Bankers Lose Key Round As Ohio Clears Path For Interra’s Hicksville Bank Deal
By CU Today Staff —
COLUMBUS, Ohio—A major hurdle facing Interra Credit Union’s proposed acquisition of The Hicksville Bank has been removed after the Ohio Division of Financial Institutions concluded the bank has the legal authority to sell substantially all its assets and liabilities to the Indiana credit union.
In an Aug. 12 seven-page nonobjection letter, interim Superintendent Ingrid White acknowledged Ohio’s bank-transfer statute does not expressly authorize a state bank to transfer its assets and liabilities to a credit union, but said it also does not prohibit such a transaction. ODFI instead relied on Ohio’s bank parity statute, which gives state banks powers available to national banks and federal savings associations, and concluded Hicksville has authority to proceed.
The decision addresses the central issue that has threatened the transaction almost since it was announced. CUToday.info reported May 6 that the Ohio Bankers League had vowed to use regulatory challenges, legislation and potentially litigation to stop the deal, arguing Ohio law identifies banks and savings institutions—but not credit unions—as institutions eligible to acquire the assets and liabilities of an Ohio state-chartered bank. CUToday.info subsequently reported that Michael Bell, a partner and chair of the Financial Institutions Practice Group at Honigman, LLP, which is representing Interra, disputed that interpretation and pointed to federal regulatory precedent and a 2019 Ohio bank branch acquisition by a credit union.
ODFI has now essentially sided with Hicksville on that threshold question. The division said Ohio Revised Code Section 1109.02(C) grants state banks “all powers” and permits “all acts” available to national banks and federal savings associations. ODFI cited OCC approvals of previous transactions in which national banks or federal savings associations transferred substantially all their assets and liabilities to credit unions and pointed specifically to federal regulations defining an “other combination” to include the transfer of deposit liabilities by a national bank or federal savings association to “a credit union or any other institution.” The division concluded those federal powers flow through Ohio's parity statute to Hicksville.
The ruling also knocks down another argument that could have complicated the transaction: Interra is privately insured rather than federally insured. ODFI said American Share Insurance is an Ohio-based insurer expressly authorized under Ohio law and regulated by both ODFI and the Ohio Department of Insurance, and said treating private insurance as inherently unsafe or unsound would run contrary to Ohio's longstanding public policy.
But one important federal hurdle remains. ODFI noted that the federal Bank Merger Act requires prior FDIC approval when an FDIC-insured institution transfers assets to a non-federally insured institution in consideration for the assumption of deposit liabilities. .
And the fight is not over. ODFI said opponents have also raised Interra's tax-exempt status, the fact that credit unions are not subject to the federal Community Reinvestment Act and the fact that credit unions are not included among eligible public depositories under Ohio law, but the regulator said those are policy issues outside its safety and soundness determination.
Bell, who has been involved in more than 75 whole-bank agreements, plus additional bank branch purchases, noted that Ohio “Now joins the great majority of states that have considered this issue supporting the free market and community banks rights to choose their strategies. This is a real win for banks, credit unions and main street America. Thankfully only a very few states have fallen victim to narrow-minded political arguments.”
Ohio Credit Union League President Paul Mercer said the decision from ODFI “represents a meaningful win for the community of Hicksville and for local residents. Interra Credit Union will provide the Hicksville community with the same level of financial service and community investment they have come to expect, while also maintaining jobs and keeping members’ money local. The fact that the Bank Lobby in Columbus has already decided to resort to attacks on impartial decision makers only underscores the weakness of their position. Any attempts by outside actors to delay or obstruct the process would only serve the interests of a few while actively burdening the Hicksville community and local residents in pursuit of a purely political agenda.”
Originally reported by CU Today.