In rural Colorado, community banks are much more than businesses where residents deposit their money.

Often the financial backbone of these communities, these banks address the unique challenges present in rural areas and tailor their financial services to the local needs. This includes everything from seasonal loans to flexible collateral such as livestock or crops to mobile services for remote and underserved areas.  

Without these services, small businesses and agricultural lending in rural Colorado would be devastated, leading to significant economic hardship in communities throughout the state.

That’s why we were deeply concerned about a new bill, SB 25-280, to permit credit unions to buy community banks.  

This is the second year in a row the state legislature is considering a bill to do irreversible damage to banking in rural Colorado. Here, community bankers know their customers, by name, and provide loans that larger financial institutions typically shy away from — such as those for ranchers, hunting outfitters, mobile homes and small businesses.

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Credit unions, originally designed to serve specific groups with a common bond, are now expanding aggressively through acquisitions. Last year, they bought a record-breaking 22 banks.

This expansion is fueled by an outdated federal tax exemption dating back to 1934, which gives credit unions an unfair advantage over tax-paying banks. As a result, credit unions can offer higher purchase prices for banks, potentially forcing banks to accept these offers.

When credit unions acquire banks, they are not subject to the same regulatory scrutiny as bank-to-bank transactions. Specifically, credit unions are exempt from the Community Reinvestment Act (CRA) and Fair Lending Laws, which require banks to invest in low-to-moderate income communities and protect against discrimination in lending. This regulatory disparity is particularly concerning given credit unions are increasingly offering the same products and services as banks.

The effect on local communities cannot be overstated. Our banks — where our boards reflect the makeup of our customers — in Hugo, Limon, Leadville, Steamboat Springs, Milner, Walden and Kremmling are integral parts of the local economies. We provide the majority of small business and agricultural loans and are typically the go-to bank for motels, hotels and restaurants.

We are also philanthropists. In 2023, six of the top seven corporate philanthropists in Colorado were banks, with zero credit unions making the top 25, according to the Denver Business Journal. Community banks sponsor everything from 4H livestock purchases to suicide prevention programs to youth sports. This type of neighborhood support and the connections made are crucial in small towns throughout our country and the reasons people are drawn to and stay in rural Colorado. 

Community banks in Colorado are vital to the success of rural areas, offering personalized services like agricultural and small business loans larger institutions often overlook. These banks understand the unique needs of local farmers, ranchers and entrepreneurs, providing the financial support necessary for growth and stability. More than just transactional, the relationships between these banks and their customers are deeply rooted in trust, often spanning generations. This continuity fosters a sense of community, ensuring local economies stay strong and resilient even through economic challenges.

Additionally, larger banks and credit unions rely on standardized algorithms and centralized underwriting processes that don’t fit the needs of rural and resort communities like those in Colorado. There’s a real concernif banks in these areas are acquired, the new owners would impose these inflexible policies, potentially harming the local economy and restricting access to capital.

The legislature appears to recognize such sales could have a significant effect on small businesses, agricultural lending and lending for low-and moderate-income areas as the bill requires an analysis of those potential effects prior to the banking board’s approval. But there is no requirement the board withhold approval in certain circumstances and there is no mandate the credit unions continue community reinvestment after the sale.

The provision has little, if any, teeth.

We urge Colorado’s legislators to put an end to finding ways for credit unions to buy rural community banks. Our rural communities deserve banking services that serve their specific and unique needs.

PJ Wharton has served as president and chief executive of Yampa Valley Bank. Randy Younger is president and chief executive of First National Bank of Hugo-Limon.