to find other alternatives — to place
their savings in the Massachusetts Hospital Life Insurance Company or “The Big
Savings Bank,” as it was sometimes called.
The Provident originally paid dividends
of 5%, which was soon reduced to 4%,

on money in the depositor’s account, an
amount it believed it could maintain even
in a challenging economic climate, while
the remainder of the bank’s earnings was
parceled out to depositors whose accounts
were over a year old in a distribution made
every five years. While the extra dividend
fluctuated with the times, it averaged about
6%. Those earnings increased rapidly from
the early 1840s, when the Provident shifted
its investment portfolio from short-term
commercial bank loans with low earnings
to highly profitable long-term loans to
industry, which were given to individuals
backed by personal security.
This shift in investment policy was the
product of the bank’s more professional
approach to investments and change in
investment vehicles. By 1820, the bank
had established a subcommittee, a “board
of investment,” which implemented the
broader investment objectives of the bank’s
board of trustees. The investment subcommittee consisted of three trustees — vice
president, president and secretary — and it
was enlarged in the mid-1830s with three
more trustees.
» continued on page 38

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