Regulators soon consider bank buy

GREELEY — While there was general exuberance in early September when Elevations Credit Union announced its plans to acquire Greeley-based Cache Bank & Trust, things have gotten oddly quiet four months later.

Neither Elevation’s CEO Gerry Agnes nor CBT CEO Byron Bateman offered comment on the status of the acquisition, with Agnes citing the upcoming regulatory approval. Colorado State Banking Board has scheduled discussion of the transaction at its Jan. 16 meeting.

“It appears the merger was announced prior to receiving regulatory approval,” said Jenifer Waller, COO of the Colorado Banking Association. “The transaction cannot move forward without appropriate approval.”

While across the nation, acquisitions of community banks by credit unions are on the rise, this merger is the first in Colorado history. It may not go down without a bit of a fight, which should be scheduled before the Colorado State Banking Board during its January meeting, the agenda for which has yet to be posted as of press time.

Credit unions have acquired 21 U.S. banks since 2018, compared with 12 purchases in the prior five years, according to S&P Global Market Intelligence. These acquisitions are leading to incredible growth for the credit unions, even as the growth of all credit unions has been rather astronomical.

S&P Global Market Intelligence found that shares and deposits from credit unions buying banks grew 45.9 percent from the fourth quarter of 2015 to the second quarter of 2019. For the remainder of the credit union market that growth rate was 25.3 percent.

CBT, which operates in Greeley, Fort Collins and Denver, has nearly $122 million in total assets and nearly $108 million in deposits, according to data from the Federal Deposit Insurance Corp. The acquisition, which was expected to close in the first quarter of 2020, will result in a combined organization with $2.2 billion in assets and 141,700 members, according to an Elevations news release.

Credit unions have been successful in converting bank clients and depositors into credit union members, and that has caused consternation in the banking industry. Credit unions don’t pay taxes, meaning they can typically offer lower loan rates than banks.

“I would assume as a minimum we would issue a letter of comment or testify,” Waller said. “I don’t know how it could even go forward legally. There are prohibitions on both sides.”

In fact, Colorado statutes regarding the sale of banks and credit union properties does not note any conduit of sale between the two. However, neither do the statutes expressly forbid those sales, and Elevations does appear to have the support of its own association.

“The acquisition is pending regulatory approval, to be approved by both the Colorado Division of Financial Services and the Colorado Division of Banking, along with the federal agencies regulating banks and credit unions,” said Scott Earl, the president/CEO of the Mountain West Credit Union Association, in a prepared statement. “And while this is the first in Colorado, it’s certainly not the first in the country.

“We’ve seen this in many other states where a community bank is acquired by a credit union because the mission of credit unions serving members and their communities best aligns with the bank’s goals,” Earl continued. “And, rather than selling to a larger bank with outside interests, acquisition by a credit union means continued investment in the local community, and exceptional service and benefits for existing customers as they transition to member-owners of the credit union.”

Waller noted that credit unions were initially defined as serving a narrowly defined membership, such as a teachers’ union or employees of a certain industry.

“I think that’s a bit of a joke now,” she said. “You are moving taxpaying entities into non-taxpaying entities, and the state could probably use that (tax income) now.”

But for now, it’s a wait and see game for all involved.

“We’re just going to have to await the outcome of the regulatory agencies,” said Mark Robey, senior vice president for regulatory affairs at Mountain West.

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