The first bank acquisition by a credit union announced this year reignited concern from the community banking sector after Frontwave Credit Union entered a definitive agreement to acquire Community Valley Bank (CVB) to expand its footprint in Southern California.
The institutions emphasized they are both fiscally sound and the agreement represents a proactive step with similar histories and philosophies to enhance their strengths and position in the marketplace, according to a press release.
“Frontwave Credit Union has a long history of making a difference in the community by helping members achieve their financial goals,” Frontwave Credit Union President and CEO Bill Birnie said in the release. “We have a strategic commitment to bring the benefits of credit union membership to more people, while reinforcing our position as a strong and reliable financial institution. The addition of Community Valley Bank will allow us to expand our footprint as we continue living out our mission to make financial dreams come true in the communities that we serve every day.”
Frontwave, which has more than 125,000 members and $1.4 billion in total assets, operates 13 branches in San Diego, Riverside, Calif., and San Bernardino, Calif. CVB operates five branches in the area and has approximately $315.8 million in total assets.
Members and employees are being promised “the best of both organizations” with expanded products and services, more financial assets and combined technology. The agreement aligned well with CVB’s long-term strategy, the release stated.
“Frontwave has demonstrated its commitment to community banking, and I am enthusiastic about the opportunity we have to partner with Frontwave,” CVB President and CEO Jon Edney said. “I’m excited for Community Valley Bank employees to join together with Frontwave employees to enhance our financial services and resources for the communities and people we serve.”
Independent Community Bankers of America (ICBA) President and CEO Rebeca Romero Rainey issued a statement reiterating ICBA’s long-standing concern over industry consolidation in the form of credit unions acquiring banks. She also noted the scrutiny Frontwave has faced for its practice of systematically enrolling new Marine recruits in checking accounts and collecting substantial revenue from fees for overdrafts.
“The growing skepticism of credit unions’ tax and regulatory exemptions must evolve into policymaker action as another tax-paying community bank is acquired by a tax-exempt credit union, especially with Congress raising questions about Frontwave Credit Union’s treatment of military servicemembers,” Romero Rainey said. “While growth-obsessed credit unions rush to leverage their tax exemption to make inflated offers for healthy community banks, each acquisition increases the federal tax exemption for nearly $2.2 trillion in credit union assets.”
ICBA urged Congress to use the current debate over tax reform to address credit unions’ tax and regulatory advantages in an open letter, and also addressed the matter in its “Repair, Reform, and Thrive” policy agenda.
Last year, 22 credit unions announced plans to acquire banks, which was the most such acquisitions in any calendar year on record.