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Colorado regulator rejects credit union, bank deal

The Colorado State Banking Board denied Cache Bank & Trust permission to sell its assets to Elevations CU following calls for the regulator to scrutinize the legality of the sale.

All but one board member voted to deny the Greeley, Colo.-based bank from selling its $114.6 million in total assets to the Boulder, Colo.-based credit union, which has $2.16 billion in total assets. The ruling touches on a nationwide trend as credit unions have increasingly become bank buyers, raising objections from bankers that credit unions have an unfair tax advantage.

Opponents of the Elevations-Cache deal pointed to Colorado's statute, arguing that banks can only sell assets to other banks. Colorado's Division of Banking statute reads: "Any state bank may, upon assuming the liabilities relating thereto, purchase all, or substantially all, of the assets and business of another bank."

The board appeared to find the argument convincing. "We are trying to make certain that we abide the statutes. ... It looks very clear. Looking beyond [the statute] is maybe an interpretation," board member Jonathan Fox said during the meeting. Fox also is chairman, president and CEO of Fowler State Bank.

Cache Bank was unable to discuss the matter, Jeffrey Dove, CFO of Cache Bank & Trust, wrote in an emailed statement. Elevations CU was also unable to comment due to the fact that the regulatory approval process is ongoing, a spokesperson for the credit union wrote in an email.

Colorado Bankers Association CEO Don Childears wrote a Jan. 13 letter to the state regulator, arguing that the board should closely consider the state's laws regarding credit unions acquiring bank assets.

"We are pleased that the board viewed the proposal the same way we did: against Colorado statutory requirements," Childears wrote in a statement following the decision.

Cache Bank disagreed. During the Colorado Banking Board's meeting, a Cache Bank representative pointed to the absence of a statute prohibiting banks from selling their assets to credit unions. "There is no section of the code that would prohibit this," the representative said.

Ultimately, the board members denied Cache Bank's sale to Elevations CU, stating that banks selling their assets to credit unions is "prohibited" in the state.

Banker concern about credit unions acquiring banks is not new. Bankers argue credit unions have an unfair advantage since they do not pay taxes. They also object to credit union acquisitions by arguing that the bank's customers might not meet the "common bond" requirement established under law. An analysis by S&P Global Market Intelligence found that credit unions have been able to maintain the majority of banks' customers in their field of membership after acquisitions.

CBA's Childears wrote in his letter that the approval of such deals will set a precedent that could hurt Colorado banks and their regulators.

"If this transaction is approved, other banks that may be interested in acquiring banks such as Cache would be at a competitive disadvantage because the result of the credit union tax advantage means an acquiring credit union has a huge competitive advantage over a potential acquiring bank," Childears wrote.

Since the announcement of the acquisition on Sept. 3, 2019, CBA received many "comments of concern about, or opposition to the purchase, from a variety of banks, large and small, in the Greeley market and elsewhere," according to the letter.

In addition to Childears' letter, the Colorado State Banking Board received public comments from Greenwood Village, Colo.-based First American State Bank COO Scott Yeoman, Denver-based ANB Bank CEO Koger Propst, the Independent Bankers of Colorado Executive Director Michael Van Norstrand and Mountain West Credit Union Association CEO Scott Earl.