VyStar Credit Union waiting on approval of HSBI acquisition (Courtesy of the Jacksonville Daily Record) — Ten months after announcing an agreement to buy a Georgia bank, VyStar Credit Union still is waiting for regulatory approval to complete the deal.The wait comes as the banking industry is pushing back against credit union buyouts of commercial banks, saying credit unions have an unfair advantage in those deals.
Jacksonville-based VyStar agreed in March to buy Heritage Southeast Bancorporation Inc., a Jonesboro, Georgia-based company that operates commercial banks in Georgia with 23 branches.
VyStar said at the time the acquisition would make it the 13th largest credit union in the U.S. with $12.5 billion in assets, 88 branches and more than 850,000 members.
The Heritage deal would mark VyStar’s second purchase of a commercial bank, following its August 2019 acquisition of Citizens State Bank based in Perry.
VyStar had hoped to complete the Heritage deal by the end of 2021, but Heritage announced in October the two parties extended the deadline to receive regulatory approvals until Feb. 28.
Publicly traded Heritage announced its year-end earnings Jan. 20 and said in a news release “all regulatory applications have been submitted and remain pending.”
The deal needs to be approved by the Federal Deposit Insurance Corp., the National Credit Union Administration, the Georgia Department of Banking and Finance and the Florida Office of Financial Regulation.
Credit unions, which are formed to serve specific groups and owned by their members, have been increasingly expanding by purchasing commercial banks, and some banking industry groups are raising concerns about that, according to a Jan. 19 report by the American Banker publication.
That report said 13 deals were announced last year by credit unions to buy banks, close to the 2019 record of 16 such deals, and more are anticipated.
Many bankers are opposing those deals, citing factors including credit unions’ non-profit status, which allows them to avoid paying income taxes.
They say the tax savings allow credit unions to offer higher prices for buyouts, according to the American Banker report.
Bankers also say that credit unions are exempt from the Community Reinvestment Act, the federal law that requires banks to serve the lending needs of their local communities.
Two groups, the Independent Community Bankers of America and the Community Bankers Association of Georgia, have formally opposed the VyStar-Heritage deal, sending a joint letter in May 2021 urging the FDIC to reject it.
“With VyStar Credit Union seeking to leverage its tax exemption for the largest-ever credit union purchase of a taxpaying community bank, the FDIC should reject its application to roll back Community Reinvestment Act safeguards in affected communities,” ICBA President and CEO Rebeca Romero Rainey said in a news release.
“The dated credit union tax exemption and faulty National Credit Union Administration oversight again threaten to claim another local institution while reducing loans and investments benefiting low- and moderate-income consumers,” she said.
The two groups called on the U.S. Congress to hold hearings on the trend of credit unions acquiring community banks and consider legislation to address their concerns.
However, American Banker said that beyond recent rulings by state regulators in Nebraska and Tennessee, legislators and regulatory agencies have not acted on the issue.
A VyStar spokeswoman said she was unable to get responses to questions about the status of the deal by publication time.
When it was announced, VyStar and Heritage did not announce the terms of the deal. But in its October release announcing the deal extension, Heritage said VyStar would pay enough cash to ensure Heritage shareholders would receive $27 per share in cash after satisfaction of its debt and other obligations.
Heritage’s year-end report said it had 7.22 million shares outstanding and listed $74 million in debt and other obligations on its balance sheet.
That would make the total value of the deal close to $270 million.
Heritage reported earnings of $13.8 million, or $1.92 a share, for 2021.