Florida's Credit Unions
Credit unions go shopping
The credit unions’ acquisitions rankle bankers who think credit unions enjoy unfair advantages in the marketplace.
Credit unions emerged in the 1930s to make financing available to people who couldn’t get a bank loan during the Great Depression. To encourage their growth, Congress allowed credit unions to operate as non-profits exempt from income taxes. Initially, Congress defined a credit union as a group bound by the same occupation, association or location, but in recent years, regulators have loosened membership requirements, helping credit unions to grow their bases of depositors.
Of the 10 deals in the past four years in Florida, the average asset size of the acquiring credit unions was $3 billion, more than 10 times the average size of the acquired banks.
For years, bankers have lobbied Congress unsuccessfully to remove or limit credit unions’ tax-exempt status, saying it amounts to a taxpayer-subsidized competitive advantage over banks. They view the credit unions’ acquisitions of banks as more evidence of a system they think is unfair.
“They want more market share in our state? That’s OK. I don’t have a problem with that. But pay your taxes,” says Alex Sanchez, president and CEO of the Florida Bankers Association. “In Florida, they don’t pay the intangible tax, the sales tax or even the hotel bed tax, in addition to the corporate income tax. We have needs in Florida, and they have to be paid for.”
Sanchez says Congress should end the tax exemption for credit unions with assets of more than $500 million. “It’s time to end corporate welfare,” he says.
Credit unions counter that they pass their tax savings along to members via higher rates on deposits and lower rates on loans. They argue that their cooperative structure justifies their tax exemption and that banks have their own advantages, including the ability to tap securities markets for capital.
“In the banking world, it’s about the shareholder. In the credit union world, it’s about the member,” says Janice Hollar, CFO at Achieva Credit Union. “We’re owned by our members, so our tax structure is different.” As non-profit co-ops, credit unions are member-owned and don’t issue stock; banks are shareholder-owned and run for a profit.
Achieva, one the fastest-growing credit unions in the state, was founded in 1937 to serve public school teachers in Pinellas County, later opening membership to all local residents as regulations changed. In 2010, Achieva expanded south of Pinellas by buying Sarasota Coastal Credit Union. In 2018 — three years after it purchased Calusa Bank — Achieva bought Preferred Community Bank of Fort Myers, adding three branches in Lee County.
With more than $1.7 billion in assets and 160,000 members, Achieva now operates 26 branches in 15 counties in Southwest Florida. In addition to checking and savings accounts, it offers mortgages, credit cards, auto loans, CDs, money-market accounts and small-business loans, traditionally a strong suit of community banks.
“We wanted to be in new markets, and it makes more sense for us to purchase an entity,” Hollar says. “Otherwise, you’re starting from zero.”
Hollar says the acquisitions also allow Achieva to spread fixed and administrative costs over a bigger volume of activity. “As we grow, we can become more efficient, and as we become more efficient, we can offer better rates, more services and lower fees for our members,” she says.