Never-ending acquisitions for large, federal income tax-exempt credit unions! In yet another attempt to grow at “no speed limits,” a massive credit union has used its taxpayer-backed dollars to purchase a bank and further grow its field of membership to increase its total assets. Jacksonville, Florida-based VyStar Credit Union, the 17th largest credit union in the US, announced its acquisition of Citizens State Bank in Perry, Florida in mid-January. This will bring VyStar’s worth to $8.7 billion with 69 branches across 22 counties in Florida and Georgia when the deal is complete.
Although this may be the first credit union-bank merger of 2019, it is hardly the last. In 2018 alone, eight large credit unions announced their purchases of smaller banks. Already this year, two other Florida-based credit unions have also announced acquisitions, proving that this strategy used by large credit unions is here to stay (unless NCUA finally decides to do something about it).
Not surprisingly, VyStar refused to disclose the price it will pay for buying the $280-million asset bank, which leads us to assume it was probably a pretty penny. Why wouldn’t it want to tell us what it is paying? Perhaps it is trying to maintain its squeaky clean “nonprofit” reputation so it can continue to claim it is operating on a bare bone budget to support people of modest means.
That, unfortunately, is a false reality. A lawyer representing the credit union was quoted saying that VyStar plans to continue “growing nonorganically,” even after the purchase of Citizens Bank is finalized, noting the credit union plans on “reviewing two to four banks a month.” VyStar president and CEO Brian Wolfburg was also quoted saying “Our recent expansions are taking VyStar into new markets, making it necessary to consider mergers/acquisitions to more efficiently serve these new markets.” If credit unions were chartered to support people of modest means, tied by a common bond in small, designated communities – why do they feel the need to “expand into new markets” in the first place?
So far it looks like VyStar’s strategy of “growing nonorganically” has worked out nicely, since it now apparently has the assets to purchase a $59 million, 23-story building in downtown Jacksonville, as well as the $9.76 million naming rights to the city’s main sports arena. In essence, instead of using its new money to serve military families and civil-service employees as chartered (note: today only five to ten percent of members are current or retired military families), VyStar is spending its riches to get richer.
The insatiable appetite to grow drives these large credit unions to abandon their missions, no matter the cost (both literal and figurative). Aside from the price of the actual purchase, every time a large credit union buys a small credit union or community bank, it threatens the existence of them altogether. As a result, average Americans and people of modest means that rely on these institutions are left high and dry by the very system that is supposed to help them.
VyStar is just the latest example of a large credit union abusing its tax status to buy assets in the form of other businesses (cough cough, PenFed). When, if ever, will regulators step in and finally wield their authority to stop this gross abuse of the tax exemption?