Ohio’s financial landscape is undergoing a significant shift as large, tax-exempt credit unions increasingly acquire community banks. This trend has raised concerns among state lawmakers and community advocates about the potential long-term impacts on local economies and state revenue.

Impact on Local Economies

Community banks play a crucial role in Ohio’s local economies by providing relationship-based lending tailored to the needs of local households and small businesses. These banks are subject to the Community Reinvestment Act (CRA), which mandates that they meet the credit needs of their communities. However, when credit unions, which are exempt from many taxes and regulations, acquire these banks, the local reinvestment requirements disappear, leaving communities with fewer safeguards and less transparency.

Research indicates that after such acquisitions, mortgage lending often declines or stagnates, mortgage denial rates rise, and small business lending, particularly through Small Business Administration (SBA) programs, drops significantly. This shift can limit access to credit for entrepreneurs, homebuyers, and rural communities, who rely on locally driven credit decisions.

State Revenue Concerns

Community banks contribute significantly to Ohio’s state revenue through income taxes. In a single year, these banks paid over $361 million in income taxes, while large credit unions paid none. If Ohio’s largest credit unions were taxed like banks, they could have contributed over $25 million to the state treasury in one year, supporting property tax relief and other priorities for Ohioans.

The acquisitions are not driven by financial necessity but by a tax advantage that enables aggressive expansion. Many of the community banks being acquired were healthy, growing businesses before their purchase.

Call to Action

States like West Virginia and Tennessee have already acted to prohibit tax-exempt credit unions from acquiring taxpaying community banks, recognizing the risks to competition, consumers, and taxpayers. Ohio is urged to take similar action by establishing clear limits on credit union acquisitions and strengthening existing protections to ensure the state’s banking system continues to support economic growth. By rewarding institutions that invest locally and contribute to their communities, Ohio can preserve a level playing field and protect state revenue.

Original reporting: Dayton Daily News — read the source article.