REGular Blog: When Do Credit Union Mergers Not Need Member Approval?

Credit unions acquiring banks has gotten a lot of headlines in the banking press world this year, with four bank asset acquisitions announced so far in 2024. However, another interesting merger story has played out behind the scenes a couple of times in recent weeks: NCUA approving mergers without a member vote.

Today, $2.9 million Waconized FCU completed a merger with $16.7 million 1st University FCU. Both credit unions are in Waco, Texas. In December of last year, the NCUA announced that the merger had been approved by the agency without a member vote.

Similarly, on Dec. 21, 2023, the NCUA approved the merger of $32.1 million Gabriels Community Credit Union in Lansing, Michigan, with Michigan State University FCU, a $7.6 billion credit union in East Lansing, Michigan. That merger was also approved by the agency without a member vote.

If you've been through a merger before, as many of us have, you may be asking - when is a merger allowed without a member vote?

Mergers are covered by Part 708(b) of the NCUA Rules and Regulations. 708b.106 covers the process of obtaining member approval for a merger. It's a lengthy process - long submission packets, multiple approval forms, notices to members, a meeting and a vote, not to mention all the work that goes on behind the scenes to convert accounts. As member-owned cooperatives, credit union members have the say in whether they approve of a merger. However, the rules allow for this process to be bypassed in certain circumstances. From 708b.105:

For mergers of federal credit unions into federally insured credit unions, if the NCUA determines that the merging credit union is in danger of insolvency and that the proposed merger would reduce the risk or avoid a threatened loss to the NCUSIF, the NCUA may permit the merger to become effective without an affirmative vote of the membership of the merging credit union otherwise required by § 708b.106 of this part.

If NCUA perceives a risk to the share insurance fund that could be mitigated by fast-tracking the merger, they can permit it without a vote of the membership. In the case of Waconized FCU, the credit union served the employees of the Owens-Illinois glass plant in Waco. In September, the company announced that the plant would be closed later that year - a clear threat to the financial viability of the credit union.

In the case of Gabriels Community, things are a little less clear. The credit union had two branches and fewer than 20 employees. The reason for the merger and the expedited approval may have had to do with a lack of succession in leadership. In an article in the Lansing City Pulse, MSU FCU CEO April Clobes said: “We don't go seek out acquisitions like this, but in this situation, Gabriels had separated with their CEO and was finding that it was becoming difficult to survive on their own. It was just a matter of happenstance and timing.”

As for timing, things were certainly accelerated as mergers go. MSU FCU was approached to see if they would be interested in early November, the merger was announced Nov. 14, NCUA approved it on Dec. 22, and it became official on Jan. 1.

The vast majority of credit union mergers go through the normal process, which requires notice to all members, a public comment period, a meeting and a member vote. For those interested, the list of proposed mergers can be found here. It will be interesting to see if NCUA's exercise of this authority becomes a trend in 2024.