Dive Brief:
- Birmingham, Alabama-based Legacy Community Federal Credit Union has agreed to acquire First Community Bank of Cullman in an all-cash transaction, the credit union said Tuesday.
- The financial terms of the deal were not disclosed. The transaction, which is expected to close this year, will help Legacy expand beyond the greater Birmingham area into Cullman County, the credit union said.
- Amid the deal, though, bank and credit union trade groups have intensified their verbal brinkmanship.
Dive Insight:
The Legacy deal is the third proposed acquisition of a bank by a credit union this year and, though that is far fewer than the record 22 credit union-whole bank deals announced in 2024, some of the reservations against such transactions still stand.
Trade groups such as the Independent Community Bankers of America have long argued the tax-exempt nature of credit unions allows them to offer a higher purchase price, putting acquisitive banks at a disadvantage.
The ICBA last week introduced a resolution calling on lawmakers to end the federal tax exemption for credit unions with $1 billion or more in assets or to establish a tax uniformity between credit unions and community banks that pay taxes.
“Eliminating the federal tax exemption for credit unions over $1 billion in assets will help ensure taxpayer dollars no longer tilt the competitive marketplace, subsidize community banking consolidation, and result in fewer choices for consumers and small businesses,” ICBA CEO Rebeca Romero Rainey said March 12.
Jim Nussle, CEO of the trade group America’s Credit Unions, blasted the ICBA the following day, saying their targeting of just the largest credit unions “shows they know their message is weak with lawmakers and consumers alike.”
“This isn’t about the millions of Americans who will suffer without access to a credit union, this is about credit union competition chipping away at the banks’ own bottom lines,” Nussle said. “For decades, banks have taken advantage of taxpayers for their own profit: they enjoy Subchapter S subsidies, make risky decisions that consequentially rip away people's American dreams, abandon communities, and get bailed out by the government when they overstep.”
Subchapter S corporation status, Nussle said, allows publicly traded banks to pass corporate income directly to shareholders for federal tax purposes. Banks, for their part, argue Subchapter S exists so income is not double-taxed — first on the corporation, and again on shareholders.
Whole bank-credit union deals are off pace from last year — at this point in 2024, six had been announced. However, Michael Bell, a partner at law firm Honigman, said last week such transactions “will be on the same pace as last year.”
Buying First Community Bank of Cullman will enable Legacy to offer a broader range of financial products and services to local residents and businesses, including enhanced digital banking options, competitive checking account choices and high-yield savings accounts, the company said.
“Legacy has been committed to crafting financial solutions for the communities we serve for over seventy years,” Glenn Bryan, Legacy’s CEO, said in a statement. “Our culture emphasizes excellence, education, energy and empowerment, and we look forward to bringing our approach to financial service to the people of Cullman County.”
The $644 million-asset Legacy counts nine branches and serves about 39,000 members in central Alabama. It plans to open two more locations this year, according to Tuesday’s press release.
First Community, by comparison, had $104 million in assets, $81 million in loans, $79 million in deposits and $13 million in equity as of Dec. 31.
“After decades of service to the Cullman area, the decision was made by our Board of Directors to seek a partner that could take our service to the next level,” Billy Faulk, First Community’s CEO, said in a statement. “We were determined to find a group that held the same philosophy of business that we do, and after an extensive search, we found that in Legacy.”
Among other credit union-bank transactions, California-based Frontwave Credit Union agreed in January to buy in-state Community Valley Bank for $56.4 million. Illinois’ NuMark Credit Union announced this month it would buy in-state lender The Lemont National Bank.
