Thursday, January 5, 2017

Emergency Mergers and Hybrid Common Bonds

The Federal Credit Union Act recognizes three types of federal credit union charters — single common bond, multiple common bond, and community. The only exception is that a multiple common bond federal credit union may also serve an underserved area.

However, under National Credit Union Administration's emergency merger authority, two credit unions with dissimilar charter types may be merged.

An emergency merger occurs when the credit union to be merged is either insolvent or in danger of becoming insolvent.

The field of membership of the merging credit union may be transferred intact to the continuing federal credit union without regard to any common bond restrictions.

In addition, the National Credit Union Administration's Chartering and Field of Membership Manual maintains that the common bond characteristic of the continuing credit union in an emergency merger does not change.

According to a National Credit Union Administration spokesperson, there were 3 emergency mergers approved during 2015 and 5 during the first 11 months of 2016

Examples of emergency mergers with dissimilar field of membership include:
  • Navy Federal Credit Union (single common bond) with United Services of America (USA) Federal Credit Union (multiple common bond);
  • Bethpage Federal Credit Union (community common bond) with Montauk Credit Union (open field of membership); and
  • Michigan State University Federal Credit Union (multiple common bond) with Clarkston Brandon Community Credit Union (community common bond).
Moreover, America First Federal Credit Union used its emergency merger with Intermountain Credit Union to switch charter type from a community to a multiple common bond and still retain Salt Lake County in its field of membership, as Salt Lake County was part of Intermountain's field of membership.

Hybrid charters are not permitted under the Federal Credit Union Act. Policymakers need to revisit National Credit Union Administration's emergency merger policy as it permits hybrid charter types.


  1. Without that enticement, out of the area credit unions would have no reason to rescue a troubled CU. That is why you have seen out of state CUs come in and do emergency mergers.

  2. FYI - the Navy/USA merger was years ago. Maybe eight or so. Impacted the California market when Navy came to San Diego.

  3. I was surprised that you have not commented on the agreesive expansion of Western FCU changing brand to Unify Financial. Most recent merger Fiscal Credit Union, Glendale, CA. Their field of memberships are Private vs Government. As far as I know this was not government assisted

    1. Look at the last 12 years of Unify, very aggressive in merger activity. Most of it was government-assisted. That FCU has both government-employees (Oakland & Concord) and private-sector (Northrop Grumman, Toyota, etc). But it is a national credit union because of its major SEGs and willingness to merge with smaller CUs in areas that it currently does not have a footprint.

  4. I forgot to mention in my previous post that my main concern was value due this small credit unio union bring to this merger? After the merger Financial Partners changed their field and f membership section on their web site to include anyone who is a member of AARP. To my knowledge their is only one group using AARP. If this is the case Financial Partners just increased there potential field of membership to approximately 12 million consumers. I did not think this is is fair in anyway especially when a large number of AARP members reside in California

    1. Mike:

      Financial Partners is a state charter. According to 10 CCR 30.51, a California credit union is permitted to have a hybrid charter.



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