Fred C. Sears, II has been the president and CEO of the Delaware Community Foundation since 2002. A UD graduate and community leader, he has spent more than 35 years in the banking industry, most recently as the president of Commerce Bank. Sears spoke with Alexandra Duszak about the Delaware Community Foundation’s mission and work with individuals and non-profits throughout the state.
TSD: The Delaware Community Foundation has a presence in all three Delaware counties. What makes the foundation so important for the state of Delaware?
FS: The biggest factor is we manage endowment funds for people who hold what’s called donor advised endowment funds, meaning that they have a personal non-profit fund that they they’ve set up. They usually give away five percent of that money to their favorite charity. They get to tell us what charity to give it to, we invest the money, we send out the checks when they tell us to, we do their tax returns—we’re like their bank office for people like that. Secondly, we also manage endowment funds for over 225 non-profits in Delaware, non-profits who have been given money or have been left money in an estate for a particular purpose. They give us the money to manage. We even manage some of the bigger ones, for United Way, YMCA, YWCA, as well as some smaller places, and even for the state of Delaware. We also have a scholarship fund [that we manage], and we help select the winners and give out the awards. We have 80 scholarship funds that give out 330 scholarships out a year. We’re also great with legacies for folks who don’t want to give away any money now. There are other groups or other organizations that we sort of honcho, like the Fund for Women and the African American Empowerment Fund.
It’s a lot of different things we’re doing, but the best part, I tell people, is because its endowment money, we’re not like The United Way. Because its endowment money, we give away between $13 [million] and $15 million a year. If we manage the money right, we’re always going to give at least that away. As we grow, we’ll give more away. We’re set—if we never raised another dime, if we never had anybody open a fund with us, as long as we manage the money right, we’re going to be able to give away $12 or 13 million for ad infinitum years.
TSD: Prior to becoming the president and CEO of the Delaware Community Foundation, you had worked in banking for more than 35 years. What drew you to the Delaware Community Foundation?
FS: They actually asked me. I was president of Commerce Bank and started Commerce Bank in Delaware back in 1999. I was running the bank for four or five years and one of the board members, who was a former boss of mine, had been the chairman of the board of Beneficial Bank when I was the executive vice president of the bank. He called me one day and said he was sitting on this board and he said, “I’ve got a job for you.” I said, “Jim, you know I’ve got a job—you’re calling me in my office. As a matter of fact, you’re a customer of mine.” He said, “No, no, no, this is the perfect job for you.” It took me awhile [to get used to it] because working at a non-profit versus 40 years of working at a bank—maybe the compensation isn’t as good, clearly there’s no such thing as stock options, bonuses, those kinds of things, but I was 61 years old and it just seemed to make sense. These opportunities don’t come along every day, and the more I looked at it, it was a great opportunity. The best part for me is, if I kept working at the bank, I probably would’ve had to step down at 65, and now I’m 68 and still working and loving every day of it.
TSD: You have been a director of more than 20 community non-profit organizations. What drew you to become involved with the non-profit sector?
FS: If you’re really going to be a community banker—which I was, whatever bank I worked for in Delaware—a very important part, I always thought, of being a good banker was being involved in the community. And even when I first got out of the U of D and went to work for Delaware Trust back in the mid ‘60s, one of the things they had there was a volunteer service club. It was a deal where they asked people in the bank to sign up and be a member of the volunteer service club. And once or twice a month we would go out and do some volunteer project, whether it be serving meals at a shelter, or the ones I remember most, when we held parties at an orphanage—it was almost a social thing. Most of us signed up for it because it was an evening event, usually 5:30 to 7:30. Most of us didn’t have families and we were single, so of course, typical of 24-, 25-, 26-year-olds, after the event, well, the night was still young, so we all would go to the Deer Park or something like that. We though, “How bad can this be? We’re putting in a couple hours of volunteer work and then going out and having a couple beers.” It was pretty good. But the more you got out there, the more you saw the need, the more you wanted to get involved. I said, I better pick a couple of charities that I like and tell my boss and other people at the bank I’ve made arrangements to volunteer or to become a board member of The Opportunity Center or The Cancer Society or The Lung Association or The Heart Association. That’s how it started.
TSD: Did the Delaware Community Foundation experience any hardship as a result of the recession? If so, how did the organization work to continue its mission through that period?
FS: It’s been very difficult, there’s no question. We’ve been around for 25 years, and we’ve only had two years where we lost money on our investments. One of them was 2002, with all the Internet issues, and the worst year ever was 2008. And it was very difficult, going to folks who had put their money with us and telling them we’d lost 30 percent of their money. Most of them understood it, most of them realized that even at 30 percent, others did a lot worse, but the positive side is that our management team, our investment team got back 22 percent of it and last year got back got 13 more percent of it, and this through April we’re up 22 percent. So anybody that stuck with us (which you should in the endowment market, that’s what we try to tell them, it means the money’s in there for the long term), and 99 percent of them did, we’re happy to report that they’re better than where they were. The problem with that, in all honesty, that’s only half the story. Most people that started with us, back in the day with stock, had significant capital gains on [their stock], so if they cashed the stock in, they’d have to pay a pretty hefty tax on all the capital gains. If they give the stock away, they don’t have to pay any tax on the capital gains and they get a tax credit for giving the stock away. So that’s where a lot of our funds came from from individuals, but clearly since 2008 there haven’t been a lot of capital gains on any stocks, so we don’t open as many funds as we used to on an annual basis.
TSD: What’s on the horizon for the Delaware Community Foundation in the future?
One of the best parts of the job with an organization like this, as you might suspect, is that I really have a wide knowledge of all the non-profits in town. I really get a good picture and I spend a fair amount of time counseling these different agencies on how is the best way to raise money, some people that they might approach for money.
We also have our own unrestricted fund where we give away about $600,000 every year. The unrestricted fund means that folks who have had a fund with us, who have paid us the way in most cases, they write up in their agreement with us that when they die, to just put the money in the DCF unrestricted fund, and let our home grants committee of about 20 people give away that money every year. That fund has grown to be about $10 million, $11 million. Through that process, we get about 100 applications for grants every year, and we give up to $25,000 to each one of them, and I get to really see who’s in need and who’s doing what in the community. The future is clearly to raise the bar here and get more people interested in having donor advisement funds or scholarship funds because that all in the bottom line helps people. We’ve grown since I’ve been here from giving away about $8 million or $9 million to $14 million or $15 million and I’d love to see by the time I leave that we’re giving away close to $20 million a year for all these different causes.