February 4, 2025

The Fiscal Impact of Credit Unions Purchasing Bank Assets  

Introduction 

The financial activities sector is an important contributor to Colorado’s overall economy and a large employer. As of December 2024, there were 182,200 people employed in Colorado’s financial activities sector. Of these 182,200, 32,896 were employed by the banking sector and 6,600 by credit unions.

Beyond employment, community banks’ and credit unions’ decisions spur economic growth by facilitating consumer spending through home and auto loans, financing small business expansion, and providing funding for state and local government projects. Community banks are more likely to facilitate small business development and government projects, whereas credit unions are more likely to facilitate auto loans. Should community banks or credit unions become more prevalent, the difference may be felt across the economy, including by bondholders, public and private sector borrowers, schools, and credit providers.

of the 2025 General Session apparently enacts small changes, but the impact could be more far-reaching. SB25-080 authorizes credit unions to purchase the assets and liabilities of up to five state-chartered banks each year with the banking board’s approval. 

This has budgetary effects. A state-chartered bank’s tax liability will change if acquired by a state-chartered credit union. State-chartered banks pay federal and state income tax on their net taxable income whereas credit unions are exempt from income taxi. Small businesses and state/local governments may feel an impact beyond lost tax revenue, as well. The incentive, regulatory environment, and/or expertise to invest in small businesses and state/local government projects differs for community banks compared to credit unions.

Key Points 

• Assuming half of potential deals through 2034 involve a credit union purchase of a state-chartered community bank, the present value of reduced corporate income tax revenue to the state is $16.0 million. 
•  This is the salary of approximately 233 teachers  the cost of the current administration’s FY 2026 budget proposal to maintain the communications dispatching system used by 90% of first responders in the state.   
• Over the next two years, SB 25-080 could result in a loss of state revenue ranging from $0 to $3.6 million
• Over the next ten years, SB 25-080 could result in a loss of state revenue from $3.9 million to $16.8 million
• Although unknown how many banks would have been acquired by credit unions in 2023 and 2024 if SB 25-080 had been in effect, there likely would have been a fiscal impact. Presuming two transactions at the average income tax liability, the revenue decrease over these two years would have been $1.5 million.
• Presuming half of the projected mergers involve a state-chartered bank being acquired by state-chartered credit union:
• The revenue decrease over the first two years is an estimated $3.3 million. 

Current Revenue from State-chartered Banks vs. Credit Unions 

Per the Division of Banking’s Annual Reports, the number of state-chartered commercial banks stands at 50, down from 70 in 2014 (Figure 1). In terms of Income Before Income Taxes and Discontinued Operations, this measure has grown from approximately $564 million in 2014 to $1.05 billion in 2023. On reported income taxes, this measure – capturing federal and state income taxes – has grown from $121 million in 2014 to $200 million in 2023(Figure 2).  

Figure 1 

Figure 2 

State Corporate Income Tax from State-Chartered Banks 

Extracting the state corporate income tax from state-chartered banks, Figure 3 presents the estimated amounts from 2014 to 2023 and forecasted from 2024 to 2034 on a total basis and Figure 4 presents the taxes on an average basis. 

Figure 3