NCUA's Combination Transaction with a Non-Credit Union Proposal

The National Credit Union Administration (NCUA) on January 30 published in the Federal Register a proposed rule regarding a credit union's combination transaction with a non-credit union, including a bank.

The proposed rule provides clarity about the processes and requirements for a federally insured credit union with respect to this transaction.

The proposed rule requires NCUA's advance approval of all these transactions. In the case of federally insured state chartered credit unions, the advance approval of the state regulator is also required.

NCUA also identifies the factors that it will review regarding this transaction. Four factors involve safety and soundness issues, while the last two factors examine the impact of this proposed transaction on credit union members and potential members and whether the proposed transaction is in keeping with the credit union's mission.

The minimum amount of information to be part of an application includes the balance sheet and income statements for both institutions; a combined financial statement showing the transaction's potential impact on the credit union's net worth; information about the due diligence assessment of the proposed transaction; a delinquent loan summary; analysis of the adequacy of the allowance for loan and lease losses; and a list of the other institution's assets that would be impermissible by law.

The proposed rule requires a credit union's board of directors must vote to approve a proposed combination transaction before the credit union submits its application package. The board of directors must certify that management has explained how the transaction would affect the credit union's balance sheet and net worth and how the purchase prices was determined. Furthermore, board members must certify that they do not have a personal or pecuniary interest in the transaction.

The credit union must address how the potential members fall within the credit union's field of membership and how the credit union plans to convert potential members into actual members.

The comment period is for 60 days and must be received by March 30, 2020.

Read the proposed rule.