Fifty-three percent of community bank leaders said they would not sell to a credit union in any circumstances, according to a recent IntraFi Network survey. The online survey, conducted from Oct. 1-15, included CEOS, presidents and CFOs from nearly 400 banks.
Less than half of all CEOs said they would refuse to sell to a credit union. However, that number jumped to 55.68 percent of CFOs and more than 66 percent of bank presidents.
More than 55 percent of respondents at banks with $1 billion or less in assets said they would not sell to a credit union. That number drops to 45.12 percent for banks with between $1 billion to $10 billion in assets. Midwest bankers were far more likely than bankers in the Northeastern, Southern or Western regions to say they would refuse to sell to a credit union — 63.58 percent to 44.12 percent, 43.61 percent and 48.08 percent, respectively.
Apprehension over credit union deals comes as community bankers continue to sound the alarm over the tax-free status of credit unions and their continuing expansion.
In Wisconsin, the Wisconsin Bankers Association along with 87 of its members voiced opposition to Assembly Bill 478, which would allow credit unions in the state to issue subordinated debt (often used in acquisitions). It would allow credit unions to lend to non-members, which circumvents the “public policy rationale behind which the tax exemption is given,” said WBA President and CEO Rose Oswald Poels in testimony to state lawmakers. And it would allow CUs to hold real property for any purpose.
A bill before Congress, the Member Business loan Expansion Act, exempts credit unions from the 15-year Federal Credit Union Act, allowing them increased flexibility on loan terms. The credit union lending loan exemption also would increase to $100,000 from $50,000; currently, loans under $50,000 do not count toward the 12.25 percent limit on commercial loans by total assets. Both moves would make it easier for credit unions to make commercial loans.
Credit union purchases of community banks, once relatively rare, have increased over the previous seven years. Nationwide, acquisitions of banks and thrifts by credit unions more than tripled between 2015 to 2019, according to S&P Global Intelligence. They still constitute a small fraction of total deals.
The survey captured community bank leader sentiments on a number of other current issues. Seventy percent said they do not nor plan to offer an alternative program or product to a traditional overdraft format. Sixty percent said they needed to learn more about what form a central bank digital currency would take before deciding whether the Fed should offer the asset. Ninety percent said President Joe Biden should renominate Federal Reserve Chair Jerome Powell for another four-year term. Nearly 60 percent indicated “moderately” improving economic conditions over the previous 12 months. An even split (38 percent) of bankers say economic conditions will either stay the same or “moderately improve” over the next 12 months.