Businesses traditionally attempt to cater to three groups: shareholders, customers and employees. For banks, local nonprofit organizations have become an important fourth group. When nonprofits look to companies for support, many times their first call is to their banking partner.
Community banks are typically privately held, for-profit entities. Unlike their credit union competitors, who are exempt from paying income taxes on their earnings, banks not only pay taxes that end up in the pockets of nonprofits through state or federal grants, most community banks contribute pre-tax dollars to all sorts of local causes.
Central Illinois banks are no different. It is almost impossible to look at the back of a road race t-shirt and not find a bank or two (or three…) amongst the many supporters. Scanning the room at any number of charitable events, you’ll see table tents from many banks in town. There is rarely a charitable golf outing or special event without major support from at least one bank. However, much of these charitable donations are direct contributions to the charity and never seen by the public.
Banks have always been some of the larger supporters of United Way throughout the country, and our region is no exception. Banks also give back to the communities they serve through human capital. Scan the names of any nonprofit board and you are sure to see at least one banker giving of their time and talent. Bank employees volunteer countless hours at numerous charities, whether reading to children, serving food to the homeless, or standing outside stores collecting much-needed cash.
Cynics may say that banks have ulterior motives with these donations, as advertisements or opportunities to network or gain additional business. This may come into the decision-making process, but it’s a very small part of the reasoning. Banks may each have their own reasons for making charitable contributions, but the phrase “a high tide raises all boats” is surely part of it. As banks provide funding for all sorts of charities, these charities in turn make a huge difference in the lives of those they serve. As these people improve their own lives, they become better citizens and help improve the lives of others. Banks benefit as their communities overall are enriched.
The recent passage of the Tax Cuts and Jobs Act of 2017 will have a significant impact on the bottom lines of partnerships, S corporations and corporations alike as the corporate tax rate is reduced from 35 percent to 21 percent. The Congressional Budget Office estimates that over the next 10 years, these companies would see a net benefit of over $1.4 trillion. That’s trillion with a “T.”
As companies look at what to do with their tax savings, they return to their four sets of constituents. Shareholders will be directly rewarded through greater net profits. Many companies have already said they will raise minimum wages or give out special bonuses to employees (Walmart, Costco, McDonald’s, Starbucks, to name a few). Others have said they will help their customers indirectly through new infrastructure, technology and products. Finally, many companies, including banks, have said they will increase their annual amount of charitable giving.
Society seems to require that banks give back to their communities, but banks have taken on this role themselves, going above and beyond in most cases. The next time you look to thank a company for helping out a charity, thank your banker! iBi
Thomas D. Schlink is the Peoria Market president for F&M Bank.