As credit unions acquire more community banks, industry groups in Ohio are escalating a battle over taxes, lending and the future of local finance.

A fight that has simmered for years between banks and credit unions is intensifying in Ohio, where a proposed acquisition in the state’s northwest corner has become the latest flashpoint in a broader debate over taxes, competition and the future of community finance.

In an opinion piece published this week in the Dayton Daily News, Aza Bittinger Jr., president and chief executive of the Community Bankers Association of Ohio, urged state lawmakers to place limits on acquisitions of community banks by tax-exempt credit unions, arguing that the deals threaten both state tax revenue and local lending.

The dispute centers on an April announcement by Interra Credit Union, a nearly $2 billion-asset institution based in Indiana, that it plans to acquire The Hicksville Bank in northwest Ohio.

To bank advocates, the transaction represents more than a single acquisition.

Bittinger argued that as large credit unions expand through bank purchases, Ohio risks losing tax revenue generated by community banks while also weakening institutions that have historically played a central role in small-business and local lending.

“Large, tax-exempt credit unions are increasingly buying up community banks, reshaping local financial markets, and creating long-term consequences for consumers, small businesses, and taxpayers,” Bittinger wrote.

He pointed to the difference in taxation between the two industries. Community banks pay federal and state income taxes and operate under regulations including the Community Reinvestment Act, which requires banks to help meet local credit needs. Credit unions, organized as member-owned nonprofits, are exempt from federal income taxes.

Story continued below…

According to Bittinger, Ohio community banks paid more than $361 million in income taxes in a single year, while the state’s largest credit unions paid none. He argued that if Ohio’s largest credit unions were taxed similarly to banks, they would have contributed more than $25 million annually to the state treasury.

Bittinger also cited independent research that he said showed mortgage lending and small-business lending can decline after credit union acquisitions of banks.

The banking trade group is now pushing for Ohio lawmakers to follow states including West Virginia and Tennessee, which have taken steps to prohibit tax-exempt credit unions from acquiring taxpaying community banks.

Credit union advocates reject both the premise and the characterization.

In response to criticism surrounding the Hicksville transaction, the Ohio Credit Union League said the sale reflected a voluntary business decision by the bank’s leadership and shareholders, not a distortion of the market.

“By initiating this sale, Hicksville Bank recognized what 3.4 million Ohio credit union members already know: as member-owned, not-for-profit financial institutions, credit unions are uniquely invested in the local communities they serve,” Paul Mercer, president of the Ohio Credit Union League, said in a statement.

The league argued that credit union acquisitions of banks are neither new nor unusual. It noted that Ohio regulators approved a similar transaction in 2019 involving the sale of a Cincinnati-area bank branch to a credit union.

The organization also disputed claims that credit unions avoid taxes altogether, saying credit unions pay state and local taxes even though they remain exempt from federal income taxes because of their nonprofit structure.

“Unlike banks, as not-for-profit institutions, any profits credit unions earn are reinvested in their communities rather than padding the pockets of shareholders,” the league said in background remarks accompanying Mercer’s statement.

The Hicksville sale, the league added, would preserve access to financial services, maintain jobs and keep a community-focused institution operating locally.

The clash reflects broader consolidation trends reshaping both banking and credit unions nationwide.

Community banks have steadily disappeared through mergers and acquisitions over the past two decades, driven in part by regulatory costs, technology investment demands and succession planning challenges. Credit unions, many of which have grown significantly larger in recent years, have increasingly emerged as buyers.

Those deals have become particularly contentious because they blur long-standing distinctions between banks and credit unions. Critics in the banking industry argue that some large credit unions now operate similarly to commercial banks while still retaining tax advantages originally intended for smaller cooperative institutions.

Credit unions counter that their member-owned structure fundamentally differs from shareholder-owned banks and allows earnings to be returned to members through lower fees, better rates and expanded services.

The debate has grown sharper as the acquisitions move beyond isolated deals into a more sustained trend.

For bank advocates, the concern is not simply competitive pressure but the gradual erosion of institutions they view as contributors to state tax bases and local economies.

For credit unions, the criticism amounts to an effort by banks to block lawful transactions and preserve market share.

The proposed Hicksville acquisition now sits at the center of that dispute, though the arguments surrounding it extend far beyond a single rural Ohio bank.

What began as a transaction between two financial institutions has increasingly become a political and philosophical fight over who should control local finance — and under what rules.

“Establishing clear limits on credit union acquisitions and strengthening existing protections would ensure Ohio’s banking system continues to support economic growth across the state.”

– Aza Bittinger Jr.
President & CEO
Community Bankers Association of Ohio