ABA Banking Journal - May 2007 - (Page 22)
Community Banking Pass the Aspirin: Should “Communications” be part of “Marketing”? 24 Taxes: Investigating two overlooked strategies could put you on your way to cutting taxes by half. Got your attention? ank profitability is like a puzzle. To understand the whole picture requires understanding how each piece of the puzzle fits with the other pieces. The pieces most bankers focus on are net interest margin, noninterest income, noninterest expense, the level of earning assets, and leverage. Unfortunately, bankers overlook an important piece of the puzzle: taxes. It’s the lost puzzle piece that has fallen into those dark recesses of the sofa. the forgotten piece of bank profits B Money left on the table The average community bank pays 32.66% of pre-tax income in taxes. Yet other community banks pay as little as 18% of pretax income in taxes. Clearly America’s community banking industry overall is not tax efficient. Take a look at the numbers. A bank that generates $10,000,000 in pretax income would have a tax bill of By Jay Brew, founder, chairman, and president of BNK Advisory Group, Bethlehem, Pa., which works with community and regional banks on asset/liability management, strategic planning and investment management. This article does not constitute legal or investment advice. 22 MAY 2007/ABA BANKING JOURNAL www.ababj.com/subscribe.html ILLUSTRATION BY DICK PALULIAN / IMAGES.COM
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