FBB:
Berne Bank Announces New Corporate Structure
Charles Isch, President and CEO of First Bank of Berne, announced that an overwhelming number of shareholders voted for conversion to a Sub-S Corporation status and that the bank has established an Employee Stock Ownership Plan (ESOP).
According to Isch, under the ESOP, employees, in a relatively short time, will be collectively one of the largest shareholders of First Berne Financial Corporation, the holding company for the bank. He further stated that “the S-Corporation status will keep the bank competitive and will help the bank to remain an independent, locally-owned community bank. This structure will also serve as a deterrent (sometimes called shark repellent) to large banks that could attempt to acquire a strong independent community bank like First Bank of Berne. ”
Board Chairman, David Baumgartner, stated that recent tax law changes now allow up to one hundred shareholders in an “S” type corporation. The new law also has special provisions that are pertinent to First Bank of Berne. All shareholders encompassing seven generations of the same family line, count as only one shareholder to qualify for the one hundred maximum shareholder requirement. In addition, all employees in an Employee Stock Ownership Plan (ESOP) count collectively as only one shareholder. An extensive genealogy study and documentation was undertaken to connect current shareholders to ancestors that are common with other current shareholders. Over 400 individuals and employees will share ownership of First Berne Financial Corporation, but because of the seven generation rule and collective employee ownership through the ESOP, the shareholder count for S-Corporation purposes is forty-six, well below the one hundred maximum allowed.
Baumgartner further commented that S-Corporations are not taxed at the corporate level, but instead, shareholders pay taxes at their lower individual tax rates on their pro rata share of bank earnings and will receive distributions from the Corporation in order to pay the tax. This action will benefit all shareholders, but especially shareholders who are at low or moderate income levels.
Board member, Paul Zuercher, commented that “all too often greed seems to be an ugly part of our American business scene. We have seen in the national news that greedy, and sometimes unscrupulous, executives and major shareholders make big gains at the expense of employees and other shareholders. It is therefore refreshing to embrace both the tax-favorable S-Corporation status and the generous Employee Stock Ownership Plan. With the S-Corporation, all shareholders can gain. But because of favorable tax treatment, lower tax-bracket shareholders can benefit immensely, although not at the expense of other shareholders. With the ESOP, an employee can own a piece of the pie, be well-rewarded for faithful employment, and better secure their financial future.”
First Bank of Berne was founded 116 years ago in 1891 by Berne and Decatur businessmen. Today it has $390 million in assets and 105 employees. The bank currently has locations in Adams, Jay, and Wells counties in Indiana, and with the spring opening of the Van Wert, Ohio Banking Center, First Bank of Berne will have eight banking center locations.
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