States Work to Stifle Credit Union Acquisitions of Banks

Several U.S. states are taking the matter of credit unions acquiring banks into their own hands.

Mississippi on March 10 became the first state to pass legislation banning credit unions from purchasing banks. The bill, which goes into effect on July 1, requires state-chartered banks to sell to a buyer insured by the Federal Deposit Insurance Corp. Some states are looking to Mississippi for inspiration as federal efforts to impede these transactions have failed to gain traction and five such deals have been announced so far in 2022.

"There are a lot of eyes looking at what was accomplished in Mississippi," said Scott Latham, president and CEO of the Alabama Bankers Association, or ABA, in an interview.

Credit unions find bank acquisitions appealing as they hunt for scale and look to diversify. The banking industry and its lobbyists, however, say credit unions' tax-exempt status give them an unfair advantage as purchasers. But taking credit unions out of the mix limits the number of potential purchasers for smaller community banks and may prevent banks from getting the best sale prices, credit union deal advisers say.

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Related: Donovan: Communities win when banks sell to CUs