Idaho credit union to acquire Montana bank for expansion into the state
In a recent development, Frontier Credit Union, based in Salem, Oregon, announced its first expansion into Montana by acquiring First Citizens Bank of Butte. This move will result in a combined entity with 16 locations and add $75 million in assets and a single branch to Frontier's footprint.
The acquisition holds personal significance to Frontier CEO Dan Thurman, who grew up in Dillon, Montana. Thurman expressed eagerness about serving the Butte community and being a part of its fabric. Casey Reilly, First Citizens' CEO, also expressed excitement about the transaction.
First Citizens will gain access to expanded product offerings, including advanced digital banking tools and quick online loan applications. As for staffing changes, Frontier does not anticipate significant alterations as a result of the transaction. The acquisition is set to close by the end of 2025.
This acquisition marks the sixth whole-bank purchase by a credit union this year, adding to the ongoing debate about the tax exemptions enjoyed by credit unions. The Independent Community Bankers of America (ICBA) has been vocal in its criticism of these exemptions, arguing that large credit unions, particularly those with assets over $1 billion, have increasingly acted like banks – acquiring community banks and expanding beyond their original fields of membership, while enjoying a full federal tax exemption.
The ICBA's CEO, Rebeca Romero Rainey, has called for policymaker action regarding credit union tax and regulatory exemptions. She believes that these acquisitions consolidate the financial services industry, harm consumers and small businesses, and represent policy abuse of credit unions' tax-exempt status originally granted to serve limited community groups.
However, the recent passage of the 2025 budget reconciliation bill, known as the "One Big, Beautiful Bill Act" (H.R. 1), has preserved the federal tax-exempt status of credit unions. This legislation defeated earlier Republican proposals to tax credit unions and ensures that they remain exempt from federal income tax, continuing to support their community-oriented mission.
Despite this, there is ongoing debate and scrutiny regarding this tax-exempt status. Some organizations, including the ICBA and state bankers' associations, call for a review and potential revision of these rules. Credit unions classified as federal instrumentalities under section 501(c)(1) of the tax code remain exempt but must comply with specific excise tax reporting under section 4960 for executive compensation above $1 million.
In summary, while credit unions currently remain tax-exempt and can acquire banks, growing concerns from banking associations signal possible regulatory or legislative scrutiny in the near future to address these complex financial and policy challenges.
In the light of the acquisition, First Citizens Bank of Butte is expected to benefit from expanded product offerings in the finance industry, such as advanced digital banking tools and quick online loan applications, offered by Frontier Credit Union. This growth in the business sector through fintech solutions highlights the blurred lines between traditional banks and credit unions, contributing to the continued debate about the tax exemptions enjoyed by credit unions in the industry.
