GreenState scraps acquisition of Nebraska bank after judge denies appeal

Dive Brief:

Iowa-based GreenState Credit Union is scrapping its proposed acquisition of Omaha, Nebraska-based Premier Bank, the credit union’s CEO, Jeff Disterhoft, told Credit Union Times and American Banker.
The move comes after Lancaster County District Court Judge Ryan Post this month affirmed a December decision by the Nebraska Department of Banking and Finance (NDBF) to deny GreenState’s application to purchase Premier.
In its appeal, Premier argued that if federally chartered banks that do business in Nebraska have the authority to sell substantially all of their assets and liabilities to a credit union, then state-chartered banks like Premier should, too. The NDBF, however, cited a wildcard rule allowing a bank’s board of directors or officers to exercise all of the incidental powers necessary to conduct the business of banking. That law does not specifically include the power to sell or buy bank assets, the NDBF asserted.

Dive Insight:

The GreenState-Premier deal is the second proposed credit union-bank combination this year to fall apart. After three delays, Florida-based VyStar Credit Union and Georgia-based Heritage Southeast Bank agreed in June to terminate their merger plans “after careful consideration of the proposed transaction and the lack of a clear path forward to obtaining the regulatory approvals needed for closing.” Mississippi-based The First Bank a month later agreed to acquire Heritage Southeast in a $207 million transaction.

Disterhoft, in comments Thursday to Credit Union Times, said GreenState “knew there would be a fight” to keep the credit union out of Nebraska.

“We are disappointed by the outcome,” he said, adding the judicial blow is only a temporary barrier. “We are still coming to Nebraska. This simply pushes our timetable back a year.”

GreenState may yet expand into Omaha organically, he said.

"Omaha is a growing market and an enticing place to be," Disterhoft told American Banker. "We'll react to acquisition opportunities as they present themselves.”

Chris Maher, Premier’s CEO, bemoaned the court decision Thursday, saying the appeal’s denial “is to the detriment of all Nebraskans who would benefit from additional competition in their state.”

“The Nebraska Department of Banking joined forces with the state banking lobby to prevent the sale of a privately owned business,” Maher told Credit Union Times. “Regulators should concentrate on safety/soundness and consumer protection. Neither of those were an issue.”

Credit union purchases of banks typically draw objections from trade groups such as the Independent Community Bankers of America (ICBA), which argues credit unions’ tax-exempt status allows them to offer a higher purchase price for acquisitions than banks can, and lets them grow more freely. That unchecked growth runs counter to the mission of serving lower-income members in relatively remote geographic areas, deal opponents argue.

Nebraska is hardly the first state to put up a fight against bank purchases by credit unions. The Colorado Banking Board in 2020 denied a bid by Elevations Credit Union to purchase the assets of Cache Bank & Trust.

The Tennessee Department of Financial Institutions, meanwhile, is appealing a judge’s decision to allow Memphis-based Orion Credit Union to purchase Financial Federal Bank. Davidson County Chancery Court Judge Patricia Moskal issued an injunction in November temporarily halting the transaction as the state banking regulator and the financial institutions argued over the meaning of the word “acquire” in the Tennessee Banking Act. Moskal lifted the injunction in May, ruling the Tennessee Banking Act allows the transaction because Orion would be acquiring Financial Federal’s assets, not its charter or stock.

State pushback against credit union-bank tie-ups, however, “is not a nationwide movement,” Disterhoft told American Banker.

“Each state has its own approach,” he said.

Indeed, Illinois has appeared more welcoming to GreenState. The credit union agreed last year to buy Oxford Bank & Trust and Midwest Community Bank — both based in the state. The latter deal closed in July.

Credit unions so far in 2022 have proposed 10 acquisitions of banks.