| State chartered credit unions in Massachusetts have for a while been allowed to convert into a bank or merge into a bank. But those acts could not technically be reciprocated.
A bill proposed in the state’s legislature earlier this year, “An act relative to mergers of credit unions and banks, and charter conversions of insured depository institutions,” would change this and allow state chartered banks to convert or merge into a credit union.
There is also a similar provision in the credit union modernization bill, which is in its second year of hearings.
“While MBA is not opposed to the concept of a two-way street that would allow a bank to convert to a credit union, we believe the committee should carefully examine the public policy implications of these measures,” the Massachusetts Bankers Association said in a statement following a recent hearing on the bill. “We also believe that the Federal Deposit Insurance Corporation, the National Credit Union Administration and the state excess insurance funds may need to provide input into the transaction.”
The conversion of a credit union to a bank or vice versa is complex. Credit unions do not pay federal or state income taxes, which could serve as a significant draw for some banks.
“The committee should be aware that any conversion of a taxpaying community bank to a tax-exempt credit union will result in less revenue for the commonwealth,” the MBA stated.
According to Jon Skarin, who deals with compliance issues at the MBA, there have been purchase and assumption deals between banks and credit unions – not technically considered mergers – where the credit union was the surviving entity.
But that may only happen once every few decades, he said.
One of the more recent transactions between a credit union and bank was when Brockton-based HarborOne Credit Union converted into a cooperative bank in 2013. The bank went on to do a partial stock offering in 2016.
In other states such as Wisconsin and Michigan, credit unions have purchased banks.
The state’s Committee on Joint Financial Services will make recommendations in February on most of the bills under their jurisdiction, and whether or not they support them or if they believe they require further study.
