At long last, state and federal regulators have taken a hard look at a massive proposed deal in which a super-large credit union attempted to purchase a bank with over $1 billion in assets. And finally, they appear to have grown tired of these antics, put their respective feet down and said, “enough is enough.”
The deal in question – in which VyStar CU ($12.4 billion) would have purchased Georgia-based Heritage Southeast Bancorporation ($1.7 billion) – was scuttled last week after regulators refused to greenlight the transaction, which would have made Jacksonville, Fla.-based VyStar the 13th largest credit union in the United States.
Fortunately, one or several of the agencies, including the FDIC, NCUA, Georgia Department of Banking & Finance, and Florida Office of Financial Regulation, refused to rubber stamp the deal.
The CEO of Heritage explained that regulatory pushback spiked the transaction. “After much contemplation and discussion, the Board of Directors [sic] of both institutions concluded the best path forward would be to discontinue the proposed transaction between our companies as all required regulatory approvals would not be obtained in a timely manner,” he said in a statement.
Reform Credit Unions applauds this move by regulators to scrutinize these transactions carefully. Far too often, similar bank purchases by large credit unions are greenlighted without many questions raised. With nine bank-buying deals announced to date in 2022 – a pace likely to make this a record year for such transactions – we continue to urge regulators and lawmakers to press for answers:
- Did Congress ever intend for untaxed credit unions to use their tax exemption to outbid bank competitors in M&A transactions? Does this really reflect the spirit of the Federal Credit Union Act?
- Are these tax-advantaged acquisitions just a way to expand credit unions’ otherwise constrained “field of membership”? Credit unions were created – and exempted from federal taxes – in exchange for serving communities of small means bound by a common bond.
- Are large credit unions using their bank purchases simply to further expand into lucrative commercial lending in upper-class areas? Shouldn’t they be expanding into low- and moderate-income communities consistent with their mission?
- Why do large credit union lobbyists fight efforts to require credit unions to show that they are in fact increasing access to safe and affordable financial services to underserved communities just as all other insured depository institutions do?
These are but a handful of questions we have at Reform. But, at last, we have reason for optimism that regulators have woken up and recognized that not all deals are good deals.