State regulators block credit union’s bank purchase
Colorado banking regulators on Thursday blocked a bid by Elevations Credit Union to buy the assets of Cache Bank & Trust.
The deal was one of more than a dozen similar transactions announced last year, but this is believed to be the first time regulators have halted a credit union’s purchase of a bank.
Just days before the hearing, the Colorado Bankers Association sent a letter to the Colorado Banking Board outlining what the trade group said were several laws that made the credit union’s purchase of a bank illegal.
In Thursday’s vote, only one of the board’s seven members voted in favor of Elevations. Local news reports indicate several members of the panel concurred with the CBA’s argument that state law prohibits purchases between different types of financial institutions. Any changes to existing statutes would have to come from state legislators.
CBA officials praised the board’s decision.
“We are pleased that the board viewed the proposal the same way we did: against Colorado statutory requirements,” CEO Don Childears said in a press release.
He added, “We welcome the (sale) transaction between Elevations and Cache; Elevations simply needs to convert from a tax-subsidized credit union to a tax-paying bank.”
That may not be as far-fetched as it sounds. One prominent credit union observer recently suggested it may only be a matter of time before a large credit union elects to convert away from the credit union charter, though most industry watchers don’t share that opinion.
A press release sent out late Thursday by the Credit Union National Association and Mountain West Credit Union Association said, “Our groups maintain the position that credit union purchases of banks offer substantial benefits to all parties involved.” The two groups also referenced a recent report from the Federal Reserve Bank of St. Louis, which suggested that if enough customers and employees are maintained following the close of these deals, CUs’ bank purchases can benefit both institutions and their stakeholders.
Elevations representatives did not offer comment on Thursday’s decision. It is currently unclear whether Elevations or Cache Bank & Trust will appeal the ruling.