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Tennessee Decision on Credit Union-Bank Agreement Sets Tone for Other States | Credit Union Journal

A Tennessee judge lifted a temporary injunction that had blocked Orion Federal Credit Union’s acquisition of Financial Federal Bank, allowing the deal to go ahead.

The billion-dollar asset Orion, of Memphis, Tennessee, announced in august that he agreed to acquire the $774 million asset bank, which is also based in Memphis. In November, Davidson County Chancery Court Judge Patricia Moskal issued an injunction in response to concerns from Tennessee Department of Financial Institutions Commissioner Greg Gonzales that the transaction was prohibited under Tennessee banking law.

Gonzales argued that the law only allows banks to buy other banks. But in a ruling on Friday, Moskal said state banking law made it clear the transaction was legal because Orion would acquire the bank’s assets, not its charter or stock.

“To say otherwise would be to broaden or broaden the meaning of the law,” Moskal wrote.

Michael Bell, a Honigman lawyer who advised Orion on the transaction, said the law is clear and the state banking commission did not follow it.

“American courts are meant to act as a check and balance on politics, and in this case they did,” Bell said.

Colin Barrett, president and CEO of the Tennessee Bankers Association, said the group was disappointed and surprised by the court’s decision and that no one understands Tennessee’s banking laws as well as the Tennessee Department of Financial Institutions.

“We remain optimistic that the Attorney General will appeal this decision. However, the ruling does not change the fact that Orion should not be allowed to blatantly abandon its mission and exploit its taxpayer subsidy status to acquire a tax-paying community bank,” he said. declared.

If the deal goes through, it will hurt the city of Memphis and result in a huge loss of tax revenue over the next decade, according to Barrett. “All Tennessee taxpayers and fiscal policy makers should be concerned,” he said.

In a month of August blog postBarrett said the deal would result in approximately $15 million in lost local, state and federal tax revenue over the next 10 years.

There have been seven deals announced in 2022 in which a credit union buys a bank. More recently, Dearborn, Mich.-based DFCU Financial said in May that it had agreed to acquire First Citrus Bank, a subsidiary of First Citrus Bancorp in Tampa, Florida, with assets of $689 million.

There were 13 such deals announced last year.

Some states are pushing back, but Bell said the ruling in Tennessee could be a watershed case and give other states pause before pursuing similar litigation.

In December, the Nebraska Department of Banking and Finance beaten down Premier Bank’s proposed sale of an $395 million asset in Omaha to the GreenState Credit Union of an $8 billion asset in North Liberty, Iowa.

Bell predicts that courts in Nebraska and Minnesota “and any other state where politics enters to impede the free market” will follow Tennessee’s lead.

“At the national level and in the vast majority of states, these transactions are going smoothly,” he said. “In a very small minority of states, politics and lobbyists have intervened. Tennessee was one of those states, but eventually the law was obeyed and the banks’ rights to sell were preserved.

The biggest deal ever for a credit union to buy a bank – VyStar Credit Union’s deal to acquire the $1.7 billion asset Heritage Southeast Bank – was recently announced. postponed a third time.