WASHINGTON-CUNA and the Texas Credit Union League are catching flak from the banking groups over objections they raised with the Federal Reserve over Utah's Zions Bancorporation's application to acquire $7.6 billion in assets Amegy Bancorporation, Inc. in Texas for $1.7 billion. The joint letter criticizes the transaction as offering nothing for consumers and attacks the million-dollar bonuses Amegy officials are promised "for delivering their bank to Zions," according to CUNA General Counsel Eric Richard. CUNA has never before taken such an aggressive approach under the banker attacks. "We decided to focus on this because Zions CEO Harris Simmons has made a career of attacking credit unions and we wanted to send a message that we're watching what Zions does," Richard commented. "It's important for him to know that this is not going to be a situation where one side takes all the punches." Simmons, the newly anointed chairman of the American Bankers Association, did not return calls from Credit Union Times requesting comment. ABA Associate Director of Public Relations John Hall said the organization does not typically comment on individual applications. However, Utah Bankers Association President Howard Headlee had plenty to say about the CUNA-TCUL letter. "You don't have to look very far to find clear evidence that Zions Bank is a tremendous benefit to whatever community they are in," he said in response to CUNA's assertions that the deal is not beneficial to consumers. "Just ask any of the community groups or non-profits here in Salt Lake City and you will find that the claims by CUNA are petty and hollow." He ridiculed the most recent court case where two credit unions won an appeal of NCUA's refusal to approve their applications to convert to community charters, in which CUNA and NAFCU filed an amicus brief. "You would think that after their most recent embarrassment in court, the shills for the mega-credit unions would be trying to salvage what little credibility they have left," Headlee said. "The real credit unions that are working hard to fulfill their public mission deserve better than these juvenile tactics." Texas Credit Union League President and CEO Dick Ensweiler, immediate past chairman of CUNA, countered that Simmons is trying to expand Zions while simultaneously trying to hold credit unions back. "He's trying to make sure credit unions are neutered," Ensweiler stated. As the letter points out, there is "very little synergy" between Zions and Amegy, he noted. The move simply eliminates yet another small, locally owned bank and is "taking ownership and decision making at the highest level" away from Houston and giving it to people in Salt Lake City, which is a very different community than Houston, Ensweiler said. The Texas league head asserted that, while Simmons is working against credit unions, "at least credit unions are serving the common good," which this acquisition, he contends, would not. Zions Bancorporation announced July 5, 2005 that it had agreed to acquire Houston-based Amegy Bancorporation, Inc. Using local identities, Zions has 400 full-service bank branches and more than 500 ATMs in Arizona, California, Colorado, Idaho, Nevada, New Mexico, Utah and Washington. Under the deal, Zions would be ranked 10th in the Texas market from the start. This is Zions first bank deal since 2002. The letter, signed by CUNA President and CEO Dan Mica and Ensweiler, read, "Specifically, CUNA and the League believe that the proposed acquisition will not have any beneficial effects on competition or on the markets to be served by the combined banking organization. CUNA and the League also conclude that the convenience and needs of the affected communities will not be served by Zions' acquisition of Amegy. Finally, CUNA and the League also contend that the financial and managerial resources of the proposed acquisition do not support approval of the transaction." The letter suggests that the Fed must take into consideration the competitive effects that the acquisition will have on the Texas market. "The entry of Zions into the Texas banking market.does nothing to further competition in the Texas market, merely replacing one large bank competitor with another," it states. "In contrast, acquisition by Zions of a smaller bank competitor to Amegy as an initial entry point into the Texas market would further competition by ensuring the existence of an additional viable competitor." Allowing Zions anything more than a "toehold" acquisition places credit unions, and likely some community banks, at a competitive disadvantage, Mica and Ensweiler argued. The two also note that the Fed must follow the Bank Holding Company Act requirements that the convenience and needs of the community be considered. According to Mica and Ensweiler, this deal serves no public good. The few new services to be offered by Amegy, like medical claims reconciliation, are not likely to be of interest to its customers. Additionally, the letter said that the application claims that the combination will save Amegy $49 million in non-interest expenses inside of two years. "Such a contention is simply speculative and unsubstantiated," the letter stated. It points out that the two are regional banks with no overlapping markets and the Amegy management is to be kept on. The application also cites protection from the flattening yield curve, but the credit union parties state that the flattening curve may exacerbate risk to both institutions after the acquisition. What the deal will do is make Amegy senior management very rich. "We also criticize some of the executive compensation arrangements that are part of the deal," CUNA's Richard said. The top five Amegy officials would receive an immediate $700,000 bonus, plus $300,000 later. "We said those funds would be better used for the benefit of consumers." All sides agree that the acquisition is still likely to be successful. Still, the credit union proponents will feel they have accomplished something as well. "Success is probably measured a couple of different ways," Utah League of Credit Unions President and CEO Scott Simpson, who has had his own run-ins with Zions inside Utah, said. CUNA and TCUL raise a "legitimate complaint" and it is important for the bankers to know "credit unions are interested and will act." Though not directly involved, Simpson said, "We are certainly following it with interest and we're definitely interested in the outcome." Until now, credit unions have shied away from taking direct, targeted shots against banks. "Normally we don't attack other people's transactions but in this case there's such a record of aggression on their part that we felt we had no choice.This is the first step we've taken after years of provocation by Zions Bank and I think it's purely defensive," Richard said. "We have no power to stop their transaction, that's up to the Fed and it's probably an uphill battle to get them to take a second look at it. But, we've made very legitimate arguments based on information on the public record and I think the points we raise are valid." "I think what we're really trying to do is to start the public debate," Ensweiler said. He explained that the credit union groups are not partnering with consumer groups at this point, but "That's the kind of groups we should get involved." [email protected]