Tennessee Regulator Files Appeal to Block Credit Union-Bank Purchase

A Tennessee judge will hear arguments in July on whether to temporarily block, for the second time, the acquisition of a bank by a credit union both based in Memphis.

The Tennessee Department of Financial Institutions (TDFI) filed documents on June 14 to appeal a May 27 court ruling that allows the $1 billion Orion Federal Credit Union to move forward with its proposed purchase of the $818 million Financial Federal Bank in Memphis, which would lift Orion as the sixth largest financial cooperative in Tennessee with nearly $1.9 billion in assets.

Based on the TDFI’s position that the deal is prohibited under state law, Davidson County Chancery Court Judge Patricia Moskal granted an injunction last November that temporarily blocked the planned credit union-bank buy. After hearing arguments from both sides, Judge Moskal lifted the injunction last month that temporarily blocked the deal.

However, the Tennessee regulator said in court documents that permitting the purchase transaction to close before a decision on appeal would undermine the TDFI’s legal authority and duties to enforce state law and prevent acquisitions that violate it.

“For example, if the status quo is not maintained and the purchase transaction is consummated while the appeal is pending, the (TDFI) commissioner’s appeal would effectively be rendered moot because of the extreme difficulty, if not impossibility, of attempting to undo the transaction in the event the commissioner prevails on appeal,” TDFI’s argued in court documents.

Attorneys for the credit union and bank did not respond to CU Times‘ request for comment. As of Tuesday at 11 a.m., they did not file a legal brief opposing the state’s appeal argument.

The deal was allowed to move after attorneys for the credit union and bank argued that the proposed transaction was not prohibited because the term “acquire” or “acquire a bank” under Tennessee law is limited to the acquisition of a bank as a corporate entity by acquiring the bank’s stock or charter. What’s more, they also argued the Tennessee regulator interpreted “acquire” too broadly, and that the term does not extend to Orion’s proposed purchase of all or substantially all of the assets and assumption of Financial Federal Bank’s liabilities, which the financial institutions referred to in an undisclosed definitive agreement announced in August 2021.