Dive Brief:

• The Nebraska Department of Banking and Finance (NDBF), in a Dec. 30 order, denied Omaha-based Premier Bank’s application to be acquired by Iowa-based GreenState Credit Union.
• Premier Bank lacks legal standing to sell its assets to GreenState because the credit union, established under Iowa laws, does not meet the definition of a "financial institution" that can participate in cross-industry acquisitions or mergers in Nebraska, a hearing officer ruled.
• The Nebraska Bankers Association (NBA) and other trade groups submitted formal objections to the deal prior to a Sept. 20 hearing, at which the NBA served as an opposing party. "The effort made by the Nebraska Bankers Association is simply blocking consumer choice for Nebraskans," Jim Kelly, GreenState’s chief marketing officer, told CUToday.info, noting that Premier is appealing the decision. 

Dive Insight:

The GreenState deal is not the only proposed bank acquisition by a credit union from 2021 to have faced pushback based on a state statute's language. A county chancery court judge in Tennessee issued an injunction in November, temporarily halting Memphis-based Orion Federal Credit Union's proposed acquisition of Financial Federal Bank as the financial institutions and a state regulator haggle over the meaning of "acquire." 

The Tennessee Department of Financial Institutions argues the word, as defined in the Tennessee Banking Act, limits the scope of a bank acquisition to its stock and charter and would forbid the assumption of assets. The credit union and bank, however, argue the Tennessee Banking Act doesn't explicitly define “acquire" and point to the Tennessee Corporation Act, which states the purchase of all or substantially all of a bank's assets is a purchase transaction, not a prohibited acquisition.

Judge Patricia Moskal ordered a "speedy hearing" to resolve legal and interpretive uncertainties but cited "the need to maintain the status quo during the pendency of this action."

The NDBF wouldn't be the first state agency in recent memory to reject a credit union's bid to acquire a bank. The Colorado Banking Board in January 2020 denied Elevations Credit Union’s bid to purchase the assets of Cache Bank & Trust after that state's banking lobby argued credit unions could not be "authorized purchasers" of banks under language used in several Colorado statutes.

GreenState in 2019 found itself on the losing end of a similar decision, albeit temporarily. Iowa's superintendent of banking denied an application to allow the credit union to purchase seven branches and related assets from First American Bank, saying the deal was finalized without his decision. First American and the state superintendent reached a settlement moving the deal forward.

GreenState last year was the most prolific credit union to propose bank acquisitions. Three of the 13 agreed deals in 2021 involved GreenState as the purchaser. Two of those transactions — a May move to buy Oak Brook, Illinois-based Oxford Bank & Trust and an October deal for Midwest Community Bank — would push the credit union into Chicago and its suburbs. The deal for Premier's four locations would establish a GreenState presence in the Omaha market. The transactions together would mark GreenState's first expansion outside Iowa.

"The players resisting these acquisitions simply do not want to compete on price," Kelly told CUToday.info. "We can give back by pricing aggressively."

Trade groups such as the Independent Community Bankers of America (ICBA) have consistently pushed back against the acquisition of banks by credit unions, arguing credit unions' tax-exempt status allows them to offer a higher purchase price than banks can, and lets them grow more freely.

Premier CEO Chris Maher told American Banker the bank is disappointed with the ruling but remains confident that "a proper interpretation of Nebraska law will overturn the decision."

Jim Titus, the hearing officer in the GreenState case, wrote Dec. 30 that "there is difficulty in finding in the statutes the authority of a bank to sell substantially all of its assets as being an incidental power to the carrying on of the business of banking, since Premier is not going to be carrying on the business of banking, but rather terminating it."

Premier asserted that Nebraska law provides specifically for the power of a national bank to transfer assets to any non-insured bank or institution in consideration of the assumption of liabilities for any portion of the deposits made in such insured depository institution.

"However, that is not precisely how the statute reads," Titus wrote. "Instead, it is a provision where the statute says no insured depository institution shall take such action except with the prior written approval of the [Federal Deposit Insurance Corp.]. 

"Otherwise … there are provisions for circumstances whereby the FDIC shall not approve the transaction and it includes factors to take into consideration such as the financial and managerial resources and future prospects of the existing and proposed institutions, the convenience and needs of the community to be served and the risk to the stability of the United States banking or financial system," Titus wrote. "This is not an empowerment statute, but rather a statute dealing with circumstances where approvals are necessary with the FDIC and where they are not."

Legislators in GreenState’s home state, too, propelled a measure in 2021 to prevent state-chartered credit unions from buying banks. The bill died after passing out of the Iowa Senate Committee on Commerce, CUToday.info reported.

Bank trade groups bristled last year at another proposed bank acquisition by a credit union — Florida-based VyStar’s $195.7 million April deal to buy Georgia-based Heritage Southeast Bank.  

"VyStar has either closed, moved, sold or consolidated half of the branches acquired" from a bank acquisition the credit union undertook in 2019, the ICBA and the Community Bankers Association of Georgia wrote in a joint letter in May. 

VyStar and Heritage in October agreed to postpone — from Dec. 31 to Feb. 28 — the date by which they can terminate the proposed deal between them, noting the transaction still requires approval from the FDIC, the National Credit Union Administration (NCUA), the Georgia Department of Banking and Finance and the Florida Office of Financial Regulation.