Dive Brief:

• National Credit Union Administration Chairman Rodney Hood defended the trend of credit unions acquiring small banks during a House Financial Services Committee hearing Wednesday.

• The head of the credit union regulator told lawmakers he doesn't want to pit credit unions against banks. "I think the important thing is that banks and credit unions are all competing in today's dynamic marketplace. At the end of the day, it's the end user, whether it's a credit union member or a bank customer, that is getting access to regulated, affordable financial services," he said.

• As an increasing number of credit unions choose to acquire banks as a way to grow membership, many opponents say their tax-exempt status gives credit unions an unfair advantage.

Dive Insight:

During the hearing, Hood said there have been 32 credit unions that have acquired bank assets over the past seven years. He compared that figure to the "roughly 250 bank-on-bank acquisitions just over the past year alone."

"I would like to note for the record that these are voluntary market-based transactions," he told members of the committee, adding that the mergers are subject to approval by his agency and the Federal Deposit Insurance Corp.

"They require dual approval. They are not happening arbitrarily or capriciously," Hood said.

Trade groups such as the Independent Community Bankers of America have been vocal in their opposition to what they have called "risky practices, costly tax subsidies, and irresponsibly lax oversight" of credit unions.

The group launched its "Wake Up" campaign in October, featuring legislative and regulatory proposals and grassroots advocacy campaigns to help community banks call for policy makers to review credit union practices.

When asked by Rep. Al Lawson, D-FL, about such pushback, Hood said credit unions are growing because they offer members affordable capital.

"Credit unions now serve one-third of the American public," he said. "I think that is because of their commitment to providing access."

When lawmakers questioned FDIC Chairman Jelena McWilliams on the trend of credit unions purchasing banks, she said it's something her agency is "looking at."

McWilliams said "the playing field may not be exactly level" because of credit unions' tax-exempt status and lack of Community Reinvestment Act enforcement.

But Hood rebutted that, in some cases, communities would be without banking access if a credit union hadn't decided to purchase a community bank.

"If it weren't for these credit unions acquiring banks, the community would be without a financial institution, and that would leave them vulnerable to pernicious payday lenders," he told the committee.

In the latest illustration of the trend, Tampa, Florida-based Suncoast Credit Union announced plans Tuesday to purchase Miami-based Apollo Bank for an undisclosed sum.

If regulators approve the deal, it would be the largest bank acquisition by a credit union since 2012, when the Federal Reserve Bank of St. Louis began tracking such figures.​

Credit unions have announced 16 bank acquisitions this year, nearly doubling the nine deals announced in 2018, according to American Banker.