Key Considerations in Merger

Key Considerations in Merger

Credit union mergers are a huge undertaking. They can be confusing, are most certainly exhausting, and create a bit of chaos during the process. However, you can minimize all of this if you know what to expect and what is required. To that end, we are here to help. Following some key considerations as your credit union head down the merger pathway.

The Requirements

For starters, before a merger can occur, the NCUA requires a few things before the merger receives a green light. They are as follows:

  • The merger is bound to NCUA chartering policies if it is to continue as a federal credit union, and must obtain NCUA approval before the merger is permitted.
  • State chartered credit unions must obtain approval from their state regulators. In addition, all state regulations must be followed. Also, these mergers are not required to follow NCUA membership policies.
  • Any merger involving a federally insured credit union and a private, uninsured, or state chartered credit union will have to follow all applicable state and federal laws specific to each entity.
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The Checklist

If you are contemplating a merger, there will be a few things you need to consider. Keep these in mind, as they will be indispensable to the overall process.

  • Is the merger permissible? We just covered this in the previous section. Make sure you understand what is involved and what regulations or approvals you need before initiating the merger conversation.
  • Probable Asset or Share Ratio Analysis. This will be required for both the continuing and merging credit union. NCUA forms 6311, 6312 can be used to help with the process. All of these are available for download from the NCUA merger guide in chapter 4, page 14. Corporate credit unions are exempt from this requirement.
  • Accounting Implications. Quarterly reports must be filed per section 741.6 of the NCUA’s Rules and Regulations. Rules are quite specific in this regard. It is best to seek the advice of a qualified accountant to parse through the reporting requirements and deferrals.
  • Considerations from Board of Directors. Before a merger, contact your NCUA District Examiner. Also, consider merger alternatives, the potential impact on members, and whether or not the merger serves the best interest of your members. Upon voting, NCUA form 6302 or 6303 must be filled out and submitted.

The Forms

The merger process can be confusing and disorienting, particularly where forms are involved. Which forms can you use? Which forms should you use? Which forms and disclosures are no longer needed? Which forms are no longer compliant? All of these are valid and necessary questions.

To make the merger process as smooth and seamless as possible, it is crucial to work with a competent credit union forms provider. Forms should be up to date and compliant with necessary state and federal regulations. In addition, your forms provider should have partnerships with different core processors. This may help your credit union on stay on track with project plan. In the event rebranding is needed, working with a forms provider that will customize forms will streamline the process.

Richard Gallagher, CEO, Oak Tree Business Systems
Richard Gallagher (Guest Author)

Richard Gallagher, CEO of Oak Tree Business Systems, Inc., Big Bear Lake, Calif., is no stranger to the credit union industry, having spent 26 years as senior executive where he oversees forms compliance, credit union merger guidance, expertise and policy considerations and is one of the pioneers of digital forms conversion and data linking/integration for credit unions. With 35+ years of experience with forms for credit unions, Oak Tree Business Systems will be with you from the start to finish, until your merger is complete.