How Do Credit Union Mergers and Acquisitions Work?

Credit union mergers and acquisitions work through a regulated sequence: the boards of two federally insured credit unions agree to combine, the National Credit Union Administration reviews the deal, the merging credit union’s members vote on it, and if approved, the merging institution’s charter is canceled and its accounts, loans, branches, and members roll into the continuing credit union.¹ The process is set out in federal regulation at 12 CFR Part 708b and is built around protecting the members who collectively own these cooperatives.²

Two Different Paths: Voluntary Merger vs. Purchase and Assumption

When people say credit union “mergers and acquisitions,” they are usually describing one of two very different transactions.

A voluntary merger is the common case. Both boards agree, the members of the merging credit union vote, and the continuing credit union absorbs everything, amending its charter if needed to serve the newly acquired members.¹

A purchase and assumption transaction is not really a merger in the same sense. It typically follows a failure: the NCUA places the failing credit union into liquidation, then a healthier credit union purchases some or all of its assets and assumes its deposit liabilities. The NCUA selects the acquiring partner and sometimes provides financial help from the National Credit Union Share Insurance Fund. There is no member vote at the failing credit union, because it has already been placed into liquidation.³

The rest of this article follows the voluntary path, since that’s the process members actually participate in.

Board Approval and the Application Package

The process begins inside the boardrooms. Once both boards approve the concept of merging, the credit unions assemble a detailed application and submit it to the NCUA Regional Director. If a state-chartered credit union is involved, the state supervisory authority must also approve before the NCUA will act.⁴

The regulation at 12 CFR 708b.104 specifies what has to be in the package:⁴

A merger plan explaining why the credit unions want to combine, with current financial statements for both.
Board resolutions on NCUA Form 6302 (continuing credit union) and Form 6303 (merging credit union).⁵
A proposed merger agreement on NCUA Form 6304, submitted unsigned at this stage.⁶
The proposed notice of special meeting and a copy of the member ballot.
Board minutes from both credit unions referencing the merger for the 24 months before board approval.
A certification signed by both CEOs and board chairs disclosing any merger-related financial arrangements to covered persons.

The NCUA also requires a statement about whether the credit unions plan to file a Hart-Scott-Rodino premerger notification with the Federal Trade Commission, though that requirement only reaches the very largest deals because many credit union assets like cash and mortgages are excluded from the size calculation.⁴

How the NCUA Reviews the Deal

The Regional Director reviews the package for financial soundness and regulatory compliance. That means checking whether the continuing credit union can safely absorb the other’s assets and liabilities, whether it has the legal authority to serve the merging credit union’s members under NCUA chartering policy, and whether the merger’s terms treat the merging institution’s members fairly. Incomplete filings get sent back with requests for more information.

Charter amendments the continuing credit union needs to expand its field of membership can be approved at this stage, contingent on the merger actually closing.² After the membership vote, the Regional Director has 30 calendar days from receiving the certified vote to approve or disapprove, unless the review is extended for more information.⁷

The Member Notice and What It Must Disclose

Members of the merging credit union must receive written notice of the proposed merger at least 45 calendar days, and no more than 90 calendar days, before the vote.⁸ The notice must summarize the merger plan, describe changes to products and services, and disclose merger-related financial arrangements with covered persons in detail.

The compensation piece is worth reading closely. A “merger-related financial arrangement” is any material increase in pay or benefits going to the CEO, the four highest-paid employees, or any board or supervisory committee member because of the merger. “Material” means an increase greater than 15 percent of existing compensation or $10,000, whichever is higher.² The notice has to name the recipients and put a dollar value on the arrangement where possible. This disclosure exists so members can see who among the people recommending the deal also stands to profit from it.

The Vote

For federal credit unions, approval requires a simple majority of the members who actually cast a ballot. Some states impose higher thresholds, including a two-thirds supermajority.⁹

The vote itself has to be run by an independent entity. That entity receives the ballots directly from members, tabulates results only after the special meeting concludes, and certifies the count in writing to both the credit union and the NCUA Regional Director. It cannot share the running vote count with the credit union before certification, though it may share the names of members who have not yet voted.¹⁰

Within ten calendar days after the vote, the merging credit union files NCUA Form 6308A, the Certification of Vote on the Merger Proposal, with the Regional Director.¹¹ If the Regional Director finds problems with how the vote was conducted, the agency can order a new one.⁷

Closing the Merger

Once the vote passes and the NCUA approves, officials from both credit unions sign, date, and notarize the merger agreement. The signing date is the effective date of the merger.⁶ The continuing credit union then has 30 days to file NCUA Form 6309, the Certification of Completion of Merger, along with a copy of the executed agreement.¹²

At that point the merging credit union’s charter is canceled. Its members, accounts, branches, and employees all move under the continuing credit union, and any approved charter amendments expanding the field of membership take effect.

What the Merger Means for Your Accounts

If your credit union is the one being absorbed, your savings, checking accounts, and loans transfer to the continuing credit union. Your membership carries over automatically.¹

Loan terms generally carry over as written. A 3 percent auto loan at the merging credit union stays at 3 percent at the continuing institution. Share certificates typically continue at their original rates until maturity. What tends to change are fee schedules, product names, online banking platforms, and branch access. The member notice you receive before the vote is where those expected changes are laid out, which is one more reason to read it before you cast a ballot.

Share insurance is the one place to pay real attention. The National Credit Union Share Insurance Fund covers individual accounts up to $250,000. If you held accounts at both credit unions before the merger, your combined balances at the surviving institution could exceed that limit. The NCUA generally provides a temporary grace period in these situations, but you should review your total balances and restructure your accounts if needed to stay within coverage.

When the Normal Process Doesn’t Apply

Not every merger goes through a member vote. When a credit union is in danger of insolvency and combining with another institution would reduce the risk of loss to the Share Insurance Fund, the NCUA can allow the merger to proceed without member approval.¹³ These emergency and assisted mergers are used sparingly and only when a failing credit union’s members would otherwise lose access to services.

Once a credit union becomes critically undercapitalized, the NCUA has 90 calendar days to place it into conservatorship, liquidate it (possibly followed by a purchase and assumption), or require a merger.³ In those assisted deals, the NCUA takes a much more active role in choosing a partner and structuring the transaction, and the member disclosure and voting rules described above do not apply in the same way.

1
National Credit Union Administration. Truth in Mergers: A Guide for Merging Credit Unions
2
eCFR. 12 CFR Part 708b – Mergers of Insured Credit Unions into Other Credit Unions
3
National Credit Union Administration. Information on NCUAs Merger and Purchase Assumption Process
4
eCFR. 12 CFR 708b.104 – Submission of Merger Proposal to the NCUA
5
National Credit Union Administration. Merger Resolution Continuing Credit Union 6302
6
National Credit Union Administration. Merger Agreement – Instructions for NCUA 6304
7
eCFR. 12 CFR 708a.308 – NCUA Approval of the Merger
8
eCFR. 12 CFR 708b.106 – Approval of the Merger Proposal by Members
9
eCFR. 12 CFR 708a.312 – Voting Guidelines
10
eCFR. 12 CFR 708b.2 – Definitions
11
National Credit Union Administration. Certification of Vote on Merger Proposal
12
National Credit Union Administration. Certification of Completion of Merger
13
GovInfo. 12 CFR 708b – Mergers of Federally-Insured Credit Unions: Voluntary Merger