June 25, 2019

Berger, Hunt address misconceptions about CUs' bank acquisitions

B. Dan Berger
Dan Berger, NAFCU President and CEO

Contrary to some bank lobbyists' arguments, the increase in credit unions' acquisitions of banks is "a strategic decision" – both for credit unions to grow and banks to benefit financially – according to an S&P Global article featuring NAFCU's Dan Berger and Carrie Hunt. Instead of targeting their displeasure about these acquisitions towards credit unions, bankers should reflect on the shortcomings of their industry and look to their own to understand why banks are selling to credit unions.

"Credit unions want the assets, they want the bank's customers, especially if it fits in the field of membership, they may want some branch locations," said NAFCU President and CEO Dan Berger. "A credit union buying a bank, it's always a strategic decision."

Credit unions looking to acquire a bank must make a cash offer because of the structural differences between the two institutions. Banks, on the other hand, can offer stock options when looking to acquire another bank, but as well run financial institutions, credit unions have the capacity to make competitive offers.

Given the fiduciary duty of banks to get the best price for shareholders when selling their institution, the credit union offer often makes the most sense. Banks, therefore, benefit financially from these acquisitions – it's not credit unions acting nefariously – and their customers benefit from the safe, affordable financial products and services offered by credit unions.

Carrie Hunt
Carrie Hunt, NAFCU Executive Vice President of Government Affairs and General Counsel

Hunt, NAFCU's executive vice president of government affairs and general counsel, explained that once an acquisition is made, the bank's customers must fall within the credit union's field of membership (FOM). For those customers that don't meet its FOM requirements, the credit union might consider adjusting its charter, selling branches that fall outside the FOM or adding segments.

Despite these considerations, bank lobbyists try to turn the conversation toward tax status to erroneously argue that credit unions have an unfair advantage. NAFCU consistently shares with lawmakers – and the public – the economic benefits credit unions' federal tax exemption provides to the nation as a whole. Conversely, banks recently received a tax break of $21 billion and nearly one-third of banks are Subchapter S corporations that pay no corporate income tax.

NAFCU will continue to set the record straight as some in the banking industry try to prevent competition and stymie credit unions' growth opportunities.