Tennessee CU Plans to Move Ahead With Bank Acquisition After Court Ruling

The $1.2 billion Orion Federal Credit Union said in a prepared statement on Wednesday that it will move ahead to acquire the $950 million Financial Federal Bank after a Tennessee Appeals Court ruled the proposed purchase is legal under state law.

The credit union’s statement also was critical of the Tennessee Department of Financial Institutions (TDFI) Commissioner Greg Gonzales who filed a lawsuit in October 2021 to stop the acquisition.

“The Commissioner has lost twice. Pursuing this issue any further only prevents local businesses from engaging in free enterprise and would be an unnecessary waste of state resources,” Orion President/CEO Daniel Weickenand said. “The interest rates and economic environment have changed dramatically in the last two and a half years since the transaction was initially challenged. The Tennessee Department of Financial Institutions should be more focused on the health and safety of Tennessee financial institutions in these uncertain times instead of Orion purchasing bank assets that has been determined legal by the Davidson County Chancery Court and now the Court of Appeals.”

After the Appeals Court announced its ruling Monday, TDFI said it is considering options though it would not elaborate. Two options would be to file an appeal with the Tennessee Supreme Court or end its legal challenge altogether. The state regulator did not respond to a CU Times request for comment on Wednesday regarding the credit union’s decision to pursue the bank purchase.

A couple of days after the Memphis-based credit union announced it signed a purchase and assumption agreement to substantially buy all of FFB assets and assume its liabilities in an all-cash transaction, Gonzales met with the board of directors of the Tennessee Bankers Association (TBA) on Aug. 13, 2021. The commissioner and the board discussed how the proposed CU-Bank acquisition could be challenged, according to court documents. A few days later, TBA sent an email to Gonzales identifying “potential roadblocks” to nix the deal.

By October, TDFI filed a lawsuit claiming state law prohibits the federal credit union from acquiring the bank. The next month, a Davidson County Chancery Court Judge Patricia Moskal granted an injunction requested by the state regulator, which temporarily blocked the acquisition until a hearing was held. In May 2022, Judge Moskal ruled in favor of Orion and the bank. By June, TDFI appealed that ruling, which was heard before the Appeals Court in Nashville last December.

If the deal is closed, the Memphis-based credit union will manage $2.1 billion in assets with more than 250 employees while its market share will expand in private banking, residential and commercial lending.

“Orion’s board of directors is eager to move forward following the court’s decision,” Orion’s Board Chair Andre Fowlkes said. “We know this partnership between two uniquely positioned Memphis based financial institutions will allow Orion the opportunity for greater community investment.”

Kent Wunderlich, CEO and board chair of Financial Federal said, “We are pleased with the decision.”

The financial institutions did not say when they expect to finalize the transaction.