A few prominent bankers
are at it again.

They want to tell other banks and credit unions what they can and can’t do. There’s no reason for it. Maybe they don’t like the credit union value proposition. Or don’t want other banks to have more options. Maybe they don’t believe in free markets and competition.

Utah credit unions
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What's the issue?

Weakening state charters

SB177  would block state-chartered banks from selling assets to a credit union. This makes the national charter more attractive. Over time, fewer banks would use the Utah bank state charter (as has already happened with credit unions), and oversight of Utah’s financial assets would move toward the federal government. Wouldn’t local control be better?

Additionally, with fewer competitors for the purchase of state bank assets, the price of those assets drops. This effect is convenient for banks that are prospective buyers of other banks. Without credit union competition, they could purchase state banks for a lower cost. Wouldn’t more competition among buyers be better for banks looking to sell?

Why shouldn't banks sell to credit unions?

No reason. Everyone wins.

When a bank sells its assets to a credit union, everyone wins. Taxpayers. Credit union members. Consumers. Even bank owners.

Credit union members

The acquisition of bank assets gives a credit union more scale—greater efficiency. This means better pricing and services.

Consumers at large

Credit unions are increasing their branch presence nationally and in Utah. Banks are decreasing.

Bank owners

Traditional economics apply to bank sales; when there are more potential buyers--increased demand--bank owners benefit.

What's going on with financial institution branching in Utah?

Who's opening branches? Who's closing them?


Banks are closing branches; credit unions are opening them.

In Utah

It's the same as nationally: Banks are closing branches. Credit unions are opening them.

In rural Utah

No surprise--the story is the same. Banks are creating banking deserts. Credit unions are creating rural oases.

A few influential bankers are at it again.

They want to tell other banks and credit unions what they can and can’t do. There’s no reason for it. Maybe they don’t like the credit union value proposition. Or don’t want other banks to have more options. Maybe they don’t believe in free markets and competition.

Whatever the reason, just as they did two decades ago, they’re trying to use government to limit the options of banks and their owners, and credit unions and their members.

What happened, then?

Twenty years ago, a few prominent bankers wanted to put more limits on credit unions—and just like last time, now they’re trying to use the Utah State legislature to do it.

Back then, to further their own profits, they told the public and legislators that putting credit unions in a legal box would stop their growth and benefit the public.

They were wrong. In fact, the only result of those efforts was costing the state a great deal of sales tax revenue.

Since then, Utah’s credit unions have proven resilient and are serving more Utahns than ever.


What's at issue, now?

A bill in the Utah state legislature, SB 177, would make it illegal for a state-chartered bank to sell more than 10% of its assets to a credit union.

However, when a bank sells its assets to a credit union, everyone wins. Taxpayers. Credit union members. Consumers.

  • Taxpayers: the business generated by a bank, formerly subject to income taxes, is now exempt from corporate income taxes. A recent NAFCU study showed that for every $1 of corporate income tax credit unions don’t pay, $2.60 of taxes are generated downstream. More details here.
  • Credit union members: the acquisition of bank assets gives a credit union more scale—greater efficiency. This means better pricing, services, and options for members.
    • With more members, a credit union can open and sustain more branches, increasing convenience for members and access to financial services for other consumers. Banks in Utah have fewer branches than they did 10 years ago; credit unions have more, and are better able to keep banking local.
  • Consumers at large: when banks sell assets, or merge with other banks, they tend to combine with larger banks from out of state. When this happens, those larger banks tend to close branches in the original state, especially in rural areas. Over time, this decreases access to financial services, especially in rural areas. More details below.

Why might a bank want to sell assets to a credit union?

  1. The market has shifted dramatically. In the 1990s when a community bank would sell it would have a minimum of 10-15 prospective purchasers. Due to consolidation today when a community bank goes to sell it typically has 5 or less prospective purchasers. Traditional economics apply: price lowers as demand lowers. Adding one or more credit unions dramatically changes these economics.
  2. Credit unions are all cash purchasers. Banks often purchase with a mix of cash and stock. Bank owners should have the freedom to pursue an all-cash buyer if desired.
  3. Credit Unions do not have the shareholder pressure to reduce expenses in an acquisition. Accordingly, they can keep all branches open and can hire most if not all the bank employees.

Nobody loses when a bank merges with a credit union — except for people who’d rather not have credit union competition in their market.

What would this bill accomplish?

The intended purpose of this bill is to prevent the sale of bank assets to credit unions.

However, it would have several negative effects on the financial services in Utah—to satisfy just one or two prominent bankers.

First, this bill weakens the state bank charter when compared to the federal charter.

Because the bill applies only to state-chartered banks, exit strategies of state-chartered banks would become more limited, and the state charter becomes less attractive than the federal charter.

The result? Fewer banks use the state charter. And banks wanting to sell assets to a credit union will need to switch to a federal charter.

If passed, SB 177 makes the state bank charter weaker, less attractive. Federal government gains more power. State government loses power.

This is like what happened with credit unions 20 years ago—at the request of these same few bankers: the state legislature weakened the credit union charter. Those few bankers said that credit unions would be subject to the more restrictive state laws, unable to do anything about them. But in fact, out of necessity, they switched to a federal charter, thereby escaping the punitive state laws. Those few bankers sold a bill of goods to the state legislature, and it cost the state’s coffers millions of dollars of sales tax.

Legislators and Utah bankers might well consider: if one or two bankers not subject to this law start pushing legislation against Utah state banks, how far will they take it? Will they continue to push legislation that puts Utah banks at a disadvantage, and national banks at an advantage? What’s to stop them?

It’s best to stop them now, before they gain any more momentum.

Second, the bill promotes the formation of banking deserts in rural Utah.

Banks across the country are closing branches and therefore reducing physical access, generally. However, credit unions increased the number of branches.

This is certainly the case in Utah.

Importantly, this trend is found not only in heavily populated areas of Utah, but also in rural areas. Between 2011 and 2012, the number of branches in rural Utah has decreased for banks, and increased for credit unions.

Splitting the data between Utah institutions and out-of-state institutions reveals some interesting information. As it turns out, when you compare out-of-state banks, Utah banks, Utah credit unions, and out-of-state credit unions, only one of the four types of financial institution had fewer branches in rural Utah in 2022 than in 2012.

You guessed it, out-of-state banks.

Notably, Utah banks tend to merge with out-of-state banks.

Long story short: Utah banks tend to merge with out-of-state banks, which tend to close branches in rural Utah, spreading banking deserts.

Wouldn’t it be better if it remained an option for Utah banks to merge with credit unions, which are working to decrease financial deserts in rural Utah? Such an option could reduce the spread of banking deserts in Utah’s rural areas.

Below is the story of how Grand County Credit Union (now Desert Rivers Credit Union) opened a branch in Green River, Utah, after the out-of-state bank closed its branch.

The few people pushing this bill will tell you that when a bank sells its assets to a credit union, bad things happen

But not really.

Their arguments are—at best—only half truths. A few key bankers, who plan to never sell assets to credit unions (and whose banks conveniently wouldn’t be subject to this law) just don’t want credit unions to grow and succeed, even at the expense of other bankers.

Here’s some more information to give you a bigger picture:

  • All profit generated by a credit union is eventually taxed. Those taxes are deferred, much like a 401k. As soon as the profit benefits an individual, they’re taxed. Because bank profits immediately benefit stockholders, due to increased stock prices, those profits are taxed.
  • These transactions are not tax exempt. Taxes are paid on both the sellers and buyers side of these transactions.
  • It does benefit credit union members when their credit union buys a bank. The acquisition of bank assets gives a credit union more scale—greater efficiency. This means better pricing and services. With more members, it may make more sense to open more branches, increasing convenience for existing members. 

So, why this legislation? A few powerful bankers are upset that credit unions have limited their earnings over the years, and want to poke credit unions in the eye—at the expense of other bankers and credit union members.

Plot twist!

The confounding thing about this legislation is that by limiting a credit union’s ability to purchase bank assets it also limits a bank’s ability to sell assets to a credit union. This bill hurts Utah’s state-chartered banks by reducing their options!

So why do bankers want it? We don’t believe most of them do.

We think that one or two prominent Utah bankers are bent out of shape over past and future competition, and they’re pushing SB177 at the expense of everyone else—credit unions, state-chartered banks, bank owners, credit union members, consumers, and ultimately all Utahns.

So, tell your legislator that you won’t stand for them supporting a few powerful people over everyone else. Let them know that the special interest of the few is not as important as the benefits of millions of Utahns.

Do a lot of banks sell assets to credit unions?

No. Not many do. From 2012 to June 2022, there have been 2,448 bank sales. 60 (2.45%) of those have been to credit unions. Not one of them has involved a Utah bank or a Utah credit union.

Those 2.45% of sales only account for 0.3% of assets sold.

So, what’s the big deal? Why do a few bankers care about this?

Great question. The best we can come up with is that one or two prominent bankers still harbor ill will toward credit unions and the competition they represent in the market, and simply want to make a point.

But making that point comes at a cost to other bankers, credit unions, and all Utah consumers.

Why are credit unions so opposed to this bill?

It’s all about standing up against narrow, powerful special interests that don’t benefit Utah communities — especially rural areas.

From what we can tell, SB177 is being driven by a few prominent bankers as a continuation of actions taken 20 years ago. Ultimately, these folks don’t appreciate competition in the consumer banking industry (it limits their profits), and legislation is their preferred way to stifle it.

But because No Utah banks have sold assets to Utah credit unions, their reasoning must be theoretical and philosophical. It’s policy enacted without reason or purpose. That’s not the Utah way, as we understand it.