The purchase of a Kentucky community bank by a Tennessee-based credit union is part of a growing trend in the industry that ultimately hurts taxpayers and local communities, said TBA President Colin Barrett.
First South Financial Credit Union in Bartlett, Tenn., announced Tuesday it plans to acquire WinFirst Bank in Winchester, Ky. It marks the 10th such buyout in 2019 and the 19th since 2018, according to American Banker.
Credit unions are nonprofit, tax-exempt entities, originally designed to allow groups of people with modest means to pool their financial resources, especially in underserved areas. First South, for example, was created for naval personnel in Millington, Tenn., and has grown to a complex corporation that is larger than 75% of all the taxpaying banks headquartered in Tennessee.
Credit unions’ taking taxpaying banks off the tax rolls results in an annual loss of tens of millions of dollars in taxes that should be paid like every other family and business, and used to support the communities in which the credit unions operate.
Based on the latest applicable federal and state tax figures in 2017, Tennessee banks paid $557,804,000 in taxes, while Tennessee credit unions paid nothing.
“Ultimately, the losers in this transaction are the Tennessee and Kentucky taxpayers who are indirectly providing the financing for this deal,” said Barrett. “Having a tax-exempt credit union acquire a taxpaying community bank essentially removes that institution from state and federal tax rolls. The consequence—it reduces the tax revenues available to support important government services, putting that burden back on everyday taxpayers. That is just not right.”
Barrett said banks have pressed Congress for years to level the playing field by removing the tax exemption for the largest credit unions, and more strictly controlling the types of financial services they can be involved with.
He said it’s time for credit unions to return to their original statutory purpose of serving people of modest means.
“This is a trend that should be disturbing to any state or federal official who is tasked with providing services to taxpayers and balancing their budget,” Barrett said. “Congress needs to finally wake up to this issue.”
About Tennessee Bankers Association
The Tennessee Bankers Association is a not-for-profit organization representing Tennessee’s commercial banks and thrifts. The Association provides continuing education, develops and monitors state and federal legislative agendas, disseminates information on all facets of the financial services industry, and promotes the public image of financial institutions. Visit us at our website, www.TNBankers.org.