WASHINGTON—Credit union acquisitions of banks, the latest of which CUToday.info reported here, has received some national media coverage.
Under the headline, “Credit Unions Go On Bank Buying Spree,” the Wall Street Journal said, “Credit unions are buying small banks in record numbers, a trend that is prompting pushback from the banking industry.”
As CUToday.info has also reported, the Journal noted CUs have purchased 21 banks since 2018, versus 12 total purchases in the prior five years.
“Bankers say the deals are proof credit unions are growing too aggressively given their not-for-profit business model,” the Journal stated. “Credit unions say they are driven by the same market forces that have driven hundreds of bank mergers in recent years.”
‘Good ROI’
Brian Wolfburg, president and CEO of Jacksonville, Fla.-based VyStar CU, was quoted as saying, “We see opportunities to expand our network, bring in new products to the table, and get a good return on investment.” VyStar acquired the $280-million Citizens State Bank in August.
The Journal report noted banks continue to complain that credit unions have advantages due to their federal tax exemption, while CUs have said the growth helps extend lower-cost loans and better deposit rates.
“Credit unions serve the greater good, not the greater greed,” NAFCU President Dan Berger was quoted as saying.
‘A Tiny Fraction,’ But…
The Wall Street Journal pointed out “credit union and bank tie-ups represent a tiny fraction of the consolidation happening in the industry, pointing to the 187 CU mergers that took place in 2018 vs. the nine bank/CU deals.
“Credit unions also are smaller overall, holding $1.5 trillion in assets in the first quarter of 2019, compared with $18 trillion for banks and thrifts,” the Journal added. “Still, the deals illustrate how competitive credit unions have become, given their tax advantages, lack of shareholders and diminishing constraints on growth.”
The Journal cited a report commissioned by the American Bankers Association and produced by the firm Federal Financial Analytics that was released earlier this year that argued, “The substantive mission-driven aspects of the credit union charter that are supposed to make them unique and justify many taxpayer benefits have eroded, if not ended.”
Banker Responds
Laura Lee Stewart, president and chief executive of Sound Community Bank in Seattle and chairman-elect of the ABA, whose bank lost to Sound Credit Union a bid to acquire Bank of Washington, told the Journal the community will lose a tax-income source as a result of the deal. “When an entity is in business doing the same thing and gets a free ride, that’s bad public policy,” she was quoted as saying. “And it’s bad for communities.”
Sound Credit Union CEO Don Clark responded by saying his CU paid $3 million in payroll, property and sales taxes in 2018.
The report noted NCUA Chairman Rodney Hood said he plans to introduce a rule later this year to clarify credit unions’ regulatory responsibilities when acquiring banks.