Dive Brief:

• The Independent Community Bankers of America (ICBA) last week called on lawmakers to implement an "exit fee" on acquisitions involving a credit union purchasing a bank.
• The proposed fee for such deals would be equal to 10% of the gross value of the acquired bank’s assets or liabilities as shown on its most recent balance sheet, whichever are greater, and would be payable by the acquiring credit union, the trade group said.
• The ICBA, which has long been vocal in its opposition to credit union acquisitions of banks, also called for Congress to review the not-for-profit institutions’ tax exemption, which it claims "fuels these transactions." It also requested a Government Accountability Office study on the evolution of the credit union industry and National Credit Union Administration (NCUA) supervision.

Dive Insight:

Credit unions appear to be ramping up their bank-buying spree after the trend saw a lull in 2020 amid the COVID-19 pandemic. Ten such deals have been announced in 2021, but five came in August alone. 

Sixteen credit unions bought community banks in 2019, but that number winnowed to seven last year. 

"Congress granted credit unions a tax exemption to serve people of modest means — not to subsidize their rapid growth at the expense of taxpaying community banks and local communities," ICBA President and CEO Rebeca Romero Rainey said in a statement last week. 

The transactions are "facilitated by a tax exemption that allows credit unions to make inflated purchase offers well above the book value of the acquired banks," Rainey said, adding that the deals eliminate locally based lenders and further consolidate the banking industry. 

The ICBA in May took particular issue with Jacksonville, Florida-based VyStar Credit Union’s planned purchase of Georgia-based Heritage Southeast Bank for $195.7 million.

The group, along with the Community Bankers Association of Georgia (CBA), wrote the regional director of the Federal Deposit Insurance Corp. (FDIC), urging the regulator to reject the deal.

"VyStar has either closed, moved, sold or consolidated half of the branches acquired from the Citizens State Bank transaction," the trade groups wrote, referencing the credit union's 2019 purchase of a Perry, Florida-based bank.

Picking up the pace

The acquisitions of $489 million-asset Citizens Bank of Florida by $3.9 billion-asset Fairwinds Credit Union, announced Aug. 19, and $92.9 million-asset Tempo Bank by $1.5 billion-asset Scott Credit Union, announced Aug. 20, mark the 100th and 101st credit union acquisitions of community banks since 2003, the ICBA said. However, more than 20% of the credit union-bank tie-ups have come since 2019, the trade group said. 

Credit union advocates, however, said the ICBA’s aggressive opposition to the deals represents a membership play.

"[W]hen a bank sells to a credit union, [ICBA] potentially could be losing a member of the association," Ryan Donovan, chief advocacy officer for the Credit Union National Association (CUNA) told Banking Dive last year. "If you talk to bankers, they'll tell you that they want all options available because they have a responsibility to their shareholders to evaluate all options. You're going to get a different story from the bank and trade associations because their interests are different."