An Olympia-based chief executive says the policy begins to level the playing field as credit unions expand through acquisitions.

A new law in Washington targeting credit union acquisitions of community banks is reshaping a fast-growing corner of the financial services industry, drawing both support and scrutiny as policymakers weigh competition, tax fairness and the future of local banking.

Beginning this year, credit unions that acquire or merge with community banks in Washington will be required, for the first time, to pay business and occupation taxes on those transactions. The move follows a surge in such deals nationwide, a trend that has unsettled some traditional banks while offering credit unions a pathway to growth.

Among those welcoming the change is Josh Deck, president and CEO of Olympia Federal Savings and Loan, a 120-year-old mutual savings bank headquartered in Olympia, Washington. Writing in an opinion column for the Puget Sound Business Journal, Deck described the legislation as a long-overdue step toward what he sees as a more balanced competitive environment.

“I applaud the state legislature’s first step toward leveling the financial playing field in our state,” Deck wrote.

The issue has taken on increased urgency as credit unions — which are generally exempt from federal income taxes — have become more active buyers of tax-paying community banks.

Deck argued that the tax exemption has allowed credit unions to outbid traditional banks for acquisitions, often at the expense of locally rooted institutions. “For too long, credit unions have used their tax-exempt status as an advantage to acquire tax-paying community-focused banks like ours—eliminating choice, local investment, and longstanding relationships between bankers and the communities they serve,” he wrote.

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When such transactions occur, Deck said, the consequences extend beyond ownership changes. “When a tax-paying local bank is absorbed by a tax-exempt credit union, communities lose not only vital public funding for essential services, but also a deeply rooted civic partner,” he wrote.

The new tax requirement is intended, at least in part, to address that concern. State lawmakers have framed the measure as a way to preserve tax revenues while still allowing consolidation within the industry.

Deck placed the issue in a broader fiscal context, noting that Washington faces funding pressures for public services. “At a time when there is a shortfall in tax dollars for critical infrastructure like education, parks and public safety, losing tax-paying community banks to tax-exempt credit unions that don’t pay for the vital government resources that keep our communities healthy and safe doesn’t seem like good business,” he wrote.

The debate also highlights a lesser-known segment of the banking sector: mutual savings banks. Like credit unions, mutual banks are customer-owned and emphasize community reinvestment rather than shareholder returns. But unlike credit unions, they pay taxes.

“This is especially true for mutual banks – they operate just like credit unions and are customer-owned, committed to affordable lending, and focused on reinvesting earnings back into their communities,” Deck wrote. “For example, we at OlyFed do not answer to outside shareholders or out-of-state benefactors.”

Olympia Federal, which has a little more than $1 billion in assets, reported earnings of $2.5 million in 2025, up from $1.1 million the year before, according to FDIC data. Deck emphasized that institutions like his play a direct role in local economies, not only through lending but also through taxes and philanthropy.

“Our loans, deposits, investments — and yes, our taxes — stay local, circulating capital back into the same neighborhoods where they were generated, multiplying their impact,” he wrote. “In the past five years, we’ve donated more than $2 million to local nonprofits and volunteered thousands of hours of community service.”

While the Washington law applies only to transactions involving credit unions acquiring banks, Deck suggested a broader reconsideration of tax policy could be warranted. “With more than 400 mutual banks in the country, imagine the collective impact if the 4,000+ credit unions joined us in paying taxes to further support essential services in local communities,” he wrote.

The measure arrives at a moment when consolidation pressures are building across the financial sector, driven by competition, technology costs and changing customer expectations. For some community banks, selling to a credit union has become an increasingly viable — and sometimes lucrative — option.

Deck, however, framed the issue less as a matter of dealmaking and more as one of long-term community impact.

“We look forward to working with lawmakers to ensure mutual savings banks can continue to flourish and deliver for the families and businesses who depend on us,” he wrote. “Putting human-centered relationships first isn’t just a philosophy; it is the foundation of the mutual model that’s all about giving back to move our communities forward.”