Banks continue to push against credit unions (Courtesy of the Jacksonville Daily Record) — Heritage Southeast Bancorporation Inc. wasted no time seeking a new merger opportunity after its breakup with Jacksonville-based VyStar Credit Union.
This time, you can bet it will be seeking a commercial bank partner.
Just two hours after the companies’ joint announcement June 15 that they terminated VyStar’s planned acquisition of Heritage, the Jonesboro, Georgia-based bank announced it engaged an investment adviser to help it seek “strategic alternatives to enhance shareholder value.”
VyStar called off the deal amid pressure on financial regulators from banks to reject credit union acquisitions of commercial banks.
Fifteen months after VyStar agreed to buy Heritage, regulatory agencies had not acted on the merger application and there was no indication they would anytime soon.
VyStar has been in the local news constantly for the past month because of problems with customer access to its online banking services.
Nationally, VyStar has been in the news for several months as the Heritage deal became a flashpoint in an ongoing fight between banks and credit unions.
To most customers, credit unions function just like banks do, but credit unions originally were created a century ago to serve a limited field of customers and banks are trying to prevent them from expanding their reach.
“Credit union purchases of community banks — which peaked at 21 in 2019 and are on pace to surpass that total this year — are getting the attention of state policymakers because credit unions don’t pay taxes, unlike their tax-paying community bank targets,” said Independent Community Bankers of America President Rebeca Romero Rainey in an opinion piece posted on the organization’s website June 9.
That included VyStar’s 2019 purchase of Citizens State Bank, based in Perry.
Rainey said regulators and lawmakers in several states have acted to stop credit unions from buying banks and she is urging Congress to examine the issue.
The independent bankers’ group also is opposing the federal Expanding Financial Access for Underserved Communities Act, which the U.S. House of Representatives passed the same day the VyStar-Heritage deal fell apart.
This legislation would allow credit unions to expand their field of membership to include “underserved communities,” specifically communities that do not have a bank branch within 10 miles.
“This bill will let credit unions do more of what they do best: promote financial well-being and advance the communities they serve,” said Credit Union National Association President Jim Nussle (pictured above) in a story posted on that organization’s website.
The independent bankers group said the legislation allows credit unions to go beyond their original purpose of serving people of modest means who have a common bond.
In a June 9 letter to the House Rules Committee opposing the bill, Rainey said “the credit union sector is dominated by multi-billion-dollar, national-reach institutions focused on commercial lending.”
VyStar serves anyone who lives in 49 Florida counties and 26 Georgia counties, as well as past and present military members and their families.
It has more than 825,000 members and assets of more than $12 billion. When it announced the deal in March 2021 to buy Heritage, which has $1.7 billion in assets and 23 Georgia locations, VyStar said the deal would make it the 13th largest credit union in the country.
VyStar didn’t announce the terms of its agreement to buy Heritage but Heritage said VyStar would pay stockholders of the publicly traded banking company $27 per share after satisfying debt.
That made the total value of the deal about $270 million.
Heritage’s stock dropped $4.95 to $20.50 on June 16 after the companies’ announcement calling off the deal.