Wall Street-style drama for two credit unions and a community bank

Mergers & acrimony
Some mergers work. Two companies become one, and the one is stronger in all respects. Some mergers don’t work. Two companies become one, but there is a friction, whether it’s a culture problem, or the businesses weren’t as synchronous as assumed, or some other issue. Some mergers never even reach the finish line.

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Then there is the bizarrely acrimonious merger between two San Diego credit unions that banking editor Kevin Wack has been following.

It started easily enough. San Diego County Credit Union made an offer to buy a smaller rival, Cal Coast Credit Union. But the deal started going sour pretty quickly. The two CEOs, Todd Lane (Cal Coast) and Teresa Campbell (SDCCU), seemed to be less aligned on the vision thing than they assumed. There were accusations and recriminations. At one point, SDCCU’s executives claimed that Lane in one tense meeting called himself a dictator (he denied saying it). 

Now SDCCU wants to kill the merger, and Cal Coast is suing to force SDCCU to go through with it and Lane is trying to tamp down the heat. In an exclusive interview with American Banker, he said Cal Coast still hearts SDCCU and still sees a future for the combined company. 

I would imagine that a lot of mergers at some point are contentious. Money is on the line, careers are on the line. I’m sure a lot of nasty things have been said in boardrooms. But those things don’t usually tumble out into the public eye. I’ve seen a lot of mergers over the years, in and out of the banking industry. Apart from maybe Elon Musk’s Twitter takeover I can’t recall one as caustic as this one.

Barbarian at the lake
When I think of “activist investor,” I think of Carl Icahn or somebody like that. The corporate raiders of the ’80s going after ever bigger and bigger companies, always looking for the ultimate trophy. The proverbial barbarians at the gate. I don’t think of a little community bank in upstate New York. But apparently Joseph Stilwell does.

Stilwell has been active in investing in Lake Shore Bancorp, which runs Lake Shore Bank in western New York. This is not RJR Nabisco. Lake Shore is the 1,111th largest bank in the U.S., according to the Federal Reserve. But Stilwell’s strategy appears to be volume. It has engaged in 78 campaigns since 2000 – yeah, about three a year. It’s forced a merger or acquisition in more than half of them. 

Lake Shore’s ownership resisted Stilwell’s attempts to force his way on, and managed to win a standstill agreement with Stilwell, our Nathan Place reported on Friday. Stilwell did get to name a director to the board, but the agreement forbids him from any other actions. 

Citizens (and only citizens) bank
The Trump administration never did publicly declare that it wanted banks to collect citizenship data from its customers, though the plans were widely reported back in February. So the administration has not officially and publicly backed off the idea, I suppose. But there were widespread reports on Friday that it did back off the plan, after boisterous criticism from banks.

If the February news was some kind of trial balloon, it fell flat. “Requiring banks to collect and report citizenship status isn’t banking. It’s immigration enforcement outsourced to private financial institutions,” Roosevelt Institute fellow Anisha Steephen told our Ebrima Santos Sanneh. Most, in fact, seemed to welcome the news that the demand would not be issued.

It was a bad, unworkable idea, Brookings Institution senior fellow Aaron Klein and Devon Bank president Chasse Rehwinkel argue today in a BankThink essay. It would end up forcing millions of actual citizens out of the banking system, either because they don’t have a passport, or couldn’t find their birth certificate, or their current name didn’t match the name on their birth certificate. And it would have been logistical chaos for banks to record and track all that information.