With credit unions buying more small banks, tensions are rising in the financial industry.

Kevin Johnson runs Florida’s largest credit union, and he acknowledges that it wasn’t until recently that he could imagine his nonprofit buying a bank with $750 million in assets.

How times have changed in the financial industry.

In just the latest acquisition of a Florida bank by a credit union, Tampa-based Suncoast Credit Union on Tuesday announced it was buying Apollo Bank of Miami. It’s the largest of the 12 Florida banks snapped up by credit unions since 2015.

Even a few years ago, such a deal would have been unthinkable. Banks and credit unions are both financial institutions that take deposits, make loans and issue checkbooks, but they’ve never exactly been pals.

Credit unions long have taken pains to position themselves as the consumer-friendly alternative to money-grubbing banks, while banks for decades have chafed at credit unions’ tax exemption and incursions onto bankers’ turf.

Now, with credit unions in full acquisition mode, tensions are rising.

VyStar Credit Union of Jacksonville, the state’s second-largest financial co-op, this year bought Citizens State Bank of Perry in northern Florida. IBM Southeast Employees Credit Union, a $1 billion institution headquartered in Delray Beach, snapped up Mackinac Savings Bank of Boynton Beach in 2017 and Oculina Bank of Vero Beach in 2018.

The buying binge has been good news for shareholders of small banks, who are able to cash out in a financial services environment that increasingly favors megabanks like Chase, Bank of America and Wells Fargo.

“The banks are looking for buyers, and certain credit unions are looking to grow,” Johnson said. “It’s a trend that makes sense for us.”

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There’s “a natural fit” between community banks and credit unions, said Ryan McIntyre, senior vice president at VyStar Credit Union. And many banks, finding themselves squeezed by the reality of doing business after the Great Recession, are looking for buyers.

“A lot of the community banks have been left behind by their larger competitors,” McIntyre said. “They’re struggling with the technology and the regulation costs.”

VyStar is “actively looking” for more banks in Florida, McIntyre said.

It’s a trend that rankles traditional bankers, who long have argued that big credit unions enjoy an unfair advantage. Because credit unions of all sizes operate as nonprofits, they don’t pay taxes.

Alex Sanchez, head of the Florida Bankers Association, considers the tax break “corporate welfare.”

“Should a family of four pay more in taxes than a billion-dollar credit union?” Sanchez asks. “That’s the question we have to answer. And the resounding answer is no.”

Sanchez argues that credit unions have moved far away from their original purpose. During the Great Depression, Congress signed off on a tax exemption for credit unions, which were envisioned as modest little cooperatives where people who shared a “common bond” — working for the same employer, or attending the same church — could deposit their paychecks.

Over the decades, credit unions grew more expansive, opening their doors to a wide variety of depositors and borrowers. As long ago as the 1990s, Florida bankers complained, only half-facetiously, that Space Coast Credit Union had opened membership to anyone who had seen a UFO.

Melbourne-based Space Coast Credit Union has grown into the state’s third-largest co-op, with assets of more than $4 billion.

VyStar, for its part, has more than $6 billion in assets and now offers membership to anyone living in 49 of Florida’s 67 counties. Suncoast Credit Union has ballooned past $10 billion in assets.

“These are behemoths,” Sanchez said. “They are not mom-and-pop credit unions.”

Sanchez proposes ending the tax exemption for credit unions with more than $1 billion in assets. As of the third quarter of 2018, there were 17 Florida-based credit unions topping that threshold and one more closing in on $1 billion.

Bankers have been making that case for decades, with no success.

“It doesn’t make sense, and that’s why Congress has not reacted to banks’ lobbying efforts,” Johnson said. “If you taxed credit unions, you’re in essence taxing consumers, because our consumers essentially own the credit union.”

Even with credit unions growing larger, Johnson said the co-ops still hold just 7 percent of America’s deposits. And he said he’s weary of the bickering,

“It’s unfortunate, because we’re in the same industry,” Johnson said.

Even the largest credit unions can’t match the breadth and convenience of Chase, Bank of America and Wells Fargo, with their ubiquitous branches, slick online offerings and reward-laden credit cards.

But credit unions do say they offer a better deal. According to the National Credit Union Administration, credits charged lower rates on loans.

A 30-year mortgage at a credit union cost an average of 3.91 percent, compared to 4.05 percent at banks as of late September. Credit unions charged an average of 3.69 percent for a four-year used-car loan, well below the 5.55 percent charged by banks.

For depositors, the advantages weren’t as clear. Credit unions pay more on certificates of deposit — 1.37 percent on a one-year CD, compared to 1.04 percent at banks.

But banks pay slightly more than credit unions on checking and savings accounts. The typical interest-bearing checking account at a bank fetches 0.14 percent, compared to 0.12 percent at a credit union.

While Sanchez says the difference between rates at banks and credit unions is “negligible,” credit union execs play up the gap.

“We have much fewer fees than most financial institutions do,” Johnson said.

jostrowski@pbpost.com

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