Customers might never notice, but many Illinois banks have made a fundamental change in their corporate makeup that benefits the institutions’ owners.
The banks, most of them smaller community banks, have been changing to S corporations, a status that gives them some of the same tax benefits as other small businesses.
Although some customers might not consider their bank a small business, that’s essentially what many of them are.
“A lot of people might think their community bank is a lot different from Joe’s Garage, but they’re not,” said Richard Soukup, a partner at accounting firm Grant Thornton in Chicago. “At the end of the day, it’s a community-oriented business.”
A study released by Grant Thornton this week found that since 1997 there have been 1,954 banks that have switched to S-corporation status. That’s about a quarter of all banks nationally.
In Illinois, 182 banks have made the switch, or about 25 percent of the banks in the state. Only Minnesota, Texas and Iowa have more.
Until 1996, all banks were taxed as C corporations.
“In a C corporation, a company earns the money and pays income taxes on it, then it’s passed on as dividends to the shareholders and taxed again,” Soukup said. “It’s a two-level taxation structure. An S corporation takes it down to one level.”
Instead, shareholders are taxed only on their share of the corporation’s taxable income, so any dividends paid are not taxed again.
Federal rules restrict which businesses can become S corporations. For example, the number of shareholders is limited to 75, a rule that would prevent most large banks from considering such a switch.
Bank on wheels: Leaders Bank in Oak Brook has introduced a service that brings the bank to the customer.
The bank’s mobile branch began running in November, said Elizabeth Snyder, vice president of retail. The bank’s customers are primarily businesses with $25 million and less in annual sales. Leaders was worried it wasn’t attractive to some customers because it has only one office, Snyder said.
The mobile branch solved that problem, she said. Now, businesses decide when they want the mobile branch to arrive–as often as daily or just once a week. The service also is customized. For businesses that deal with large amounts of cash, for example, Leaders will send out an armored car to make the pickup, Snyder said.
Rapid growth: Bank of America in December more than doubled the number of its Chicago-area offices.
Five offices opened during the first 11 months of the year. Last month, eight were added, including a Bolingbrook branch that opened its doors on Tuesday.
That rapid expansion helped Charlotte, N.C.-based Bank of America meet another goal: opening 150 branches nationally in 2003.
Slight name change: Going by one name is good enough for Cher, Madonna and Sting. Now, Harris Bank is shortening its name, at least on some signs.
New branch signs will carry only “Harris,” dropping the word “Bank.” Customers already think of banking when they see the name and “using the shorter version simplifies the signage design for greater impact,” said spokeswoman Jen Dillon.
The change will be evident at new branches and at existing offices as signs are replaced, she said.
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One thing that won’t change: Hubert the Harris lion will continue to play a big role in the bank’s marketing effort, Dillon said.
“Hubert is an extremely valuable asset that we intend to nurture and protect,” she said.