The study noted that New Hampshire (NH) banks are required to pay both Federal income taxes and the NH Business Profits Tax, and also participate in the Community Reinvestment Act (CRA), while credit unions are exempt from all corporate income taxes and do not participate in CRA.
The study found that 44 percent of community bank branches in the state (68 branches) serve New Hampshire’s least wealthy counties, while only 15 percent of credit union branches (14 branches) serve similar areas.
In addition, the study noted that only 25 percent of the credit union tax subsidy is passed-on to depositors and borrowers, and another one-quarter of the tax subsidy is absorbed in higher (than New Hampshire community banks) non-interest expenses of credit unions. The remainder of the subsidy is used to fund credit union expansion.
The corporate income tax exemption provided to credit unions was originally justified as an incentive for credit unions to provide banking services to lower income areas and individuals. However, the study's findings suggest that the original justifications for exempting credit unions from the corporate income tax are no longer appropriate.
Other key findings of the study are:
- Credit unions are now the largest depository institutions headquartered in the State of New Hampshire and deposits at credit unions are increasingly consolidated in a small number of New Hampshire credit unions.
- New Hampshire credit unions have generally been more profitable than New Hampshire community banks over the past decade, despite having higher expense ratios.
- New Hampshire credit unions are increasingly relying on fee-based income for profitability. Fee-based income at New Hampshire credit unions has risen faster than has fee-based income at New Hampshire community banks.
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