Federal Register / Vol. 83, No. 125 / Thursday, June 28, 2018 / Rules and Regulations 30301 

1 82 FR 26605 (June 8, 2017). 

[FR Doc. 2018–13869 Filed 6–27–18; 8:45 am] 

BILLING CODE 7535–01–C 

NATIONAL CREDIT UNION 

ADMINISTRATION 

12 CFR Parts 701 and 708b 

RIN 3133–AE73 

Bylaws; Voluntary Mergers of 

Federally Insured Credit Unions 

AGENCY: National Credit Union 

Administration (NCUA). 

ACTION: Final rule. 

SUMMARY: The NCUA Board (Board) is 

revising the procedures a federally 

insured credit union (FICU) must follow 

to merge voluntarily with another FICU. 

The changes: Revise and clarify the 

contents and format of the member 

notice; require merging credit unions to 

disclose certain merger-related financial 

arrangements for covered persons; 

increase the minimum member notice 

period; and provide a method for 

members and others to submit 

comments to the NCUA regarding the 

proposed merger. In addition, the NCUA 

has replaced its Merger Manual with 

revised model forms that conform to the 

requirements of this rule. The 

regulations now includes these forms. 

DATES: This rule is effective October 1, 

2018. 

FOR FURTHER INFORMATION CONTACT: 

Elizabeth Wirick, Senior Staff Attorney, 

Office of General Counsel, 1775 Duke 

Street, Alexandria, VA 22314–3428 or 

telephone (703) 518–6540. 

SUPPLEMENTARY INFORMATION: 

I. Background 

In June 2017, the Board issued 

proposed revisions to the NCUA’s 

voluntary merger rule.1 The proposed 

rule was designed to address 

shortcomings in the current rule which 

did not always provide credit union 

members sufficient time to consider the 

merger or adequately communicate all 

information relevant to the merger 

decision. 

The proposed revisions addressed the 

timing and contents of the notice 

provided to members of a merging 

federal credit union (FCU), provided 

FCU members with an opportunity to 

make their views known to the general 

membership, clarified the material that 

must be submitted to the NCUA for 

review, and revised definitions. In 

addition, the proposed rule reorganized 

the current rule to improve readability 

and clarity. These revisions were 

designed to ensure that a merging FCU’s 

member-owners have more complete 

and accurate information regarding a 

proposed merger, including disclosure 

of financial arrangements that could 

create potential conflicts of interest. The 

proposal also sought comments on 

whether the final rule should apply to 

all merging FICUs rather than only to 

merging FCUs. 

The Board is now finalizing the 

proposed rule, with some changes. The 

changes significantly narrow the 

definition of a ‘‘merger-related financial 

arrangement’’ that is subject to 

disclosure, adopt a less burdensome 

method for members to communicate 

their views on the merger, and apply the 

entire rule to all FICUs. 

The Board received 84 comments on 

the proposed rule. Seventy of the 

commenters opposed the rule. Of the 

remaining 14 commenters, eight 

supported the proposed rule, four 

supported the proposed rule except for 

the member-to-member communication 

provision, one addressed only the 

question of whether the rule should 

apply to federally insured, statechartered credit unions (FISCUs), and 

one requested an extension of the 

comment period. 

In addition to the comments on the 

proposed rule, the Board has also been 

informed by a more thorough review of 

voluntary merger proposals since early 

2017 (merger review). NCUA staff 

reviewed the member disclosure 

documents and ballot for every merger 

application submitted by an FCU, with 

an eye toward identifying ongoing 

issues. The direction of the final rule 


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2 12 U.S.C. 1785(b)(3). 

3 82 FR 26605 (June 8, 2017) (citing 12 U.S.C. 

1785(c)). 

4 12 U.S.C. 1785(c). 

5 Id. 1785(b)(3); 12 CFR 708b.105(b). 

6 12 U.S.C. 1785(b)(3). 

7 82 FR 26605, 26613 (June 8, 2017). 

reflects the experience and knowledge 

the NCUA has gained from the merger 

review process. 

II. General Comments on Proposed 

Rule 

The section-by-section summary of 

the final rule, below, discusses 

comments on specific provisions of the 

rule. This section explains the Board’s 

views on general comments relating to: 

(1) The nature of the NCUA’s authority; 

(2) credit union member-ownership; and 

(3) the state of the merger landscape for 

credit unions generally. 

The NCUA’s authority to regulate 

mergers: Several commenters 

questioned the NCUA’s authority to 

regulate credit union mergers, or 

suggested that the NCUA’s role is 

limited to safety and soundness 

concerns. These comments are 

inaccurate. The FCU Act explicitly 

requires the Board’s ‘‘prior written 

approval’’ before a FICU merges with 

another FICU.2 Moreover, as detailed in 

the preamble to the proposed rule, the 

FCU Act requires the Board to consider 

six factors in determining whether to 

approve FICU mergers and other types 

of transactions.3 While several of the 

factors are safety and soundness-related, 

the factors also include ‘‘the 

convenience and needs of the members’’ 

and ‘‘whether the credit union is a 

cooperative association organized for 

the purpose of promoting thrift among 

its members and creating a source of 

credit for provident or productive 

purposes.’’ 4 Clearly, the FCU Act 

expects the Board to consider the effect 

of the proposed merger on credit union 

members and gives the Board authority 

to deny mergers that do not, in its 

judgment, serve members well. 

Need for a rule change: Many 

commenters considered the proposed 

rule unnecessary. Twenty-two 

commenters opined that the NCUA has 

sufficient authority to address any 

issues related to particular mergers 

under the current rule. Twenty-two 

commenters also asserted that evidence 

of a widespread problem with mergers 

was lacking. While the Board agrees that 

the FCU Act and current regulation 

provide it authority to impose 

requirements on specific merger 

transactions on a case-by-case basis,5 it 

questions whether this is the best 

approach in the long term. Further, the 

merger review confirmed prior 

anecdotal reports that the current 

regulation and model forms do not 

encourage clear member disclosures in 

many situations, particularly in the area 

of insider benefits. The use of 

terminology that may not be clear to all 

credit union members, combined with 

the lack of instructions around how to 

disclose merger-related financial 

arrangements, often resulted in 

disclosures that obscured critical 

information. The Board has determined 

that adopting a uniform, explicit 

standard for disclosures, with updated 

regulatory language and a conforming 

sample form, is a more cost-effective 

and efficient use of agency resources 

than the case-by-case approach it 

utilized during the merger review. 

Nature of Credit Union Membership: 

Several commenters stated that while 

shareholders of public companies can 

sell their shares of stock at any time, 

credit union members have no right to 

the net worth of a credit union except 

in liquidation. This assertion ignores the 

reality that hundreds of credit unions 

annually return excess net worth to 

members via bonus dividends or 

interest rebates. Further, the fact that 

ownership of a portion of a credit 

union’s net worth is less negotiable than 

a share of stock in a public company is 

irrelevant at the time of a proposed 

merger transaction. A credit union in 

good condition has the option of 

voluntary liquidation instead of 

voluntary merger. In recommending a 

proposed merger transaction, the board 

of directors of a merging credit union 

has made the determination to transfer 

its net worth to the continuing credit 

union instead of voluntarily liquidating 

and disbursing the credit union’s net 

worth to its members. 

Factors contributing to mergers: A 

number of commenters offered 

thoughtful analyses about how 

conditions, in the credit union industry 

and at the NCUA, tend to favor mergers 

and disfavor a robust appraisal of 

whether the merger meets the 

convenience and needs of the credit 

union’s members. Several commenters 

who supported the rule argued that 

mergers have become the NCUA’s 

method to resolve issues such as CEO 

succession and worrisome financial 

trends. Also, two commenters opposed 

to the rule stated the NCUA should 

acknowledge that many mergers occur 

because the merging credit union has 

determined it cannot keep up with 

increasing and changing regulation. The 

Board agrees that mergers should not be 

the first resort when an otherwise 

healthy credit union faces succession 

issues or lack of growth. The changes 

implemented in the final rule, 

particularly to the member notice, will 

provide members the information they 

need to determine whether the merger 

meets their needs. 

Role of Boards of Directors and the 

NCUA: Several commenters who 

supported the rule also asserted that the 

boards of directors of merging credit 

unions were failing to conduct sufficient 

due diligence and that the NCUA was 

not enforcing its rule on fiduciary duties 

for directors of FCUs. The merger 

review documented many instances 

where boards of merging credit unions 

discussed the possibility of a merger 

with multiple credit unions and 

approached the merger transaction with 

the best interests of their members as 

the highest priority. For example, one 

merging credit union wrote to nine 

different CUs, soliciting a merger 

partner, and conducted interviews with 

representatives of the credit unions that 

submitted the three best responses. The 

Board acknowledges, however, that not 

all boards of directors are as 

conscientious about fulfilling their 

fiduciary duties. The Board believes that 

this final rule, which will provide 

members with a more complete and 

understandable picture of the merger 

transaction, addresses these concerns. 

The revised member notice clearly 

communicates information about the 

merging credit union’s net worth 

relative to the continuing credit union’s 

net worth and whether insiders will be 

receiving significant payouts from that 

net worth. The revised member notice 

will also clearly convey how the 

proposed merger will affect access to 

locations and services. These changes 

give members greater ability to assess 

whether the proposed merger is in their 

best interests. The Board also confirms 

that, for merging FCUs, the NCUA’s 

Regional Offices must ensure that 

boards and management have fulfilled 

their fiduciary duties under 12 CFR 

701.4. 

III. Comments on Specific Provisions of 

Proposed Rule and Summary of Final 

Rule 

A. Applicability to FISCUs 

In the proposed rule, the Board noted 

that its concerns may not be limited to 

mergers where the merging credit union 

is an FCU. The plain language of section 

205 of the FCU Act provides the NCUA 

with authority to approve mergers for all 

FICUs, not only FCUs.6 Accordingly, the 

Board requested specific comments on 

whether it should use the authority in 

the FCU Act to also apply the rule to 

merging FISCUs.7


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8 12 U.S.C. 1785(c)(1). 

9 Id. (c)(2). 

10 Id. (c)(3). 

11 Id. (c)(4). 

12 Id. (c)(5). 

13 Id. (c)(6). 

14 12 CFR part 708a, subpart A. 

15 12 CFR part 708a, subpart C. 

16 12 CFR part 708b, subpart B. 

17 82 FR 26605, 26606 (June 8, 2017). 18 12 CFR 708b.2. 

Thirty-one of the thirty-five 

commenters addressing this issue 

thought the voluntary merger rule 

should not apply to merging FISCUs. 

These commenters argued that 

extending the merger rule’s applicability 

to FISCUs was unwarranted because 

merger procedures are already regulated 

under state law and issues related to 

voluntary mergers do not present a 

safety and soundness threat. 

The Board disagrees with the majority 

of commenters. Instead, as expressed by 

a minority of commenters, the Board 

finds that merger transactions may 

present safety and soundness risks 

which endanger the continuing credit 

union regardless of whether the merging 

credit union is an FCU or a FISCU. For 

example, members of a merging credit 

union who discover, after the fact, that 

they were inadequately informed about 

the details of the merger may become 

disgruntled. The dissatisfied members 

could create bad publicity, creating a 

reputation risk for the continuing credit 

union. Unhappy members could also 

choose to stop doing business with the 

continuing credit union, affecting 

earnings projections. In contrast to 

commenters’ assertions, the statutory 

factors the Board must consider in 

granting or withholding approval of a 

merger transaction include several 

factors related to safety and soundness, 

such as the financial condition of the 

credit union,8 the adequacy of the credit 

union’s reserves,9 the economic 

advisability of the transaction,10 and the 

general character and fitness of the 

credit union’s management.11

Further, several commenters also 

affirmed the Board’s observation in the 

preamble to the proposed rule that the 

same incentives for potential conflicts of 

interest exist in both FISCUs and FCUs. 

The amended disclosure requirements 

of the final rule address this potential by 

providing credit union members with 

information about how the merger 

transaction will affect their interests. 

The disclosures are in keeping with the 

statutory factors that require the Board 

to consider ‘‘the convenience and needs 

of the members to be served by the 

credit union’’ 12 as well as whether the 

credit union conforms to its purpose ‘‘of 

promoting thrift among its members and 

creating a source of credit for provident 

or productive purposes.’’ 13 The Act 

does not limit these concerns to FCUs 

and FCU members. 

Finally, the other regulations the 

Board has adopted under the authority 

of Section 205 apply to all FICUs rather 

than only FCUs. These regulations 

address: 

FICU conversions to banks; 14

FICU mergers with banks; 15 and 

FICU mergers with credit unions not 

insured by the National Credit Union 

Share Insurance Fund (NCUSIF).16

Applying all portions of the merger 

rule to all FICUs conforms to the 

approach the Board has taken in these 

other regulations promulgated under the 

same authority in the FCU Act. 

For the reasons above, the Board has 

determined to apply the final rule to all 

FICUs. To allow time for FISCUs to 

comply with the final rule, the Board 

has delayed the effective date until 

October 1, 2018. The final rule will 

apply only to new merger applications 

submitted after the rule’s effective date. 

B. Section 708b.2 Definitions 

Covered Person 

The proposed rule requires merging 

FCUs to disclose to members any 

‘‘merger-related financial arrangement’’ 

provided to a ‘‘covered person.’’ As 

discussed in the preamble to the 

proposed rule,17 the definition of 

‘‘senior management official’’ in current 

§ 708b.2 frequently resulted in FCU 

members having incomplete 

information about the benefits provided 

to FCU insiders as part of a merger 

transaction. The proposed rule amended 

§ 708b.2 by removing the definition of 

‘‘senior management official’’ and 

adding a definition for ‘‘covered 

person.’’ The term ‘‘covered person’’ 

means the credit union’s chief executive 

officer or manager; the four most highly 

compensated employees other than the 

chief executive officer or manager; and 

any member of the board of directors or 

supervisory committee. 

Thirty-six commenters who addressed 

the definition of covered person 

opposed it, and suggested a variety of 

alternatives. Six commenters did not 

object to the definition, and one of these 

commenters suggested expanding it to 

include family members of covered 

persons. In addition, two commenters 

agreed the definition of ‘‘senior 

management official’’ in the current rule 

was under-inclusive without offering an 

explicit opinion about the proposed 

changes. 

The most common objection, stated 

by twenty-six commenters, was that the 

proposed definition of ‘‘covered person’’ 

would encompass all employees at 

smaller credit unions, when many of 

these employees are not in a position to 

influence merger discussions. This is an 

inaccurate characterization of many 

small credit unions. In the course of the 

merger review, the NCUA observed that 

all of the employees in many smaller 

credit unions exercised leadership or 

management roles and were in a 

position to influence merger 

negotiations. For example, in one credit 

union, an employee with the title of 

‘‘teller’’ was involved in locating a 

merger partner and negotiating the 

terms of her severance payment. 

Many of the objections to the 

definition of ‘‘covered person’’ were 

related to concerns with the proposed 

rule’s expanded definition of ‘‘mergerrelated financial arrangement.’’ The 

final rule has a narrower definition of 

merger-related financial arrangement 

than the proposed rule or even the 

current rule, as detailed below. As a 

result, fewer covered persons will have 

arrangements that are subject to 

disclosure. Further, the merger review 

revealed very few instances where 

family members of covered persons 

received merger-related financial 

arrangements, so the Board does not see 

the need to expand the definition of 

covered person to include family 

members. Accordingly, the Board is 

adopting the definition of covered 

person as proposed. 

Merger-Related Financial Arrangements 

The NCUA’s merger rule has required 

merging credit unions to disclose 

‘‘merger-related financial arrangements’’ 

to members since 2007. ‘‘Merger-related 

financial arrangements’’ include any 

increases in compensation or benefits 

that exceed the greater of 15% or 

$10,000.18 The proposed rule expanded 

the definition of ‘‘merger-related 

financial arrangement’’ to cover 

increases in compensation or benefits 

received by a covered person, of any 

amount. Compensation includes 

bonuses, early payout of retirement 

benefits, increased insurance benefits, 

and any other financial rewards or 

benefits. The proposed rule also 

considered any increases in the 24 

months before ratification of the merger 

proposal, as well as any related 

increases occurring after the merger, as 

merger-related. 

Thirty-seven commenters objected to 

the proposed expansion of the 

definition of merger-related financial 


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arrangement. Twenty-three of these 

commenters thought that the NCUA 

should retain a threshold similar to or 

higher than that in the current rule. 

Fourteen commenters suggested that 

increases in compensation and benefits 

for staff transferring to continuing credit 

unions from merging credit unions are 

to be expected, because continuing 

credit unions are usually significantly 

larger than merging credit unions. A 

number of these commenters said 

disclosure should not be required in 

situations where an employee receives 

an increase as a result of transferring to 

the continuing credit union. Two 

commenters recommended disclosure of 

merger-related financial arrangements as 

an aggregate amount rather than broken 

out by individual recipient. 

A smaller number of commenters 

either had no issues with the proposed 

definition of merger-related financial 

arrangement or wanted more detail in 

disclosures about merger-related 

financial arrangements. Two 

emphasized that all payments to 

management should be disclosed to 

members. One commenter suggested 

that the rule should provide for 

clawback of any merger-related financial 

arrangement not disclosed at the time of 

merger. 

The final rule adopts a narrower 

definition of the term ‘‘merger-related 

financial arrangement’’ than proposed 

based on commenters’ suggestions as 

well as experience gained from the 

merger review. The final definition 

covers fewer types of compensation 

than the definition in the current rule. 

In particular, the final rule will not 

require employer-provided medical 

insurance, retirement, and other benefits 

offered on a non-discriminatory basis to 

all employees of the continuing credit 

union to be disclosed as merger-related 

financial arrangements. All of the seven 

commenters who responded to the 

Board’s question about whether such 

benefits should be subject to disclosure 

specifically requested that these types of 

benefits not be subject to disclosure. 

The merger review provided further 

support for revising the definition of 

‘‘merger-related financial arrangement.’’ 

The NCUA experienced significant 

difficulties in obtaining sufficient 

information about benefits at the 

continuing and merging credit unions 

because, in most cases, staff for the 

merging credit union were genuinely 

uninformed about the relevant details of 

their benefits plans at the merging and 

continuing credit unions. It thus seems 

unlikely that benefits offered to all 

employees of the continuing credit 

union would be a source of potential 

conflicts of interest. The merger review 

also confirmed the difficulties in 

quantifying and explaining these 

benefits in the member notice. Even 

after obtaining information on plan 

costs and benefits, it was often difficult 

to determine whether, for example, a 

particular health insurance plan at a 

continuing credit union was superior to 

that at a merging credit union. Potential 

benefits from new retirement plans are 

too far removed in time to accurately 

project what benefits, if any, might 

result. The Board agrees with 

commenters that benefits offered on a 

non-discriminatory basis to all 

employees of the continuing credit 

union need not be disclosed as mergerrelated financial arrangements for 

employees of the merging credit union. 

The definition of merger-related 

financial arrangement in the final rule 

thus excludes employer-provided 

medical insurance, retirement, and 

other benefits offered on a nondiscriminatory basis to all employees of 

the continuing credit union. 

The final rule also retains the current 

threshold for the value of merger-related 

financial arrangements in the current 

rule. This means that only mergerrelated increases that exceed the greater 

of $10,000 or 15% of compensation 

must be disclosed. As discussed in the 

preamble to the proposed rule, the 

Board believed eliminating the 

threshold would offer regulatory relief 

and promote clarity. In light of the 

number of comments requesting a de 

minimis threshold such as this, the 

Board has determined to retain the 

current rule’s requirement that only 

increases that exceed the greater of 

$10,000 or 15% are subject to 

disclosure. Increases below this 

threshold are less likely to incentivize 

staff of merging credit unions to 

promote a merger that is not in 

members’ best interests. 

The proposed rule also includes any 

increases received in the 24 months 

before the merger, as well as related 

increases paid after the merger, in the 

definition of ‘‘merger-related financial 

arrangement.’’ Commenters objected to 

not having a date certain after a merger 

when compensation increases will not 

be deemed merger-related. Several 

commenters also stated that the NCUA 

should retain its ‘‘but for’’ test when 

considering whether an increase is 

merger-related and only require 

disclosure for increases that would not 

have occurred but for the merger. The 

Board has determined that the 

definition of ‘‘merger-related financial 

arrangement’’ in the final rule will 

include only increases that occurred 

because of, or in anticipation of, a 

merger (i.e., the ‘‘but for’’ test). 

Merging credit unions should, 

however, be aware that any increases 

occurring in the 24 months before the 

merger may be deemed merger-related 

after review of board minutes, 

examination reports, and other relevant 

information. Similarly, continuing 

credit unions should be on notice that 

compensation provided only to staff 

transferred from the merging credit 

union is likely also merger-related and 

should be disclosed in the member 

notice if it is above the threshold 

amounts. If the NCUA discovers that a 

member notice was misleading or 

inaccurate about the amount of mergerrelated financial arrangements, it may 

take appropriate enforcement action. 

While benefits that are available to all 

employees of a continuing credit union 

are not merger-related financial 

arrangements under the final rule, the 

Board emphasizes that any benefits that 

apply only to certain employees must be 

disclosed as merger-related financial 

arrangements if they meet the threshold 

in the rule. Some examples of these 

types of benefits include supplemental 

retirement plans for high-ranking 

employees, additional life insurance for 

certain employees, and additional paid 

leave time. Also, the following 

arrangements, identified during the 

merger review, provide other examples 

of the types of benefits that must be 

disclosed if they exceed the threshold 

amount. 

Life insurance and annuities: One 

merging credit union had reduced the 

value of an executive’s life insurance 

policy when the original premiums 

failed to yield the desired amount. 

Because the value of the policy was 

reduced, the executive became 100% 

vested in the policy several years earlier 

than scheduled. This reduction 

occurred several years before the 

merger. Shortly before the merger, and 

at the request of the continuing credit 

union, the merging credit union made 

another payment to restore the life 

insurance policy to the original amount, 

but without reverting to the original 

vesting schedule. This is a mergerrelated financial arrangement because, 

but for the merger, the executive’s life 

insurance would have had a lower 

value. 

Payment for accrued leave: In many 

mergers, executives or staff receive 

payment for accrued leave. The Board 

recognizes that many merging credit 

unions permit employees to cash out 

accrued leave under certain 

circumstances. Some credit union 

policies give employees the option to 

receive payment for accrued leave at 

specified times like year-end, some 

allow payouts when employees leave 


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19Of the 139 mergers reviewed as of May 7, 2018, 

the NCUA is aware of only two that were not 

approved by members and those mergers had no 

merger-related financial arrangements. 

the credit union, and some policies 

allow both types of payments. Credit 

unions and their employees who have 

such policies often take the view that 

any payments for accrued leave should 

not be deemed merger-related financial 

arrangements. This is an overly narrow 

approach. Regardless of whether a 

merging credit union’s policies give 

employees the right to cash out leave, 

the test is whether the payment for leave 

occurs earlier in time or in a greater 

amount because of the merger. 

Bonuses: The Board is aware that the 

boards of directors of many merging 

credit unions want to recognize 

employees for their service to the credit 

union and do this by authorizing some 

type of payment to employees during 

the merger process. Some commenters 

and merging credit unions have argued 

that such payments in recognition of 

past service should not be deemed 

merger-related. In determining whether 

such payments must be disclosed, the 

NCUA will, as discussed above, apply 

the ‘‘but for’’ test and only require 

disclosure of payments that would not 

have occurred but for the merger. 

Severance payment agreements: In 

several mergers, continuing credit 

unions executed employment 

agreements with employees of the 

merging credit union that constituted 

merger-related financial arrangements. 

Some contracts guaranteed employment 

for a number of months or years, with 

the proviso that if the employee was 

terminated for any reason other than for 

cause, the continuing credit union 

would pay the employee compensation 

for the remainder of the period. Other 

contracts were even more generous and 

promised to pay the employee 

compensation for the agreed-upon 

period even if the employee quit. 

Employment contracts that guarantee 

payment of compensation for a set 

period are merger-related financial 

arrangements if they result from the 

merger and meet the threshold in the 

definition. 

The above examples are not an 

exhaustive list. The general rule is that 

any benefit that an employee from a 

merging credit union will receive at the 

continuing credit union that is greater 

than the threshold amount must be 

disclosed as a merger-related financial 

arrangement unless an identical benefit 

is offered to all employees of the 

continuing credit union. Also, any 

benefit under an existing arrangement 

that is triggered by a change in control 

provision is, by definition, a mergerrelated financial arrangement if it is 

greater than the threshold amount. 

While the Board agrees with many 

commenters on various aspects of the 

subject of merger-related financial 

arrangements, a number of commenters 

made flatly erroneous comments on this 

topic. These include comments that: (1) 

Discounted the nature of member 

ownership and the obligations a credit 

union has to its member-owners; (2) 

made incorrect statements about 

disclosure requirements applicable to 

other entities; and (3) ignored the 

potential for conflicts of interest due to 

increases in compensation. For 

example, five commenters suggested 

that the NCUA’s review of mergerrelated compensation alone would 

suffice and disclosure to members was 

unnecessary. Another suggested that 

members have no role in considering 

merger-related payments to employees. 

These comments are legally inaccurate 

and philosophically off-base. The net 

worth of a credit union belongs to its 

members. Payments to insiders, 

especially in the context of a voluntary 

merger where a credit union could 

choose to liquidate and distribute its net 

worth among its members, are 

distributions of the credit union’s net 

worth. Accordingly, members should be 

informed when a significant payout 

occurs. 

Another objection the NCUA heard 

frequently during the merger review was 

that requiring such disclosures would 

cause merger votes to fail. The merger 

review demonstrates these fears have no 

basis in reality. During the merger 

review, despite heightened scrutiny and 

disclosures of merger-related financial 

arrangements, no mergers failed for this 

reason.19

Similarly, some commenters opined 

that the proposed rule would subject the 

compensation of employees of merging 

credit unions to a higher level of 

scrutiny than employees of any other 

type of industry. Contrary to these 

assertions, even if the proposal’s 

requirement to disclose increases in 

compensation related to the merger had 

been adopted as proposed, employees of 

merging credit unions are subject to far 

fewer disclosures about their 

compensation than employees of other 

industries. The existing rule and 

proposed rule only require disclosure of 

the amount of increases above the 

threshold amount. In contrast, many 

employees and executives in other 

industries are subject to disclosure of 

the entire amount of their 

compensation. Salary information for 

the CEO, CFO and the three other most 

highly compensated employees of 

publically-traded companies is available 

in filings with the Securities and 

Exchange Commission. Salary 

information for CEOs of non-profit 

organizations, including state-chartered 

credit unions, is available on Form 990 

filed with the Internal Revenue Service. 

Other commenters seemed unaware of 

the potential for conflicts of interest 

associated with merger-related financial 

arrangements. Several stated that higher 

salaries at the continuing credit union 

do not present a conflict of interest 

necessitating disclosure, or that such 

increases should only be subject to 

disclosure if the total amount of an 

employee’s salary would be above what 

is customary for similar positions at the 

continuing credit union. The Board 

disagrees. The prospect of a 

significantly higher salary at the 

continuing credit union could be a 

motivating factor in an individual’s 

choice to advocate for a merger, both 

internally within the credit union 

leadership and with members. Credit 

union management may well have 

considerable influence with members, 

who may look to management for 

trusted opinions and advice about 

whether the proposed merger is in the 

best interests of the credit union and its 

members. It is not unimaginable that the 

prospect of a significantly higher 

compensation package could affect an 

individual manager’s thinking about the 

desirability of the merger. 

The Board does not object to the fact 

that employees of merging credit unions 

may be seeking or receiving higher 

remuneration through a merger. The 

Board agrees that in many cases, 

employees of merging credit unions are 

receiving below-market pay, and some 

of these credit unions do not have the 

ability to appropriately compensate 

their deserving employees. During the 

merger review, the vast majority of 

mergers that included compensation 

increases had increases that were below 

the threshold amount for merger-related 

financial arrangements in the current 

and final rule. Thus, the continuing 

credit union was able to adjust 

compensation to market rates without 

triggering a disclosure requirement. The 

final rule simply requires that members 

be informed of significant increases, so 

that they understand all of the factors 

potentially contributing to the merger. 

One commenter requested the 

disclosure requirement only apply to 

the amount of the increase, not entire 

compensation. The Board reiterates that, 

as stated in the rule text and discussed 

in the preamble to the proposal, and as 

under the current rule, only the 

amounts of the increases are subject to 

disclosure. 


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20 12 CFR 708b.105(b). 

21 12 U.S.C. 1786(d)(2). 

22 Id. 

The merger review identified many 

instances where a merging credit union 

had not disclosed all merger-related 

financial arrangements in their member 

notices. In some of these cases, credit 

union representatives asserted that the 

payment should not be deemed mergerrelated if the merging credit union had 

the ability to make this payment. The 

determinative factor is not whether the 

merging credit union could have chosen 

to make this payment had it remained 

a separate credit union. If that were the 

standard, many payments by a merging 

credit union would fall outside the 

definition. Rather, the relevant question 

is, ‘‘Would this payment have occurred 

if the credit union were not merging?’’ 

If the answer is no, then the payment is 

merger-related and the merging credit 

union must disclose it on the member 

notice if it exceeds the threshold 

amount. 

Finally, during the merger review, 

staff identified a number of instances 

where merging credit unions with 

significant levels of merger-related 

financial arrangements made the 

required disclosures, but surrounded 

the disclosure of the amounts with 

voluminous text. Some draft 

disclosures, particularly those prepared 

by outside attorneys, seemed designed 

to obscure or bury the fact of the 

payments in the name of providing 

‘‘context’’ about the need for the 

payments. Again, nothing in the FCU 

Act or the final rule prohibits payments, 

in any amount, to insiders of a merging 

credit union. The Board neither 

encourages nor discourages such 

payments, as this determination rests 

with the boards of the merging and 

continuing credit unions and the 

members of the merging credit union. 

The Board, however, is requiring that 

disclosures to members of the merging 

credit union be clear and 

understandable, as provided in the 

revised model member notice. 

Record Date 

The proposed rule also adds a 

definition of ‘‘record date’’ to clarify 

which FCU members are eligible to vote 

on a proposed merger. The NCUA 

received only two comments on this 

provision, both of which supported 

adding this definition. Accordingly, the 

definition of ‘‘record date’’ in § 708b.2 is 

unchanged from the proposed rule. 

C. Section 708b.105 Submission of 

Merger Proposal to the NCUA 

The proposed rule required the 

merging and the continuing credit 

unions to submit their respective board 

minutes to the NCUA that reference the 

merger during the 24 months before the 

boards of directors of the credit unions 

approved the merger plan. Twelve 

commenters thought this time period 

was excessive and suggested a shorter 

period, while one commenter observed 

that merger-related discussions might 

have begun earlier than two years before 

the merger. The merger review 

documented many merger-related 

discussions that occurred before the sixor twelve-month lookback some 

commenters favored. Also, while 

examiners review board minutes during 

exams, these are not, as some 

commenters claimed, available for the 

Regional Office to download when a 

merger package is submitted. 

Accordingly, the final rule adopts this 

requirement as proposed. 

The proposed rule also added a 

requirement that the merging and 

continuing credit unions certify that 

there are no other merger-related 

financial arrangements other than those 

disclosed in the notice to the members 

of the merging credit union. The final 

rule adopts this requirement as 

proposed, with one addition. As 

suggested by one commenter, the final 

rule adds the requirement that the CEOs 

of both credit unions also sign the 

certification. 

D. Section 708b.106 Approval of the 

Merger Proposal by Members 

Timing Requirements for Member 

Notice 

The proposed rule increased the 

length of the minimum notice period 

preceding the meeting to discuss and 

vote on the merger proposal. Under the 

current rule, a merger meeting and vote 

could occur as few as seven days after 

the merging FCU mails notice of the 

meeting to its members. The proposal 

required a merging FCU to mail notice 

of the meeting and vote at least 45, but 

no more than 90, days before the 

meeting. Twenty-three commenters 

expressed an opinion about the notice 

period. Sixteen of the commenters 

suggested a shorter notice period, 

although several of these commenters 

also agreed the current seven-day 

minimum was too short. Six 

commenters supported the proposal’s 

timeframe or requested a longer notice 

period. One commenter agreed the 

current seven-day notice period was 

insufficient but did not suggest an 

alternative. 

The Board is adopting the timing 

requirements for the member notice as 

proposed, except for FICUs seeking to 

terminate NCUSIF coverage. The Board 

agrees with commenters who noted that 

the process of relinquishing the charter 

of a functioning credit union, and 

determining the disposition of the 

merging credit union’s net worth, merits 

allowing members sufficient time to 

consider the merger proposal. The value 

of a credit union charter is considerable 

even without considering the net worth 

of the merging credit union. Obtaining 

a new credit union charter is timeconsuming and requires organizers to 

raise capital. Moreover, usually most or 

all of the merging credit union’s net 

worth transfers to the continuing credit 

union. For these reasons, an expanded 

notice period is appropriate. 

The Board does not agree with some 

commenters’ concerns that the 45-day 

minimum notice period will create 

problems when a quick merger is 

necessary. The Board reminds these 

commenters that the merger rule already 

permits the NCUA to waive the member 

vote if it finds that a merging credit 

union is in danger of insolvency and 

that a merger would avoid a loss to the 

NCUSIF.20 If a merging credit union’s 

situation is severe enough to warrant a 

waiver of the member vote, obviously 

the 45-day notice requirement would 

not apply. For other merging credit 

unions, the addition of a reasonable 

number of days to the process will not 

affect the merger. OGC’s merger review 

did not identify any mergers where 

changing the required notice period 

would have caused the merger proposal 

to fail. Further, once credit unions build 

in the increased notice period into their 

estimates of the timeframe required to 

merge, the effect on merger transactions 

should be minimal. 

The Board is not lengthening the 

notice period for mergers where a FICU 

is proposing to terminate NCUSIF 

coverage by merging with a nonfederally insured credit union. For 

terminations of NCUSIF coverage, the 

FCU Act specifies a notice period of at 

least seven days, but no more than 30 

days.21 The Board cannot adopt a 

regulation that would conflict with the 

statute and so is retaining the 

requirement in the current rule for a 

notice period of seven to 30 days for 

mergers that result in termination of 

NCUSIF coverage. 

Ideally, the Board would prefer to 

impose requirements for providing 

member notice in mergers that involve 

termination of federal share insurance 

that are the same as requirements for 

member notices in mergers that do not 

include federal share insurance 

termination. The required statutory 

notice period for federal share insurance 

termination,22 however, makes this 


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23 Id. 

24 Id. 

25 70 FR 3279, 3285 (Jan. 24, 2005). 

26 82 FR 26605, 26610 (June 8, 2017). 

27The Act requires an FCU’s Supervisory 

Committee to verify member account balances at 

least once every two years. 12 U.S.C. 1761d. 

impossible. Accordingly, the final rule 

retains the existing requirement that 

FICUs proposing to merge into a nonfederally insured credit union must 

send their members notice at least 7 but 

not more than 30 days before the 

member vote. 

In practice, however, many members 

of FICUs seeking to terminate NCUSIF 

coverage already receive a notice period 

that is closer to the notice period the 

final regulation imposes for other types 

of mergers. The FCU Act requires that 

at least 20% of members participate in 

the vote to terminate federal share 

insurance coverage.23 Because of this 

participation requirement, some credit 

unions seeking to terminate NCUSIF 

coverage provide an additional, prenotice communication to increase the 

likelihood of achieving the required 

member participation. The 7- to 30-day 

notice period in the FCU Act applies 

only once a credit union’s board 

approves a proposal to terminate 

insurance coverage.24 As the FCU Act is 

silent about notices before the credit 

union board approves an NCUSIF 

termination proposal, the NCUA has 

permitted credit unions seeking to 

terminate NCUSIF coverage to send an 

additional notice in advance of the 

credit union board’s approval to advise 

members that the credit union’s board 

will be considering the matter.25

Contents of Member Notice 

The proposed rule also included 

changes to the contents of the notice 

members of merging credit unions 

receive. These changes were designed to 

improve the quality and readability of 

the information provided in the member 

notice. Relatively few commenters made 

specific observations about these 

provisions, and the comments were 

mixed. Three commenters, who were 

otherwise opposed to the rule, 

affirmatively noted they had no 

objections to these changes or that they 

improved clarity. Two commenters 

deemed the goal of having a short, 

understandable notice unrealistic. One 

commenter said that merging credit 

unions should determine what 

information is most relevant to their 

members. Several commenters worried 

that lengthy disclosures would make 

members less likely to read them. 

Several commenters thought the 

member disclosure documents should 

contain more information. One 

requested the notice include more 

information about the factors the credit 

union’s board considered in 

determining to merge and in selecting a 

merger partner. Five suggested the 

disclosures should include additional 

information about the disposition of the 

merging credit union’s net worth. These 

suggestions included: (1) Requiring the 

merging credit union to disclose the 

ratio of member benefits to the merging 

credit union’s net worth compared to 

the ratio of merger-related financial 

arrangements to the merging credit 

union’s net worth; (2) requiring the 

notice to discuss the possibility of a 

merger dividend to members; and (3) 

requiring the notice to state the dollar 

amount of the merging credit union’s 

net worth. Another commenter 

requested specific disclosures when an 

acquiring credit union books ‘‘negative 

good will’’ due to the merger, including 

the merging credit union’s estimated 

book value and market value presented 

in terms of dollars per member. Other 

commenters requested that instead of 

requiring information about life savings 

and loan protection insurance, which 

are infrequently offered, the notice 

should require specific information 

about more common products and 

services. 

The Board is adopting the amended 

disclosures mostly as proposed. The 

only change in the final rule is the 

addition of information in the member 

notice about the effect of the merger on 

ATM access. In the proposal, the Board 

inquired whether the required 

disclosures in the notice should be 

expanded to include items such as ATM 

access or fee comparisons.26 Several 

commenters requested the member 

notice include information about any 

ATM access changes, as well as other 

suggestions. The Board believes that the 

amended disclosures adequately convey 

to members the most relevant 

information—how the merger will affect 

locations and services and how or if 

there will be a distribution of the 

merging credit union’s net worth. In 

addition, as discussed below, the NCUA 

has added revised sample member 

notice and ballot forms that conform to 

the requirements in § 708b.304. 

The Board also clarifies that the 

member notice and ballot should not be 

combined with other types of notices. 

For example, one draft member notice 

submitted during the merger review 

attempted to combine the merger notice 

with the Supervisory Committee 

audit.27 The merger notice included a 

statement at the very end that the 

member should check their account 

balances as listed on an enclosed sheet, 

and unless they returned another 

document disputing the balance, the 

credit union’s records were presumed 

correct. Although this procedure is the 

most common way credit unions 

conduct Supervisory Committee audits 

and is not problematic on its own, in 

this case, members who failed to read to 

the end of the member notice would not 

have realized they also needed to verify 

their account balances. The Board 

understands the appeal of consolidating 

information into fewer mailings, but this 

convenience for the credit union is 

outweighed by the danger that members 

will miss information about the 

proposed merger, the other issue, or 

both. 

Member Comments on the Proposed 

Merger Transaction 

The proposed rule included 

provisions to facilitate member 

discussions about the merger 

transaction. These provisions, modelled 

on a similar requirement in the NCUA’s 

rule governing credit union to bank 

conversions, would establish 

procedures to allow for member-tomember (MTM) communication in 

advance of a member vote. The MTM 

communication provision was the least 

popular part of the proposed rule, with 

45 commenters opposing it. The most 

common objection was that the MTM 

communication process would delay the 

merger process, make mergers more 

complicated and costly, or discourage 

them entirely. Another frequently 

expressed fear was that disgruntled 

members, employees or competitors 

would use the MTM communication to 

convey misleading or inaccurate 

information. Other commenters opined 

that the MTM would expose the 

merging and continuing credit unions to 

reputation or litigation risk, raise the 

costs of mergers, and that members 

prefer alternate methods of receiving 

communications from other members. 

Finally, a few commenters objected to 

the NCUA’s role in overseeing the MTM 

communication process and disagreed 

with the NCUA’s observation that the 

proportion of votes in favor of merger is 

lower for ballots cast in person than for 

ballots cast by mail and, therefore, 

justifies the need for additional MTM 

communication. 

Commenters suggested a variety of 

alternatives to the MTM provisions of 

the proposed rule. Two commenters 

suggested the merging credit union 

aggregate all member comments and 

either distribute one communication, or 

share the aggregated comments at or 

before the special meeting. Three 

commenters suggested holding an extra 


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28https://www.occ.gov/topics/licensing/ 

corporate-activities-weekly-bulletin/index-weeklybulletin.html. 

29https://www.occ.gov/topics/licensing/publiccomment/index-public-comments.html. 

30 12 U.S.C. 1761b(9). 

31 12 CFR 708b.104(a)(6). 

32 82 FR 26605, 26610 (June 8, 2017). 

member meeting either during the 

voting period or before the voting period 

where members can obtain information 

on and discuss the merger, with a 

summary of the meeting posted online. 

Two commenters suggested that the 

NCUA create an online posting for each 

merger that allows members to submit 

comments. Further, one commenter 

requested public notice at the time a 

merger application is filed with the 

NCUA. 

The Board believes many of the 

commenters’ fears about the MTM 

communication provision are unlikely 

to materialize. The MTM 

communication provisions were 

modelled after those in the NCUA’s part 

708a regulation on credit union 

conversions to banks. Since the MTM 

communication provisions of part 708a 

took effect in early 2007, there have 

been eleven bank conversion attempts. 

An MTM communication occurred in 

fewer than half of these attempts. As 

most proposed bank conversions, which 

have a greater effect on member rights 

than a merger with another credit union, 

do not have an MTM communication, 

the Board finds it unlikely that many 

credit union merger proposals would 

evoke MTM communications. 

In terms of the potential for abuse, the 

Board reminds commenters that the 

proposed rule provided for the NCUA to 

review MTM communications that 

merging credit unions find inaccurate or 

misleading. While this process would 

require time and effort on the NCUA’s 

part, the Board expects this commitment 

would not be major because only a 

small proportion of credit union 

mergers would involve MTM 

communications. 

In summary, the Board believes many 

of the commenters’ fears about the 

effects of the MTM communication 

provisions are exaggerated. 

Nevertheless, the Board agrees that there 

may be an alternative way to 

accomplish the Board’s goal of 

permitting members to dialogue about 

the proposed merger transaction while 

avoiding the features that made the 

MTM communication objectionable to 

commenters. The Board requested 

comments about all aspects of the 

proposed rule, which includes the MTM 

communication provision. The Board is 

now adopting the suggestions of two 

commenters who requested that the 

NCUA provide publicly accessible 

information about proposed merger 

transactions on the NCUA’s website, 

with a section for member comments. 

The final rule requires the member 

notice to include information about the 

NCUA website where merger 

information and member comments are 

posted, as well as the email and 

physical addresses where members may 

submit their comments for posting. 

Other regulators regularly provide 

similar information on their websites 

about pending transactions of regulated 

institutions. The Office of the 

Comptroller of the Currency (OCC), for 

example, posts a weekly listing of all 

applications it has received and actions 

it has taken.28 The actual applications 

for transactions such as mergers, are 

also posted on the OCC’s website, along 

with a section for posting public 

comments.29

The Board intends to establish a page 

on the NCUA’s website similar to the 

OCC’s, allowing credit union members 

and the public to view non-confidential 

portions of merger applications. The 

member notice will include a link to the 

website where the merger application 

and comments will be available, as well 

as information about how to submit a 

comment. Because the purpose of the 

website is to encourage dialogue 

between credit union members, the 

NCUA will post comments only from 

credit union members, as well as any 

responses from credit union 

management. Members must include 

their name and their city and state of 

residence, at a minimum, or their 

comment will not be posted. The NCUA 

will review comments before posting to 

ensure that the comments are 

appropriate and limited to the topic of 

the proposed merger. 

For the reasons above, the merger 

applications website replaces the MTM 

communication provisions of the 

proposed rule. The NCUA is in the 

process of developing the website, and 

it will be operational by the effective 

date of this rule. 

Electronic Notification and Voting 

As part of the merger review, a credit 

union inquired if it could supply the 

member notice, and conduct the 

member vote, electronically. The Board 

does not object to providing member 

notices and other documents 

electronically to members who have 

previously agreed to electronic 

notification. Nor does the Board object 

to providing the option to vote 

electronically. Credit unions using 

electronic means, however, must also 

allow members to vote by paper ballot 

in person or by mail and should ensure 

that their bylaws allow for voting by 

electronic means. 

Return of Net Worth to Members 

Several times during the merger 

review, credit unions inquired about the 

permissible methods of calculating how 

to return some net worth to members. In 

particular, some credit unions wanted to 

base the calculation on loan balances as 

well as, or in addition to, the traditional 

methodology of using share account 

balances to calculate a merger dividend. 

The FCU Act does not specify a 

particular methodology for returning net 

worth to members of a merging credit 

union. Also, the Act has general 

authority for loan-related rebates; credit 

union boards may ‘‘authorize interest 

refunds to members of record at the 

close of business on the last day of any 

dividend period from income earned 

and received in proportion to the 

interest paid by them during that 

dividend period.’’ 30 The merger 

regulation is also not specific, simply 

requiring that a merging credit union 

must provide an explanation of ‘‘any 

provisions for reserves, undivided 

earnings or dividends.’’ 31 Borrowers, as 

well as savers, contribute to building a 

credit union’s net worth. Accordingly, 

the Board clarifies that the regulation 

does not prohibit returning a portion of 

net worth to members based on loan 

balances. The Board cautions that 

merging credit unions that are returning 

a portion of net worth based on loan 

balances must describe the payment 

accurately. Payments based on loan 

balances should use a term such as 

‘‘interest rebate,’’ as dividends only 

apply to share accounts. Also, the 

NCUA will review benefits provided to 

covered persons and will require 

disclosure if a return of net worth 

occurs in an amount that exceeds the 

threshold for merger-related financial 

arrangements. 

E. Forms 

In the proposed rule, the NCUA 

committed to issue revised forms and 

revisions to its Merger Manual in 

conjunction with any final 

rulemaking.32 In light of the fact that 

subpart C of part 708b already contains 

many merger-related forms, the Board 

has determined to eliminate a separate 

merger manual and incorporate all 

relevant forms into the rule. Having all 

merger-related information in the same 

location will ease compliance for credit 

unions. It will also prevent the Merger 

Manual and forms from falling out of 

conformance over time due to regulatory 

changes. 


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33 5 U.S.C. 603(a). 

34 Id. 605(a). 

The final regulation now includes a 

new § 708b.304 that includes all of the 

merger-related forms for a FICU merging 

into another FICU. Most of the forms are 

substantially identical to existing forms 

in the merger manual. The Member 

Notice, however, has been significantly 

revised. The revisions incorporate all of 

the requirements of the final rule. The 

NCUA, is not, however, making this 

format mandatory and will consider 

other notices that provide the same level 

and type of information to members. 

Merging credit unions should be aware, 

however, that NCUA approval of 

alternate forms of member notices will 

require extra time, as Regional Offices 

will likely need to consult with the 

Office of General Counsel about the 

modified language. 

III. Conforming and Clarifying 

Amendments to Other NCUA 

Regulations 

Appendix A to Part 701, Federal Credit 

Union Bylaws 

As discussed above, the Board is 

requiring merging credit unions to mail 

member notices at least 45 days, but no 

more than 90 days, before the meeting 

to vote on a proposed merger. 

Accordingly, the Board is proposing to 

amend Article IV of the FCU Bylaws to 

be consistent with the proposed 

amendments to part 708b. 

IV. Regulatory Procedures 

A. Regulatory Flexibility Act 

The Regulatory Flexibility Act 

requires the NCUA to prepare an 

analysis of any significant economic 

impact a regulation may have on a 

substantial number of small entities 

(primarily those under $100 million in 

assets).33 This rule will affect relatively 

few small credit unions. Accordingly, 

the NCUA certifies that this regulation 

will not have a significant economic 

impact on a substantial number of small 

entities.34

B. Paperwork Reduction Act 

The Paperwork Reduction Act of 1995 

(PRA) (44 U.S.C. 3501 et seq.) requires 

that the Office of Management and 

Budget (OMB) approve all collections of 

information by a Federal agency from 

the public before they can be 

implemented. Respondents are not 

required to respond to any collection of 

information unless it displays a current, 

valid OMB control number. 

The proposed increase in burden 

under § 708b.106 associated with 

member-to-member communications 

has been eliminated. NCUA will offer a 

website where members can post 

comments on proposed mergers. 

NCUA believes that the certification 

requirement under § 708b.104 does not 

warrant an increase to the 5 hours 

already allotted a respondent to submit 

the merger proposal to NCUA. 

Similarly, the requirement to supply 

two years of board meeting minutes will 

also not add to the burden since FICUs 

must maintain these minutes and make 

them available for examiners. This also 

applies to § 708b.106(b) where the final 

rule specifies the contents of a member 

notice. This notice is to include the 

addition of the website where members 

can share comments and a targeted 

listing of branch locations of merging 

credit unions. This will not increase the 

7 hours currently approved for a 

respondent to provide this notice. 

In accordance with the PRA, the 

information collection requirements 

included in this final rule have been 

submitted to OMB for approval under 

control number 3133–0024. The 

proposed rule made revisions to the 

information collection requirements 

under OMB control number 3133–0182; 

but with the removal of the member-tomember communications, there is no 

change to the burden. 

Estimated number of respondents: 

214 FICU. 

Estimated total annual burden hours: 

7,490. 

C. Executive Order 13132 

Executive Order 13132 encourages 

independent regulatory agencies to 

consider the impact of their actions on 

state and local interests. The NCUA, an 

independent regulatory agency as 

defined in 44 U.S.C. 3502(5), voluntarily 

complies with the executive order to 

adhere to fundamental federalism 

principles. The final rule does not have 

substantial direct effects on the states, 

on the relationship between the national 

government and the states, or on the 

distribution of power and 

responsibilities among the various 

levels of government. Nothing in the 

rule precludes states from adopting 

more rigorous requirements. Further, 

the requirements for FISCUs are the 

same as for FCUs, and are designed to 

provide disclosure to members, that are 

similar to, or less burdensome than the 

requirements imposed by the SEC on 

state-chartered publicly-traded 

companies, or by the IRS on statechartered non-profits (including many 

FISCUs). The NCUA has therefore 

determined that this final rule does not 

constitute a policy that has federalism 

implications for purposes of the 

executive order. 

D. Assessment of Federal Regulations 

and Policies on Families 

The NCUA has determined that this 

rule will not affect family well-being 

within the meaning of section 654 of the 

Treasury and General Government 

Appropriations Act, 1999, Public Law 

105–277, 112 Stat. 2681 (1998). 

E. Small Business Regulatory 

Enforcement Fairness Act 

The Small Business Regulatory 

Enforcement Fairness Act of 1996 

(SBREFA) provides generally for 

congressional review of agency rules. A 

reporting requirement is triggered in 

instances where NCUA issues a final 

rule as defined by Section 551 of the 

Administrative Procedure Act. NCUA 

does not believe this final rule is a 

‘‘major rule’’ within the meaning of the 

relevant sections of SBREFA. NCUA has 

submitted the rule to the OMB for its 

determination in that regard. 

List of Subjects 

12 CFR Part 701 

Advertising, Credit, Credit unions, 

Fair housing, Insurance, Reporting and 

recordkeeping requirements. 

12 CFR Part 708b 

Credit unions, Mergers of credit 

unions. 

By the National Credit Union 

Administration Board, on June 21, 2018. 

Gerard Poliquin, 

Secretary of the Board. 

For the reasons discussed above, the 

National Credit Union Administration 

amends 12 CFR parts 701 and 708b as 

follows: 

PART 701—ORGANIZATION AND 

OPERATIONS OF FEDERAL CREDIT 

UNIONS 

■ 1. The authority citation for part 701 

continues to read as follows: 

Authority: 12 U.S.C. 1752(5), 1755, 1756, 

1757, 1758, 1759, 1761a, 1761b, 1766, 1767, 

1782, 1784, 1786, 1787, 1789. Section 701.6 

is also authorized by 15 U.S.C. 3717. Section 

701.31 is also authorized by 15 U.S.C. 1601 

et seq.; 42 U.S.C. 1981 and 3601–3610. 

Section 701.35 is also authorized by 42 

U.S.C. 4311–4312. 

■ 2. Revise the first sentence of Section 

2 of Article IV of appendix A to part 701 

to read as follows: 

Appendix A to Part 701—Federal 

Credit Union Bylaws 

* * * * * 

Article IV. Meetings of Members 

* * * * * 

Section 2. Notice of meetings required. a. 

The secretary must give written notice to 


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each member: At least 30 but no more than 

75 days before the date of the annual 

meeting; at least 7 days before the date of any 

special meeting; and at least 45 but no more 

than 90 days before the date of any meeting 

to vote on a merger with another credit 

union. * * * 

* * * * * 

PART 708b—MERGERS OF 

FEDERALLY-INSURED CREDIT 

UNIONS; VOLUNTARY TERMINATION 

OR CONVERSION OF INSURED 

STATUS 

■ 3. The authority citation for part 708b 

continues to read as follows: 

Authority: 12 U.S.C. 1752(7), 1766, 1785, 

1786, and 1789. 

■ 4. Amend § 708b.2 as follows: 

■ a. Add a definition in alphabetical 

order for ‘‘Covered person’’. 

■ b. Revise the definition of ‘‘Mergerrelated financial arrangement’’. 

■ c. Add a definition in alphabetical 

order for ‘‘Record date’’. 

■ d. Remove the definition for ‘‘Senior 

management official’’. 

The revisions and additions read as 

follows: 

§ 708b.2 Definitions. 

* * * * * 

Covered person means the chief 

executive officer or manager (or a 

person acting in a similar capacity); 

each of the four most highly 

compensated employees other than the 

chief executive officer or manager; and 

any member of the board of directors or 

the supervisory committee. 

* * * * * 

Merger-related financial arrangement 

means a material increase in 

compensation or benefits because of, or 

in anticipation of, a merger that any 

covered person of a merging credit 

union has received during the 24 

months before the date the boards of 

directors of both credit unions approve 

the merger plan. It also means a material 

increase in compensation or benefits 

that any covered person of a merging 

credit union will receive in the future 

because of the merger. This includes the 

sum of all increases in direct and 

indirect compensation, such as salary, 

bonuses, leave, deferred compensation, 

early payout of retirement benefits, or 

any other financial rewards, other than 

benefits available to all employees of the 

continuing credit union on identical 

terms and conditions. A material 

increase is an increase in value that 

exceeds the greater of 15 percent of 

existing compensation or benefits or 

$10,000. 

* * * * * 

Record date means a date announced 

by the board of directors of a merging 

credit union as the date by which a 

person must have been a member of the 

merging credit union to be eligible to 

vote on a proposed merger. 

* * * * * 

■ 8. Amend § 708b.104 by revising 

paragraphs (a)(4), (5) and (8), removing 

the period at the end of paragraph 

(a)(9)(ii) and adding a semicolon in its 

place, and adding paragraphs (a)(10) 

and (11) to read as follows. 

§ 708b.104 Submission of merger proposal 

to the NCUA. 

(a) * * * 

(4) Proposed Notice of Special 

meeting of the Members; 

(5) Copy of the form of Ballot to be 

sent to the members; 

* * * * * 

(8) If the merging credit union’s assets 

on its latest call report are equal to or 

greater than the threshold amount 

established and published in the 

Federal Register annually by the 

Federal Trade Commission under 15 

U.S.C. 18a(a)(2)(B)(i), a statement about 

whether the two credit unions intend to 

make a Hart-Scott-Rodino Act premerger 

notification filing with the Federal 

Trade Commission and, if not, an 

explanation why not; 

* * * * * 

(10) Board minutes for the merging 

and continuing credit union that 

reference the merger for the 24 months 

before the date the boards of directors of 

both credit unions approve the merger 

plan; and 

(11) A certification signed by the 

CEOs and Chairmen of the merging 

credit union and the continuing credit 

union, using the form in § 708b.304(c), 

that there are no merger-related 

financial arrangements to covered 

persons other than those disclosed in 

the notice required by paragraph (a)(4) 

of this section. 

■ 9. Revise § 708b.106 to read as 

follows: 

§ 708b.106 Approval of the merger 

proposal by members. 

(a) Advance notice of member vote. 

Members of the merging credit union 

must receive written notice at least 45 

calendar days, but no more than 90 

calendar days, before any member 

meeting called to vote on the merger 

proposal. 

(b) Contents of member notice. While 

the merging credit union may refer 

members to attachments for additional 

information or explanation, the notice 

provided to members pursuant to 

paragraph (a) of this section must be in 

the form set forth in subpart C of this 

part and contain the following 

information: 

(1) A statement of the purpose of the 

meeting and the time and place; 

(2) A statement that members may 

vote on the merger proposal in person 

or by mail ballot (or electronically, if the 

credit union’s Bylaws so permit) 

received by the merging credit union no 

later than the date and time announced 

for the member meeting called to vote 

on the merger proposal; 

(3) A statement about the availability 

of a website where members of the 

merging credit union can share 

comments and questions about the 

merger pursuant to paragraph (d) of this 

section; 

(4) A summary of the merger plan, 

including but not necessarily limited to: 

(i) A statement that the merging credit 

union does or does not have a higher net 

worth percentage than the continuing 

credit union; 

(ii) A statement as to whether the 

members of the merging credit union 

will receive a share adjustment or other 

distribution of reserves or undivided 

earnings, including a summary of 

reasons for the decision and, at the 

merging credit union’s discretion, a 

short explanation about the capital 

level; 

(iii) An explanation of any changes to 

ATM access or to services such as life 

savings protection insurance or loan 

protection insurance; 

(iv) If the continuing credit union is 

not federally insured, an explanation of 

any changes related to federal share 

insurance; and 

(v) A detailed description of all 

merger-related financial arrangements. 

This description must include the 

recipient’s name and title as well as, at 

a minimum, the amount or value of the 

merger-related financial arrangement 

expressed, where possible, as a dollar 

figure; 

(5) A statement of the reasons for the 

proposed merger; and 

(6) A statement identifying the 

physical locations of the merging credit 

union by street address, stating whether 

each location is to be closed or retained, 

and a list of branches of the continuing 

credit union by street address that are 

located in reasonable proximity to the 

merging credit union’s locations. 

(c) Additional documents. The notice 

provided to members pursuant to 

paragraph (a) of this section shall be 

accompanied by the following separate 

documents: 

(1) The current financial statements 

for each credit union and a consolidated 

financial statement for the continuing 

credit union; 


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(2) Any additional information or 

explanatory material that the merging 

credit union wishes to provide that does 

not detract from the required 

disclosures and gives further detail to 

members regarding information 

disclosed pursuant to paragraph (b) of 

this section; and 

(3) A Ballot for Merger Proposal. 

(d) Member information. Within 30 

calendar days of receiving the notice 

provided to members pursuant to 

paragraph (a) of this section, members 

may jointly or individually submit a 

comment about the merger to the 

NCUA. The NCUA will post these 

comments on a website accessible to 

credit union members. 

(e) Posting member comments. The 

NCUA reserves the right to not post 

comments that it reasonably believes: 

(1) Are false or misleading with 

respect to any material fact; 

(2) Omit a material fact necessary to 

make the statement in the material not 

false or misleading; 

(3) Relate to a personal claim or 

personal grievance, or solicit personal 

gain or business advantage by or on 

behalf of any party; 

(4) Address any matter, including a 

general economic, political, racial, 

religious, social, or similar cause that is 

not related to the proposed merger; 

(5) Directly or indirectly and without 

expressed factual foundation impugn a 

person’s character, integrity, or 

reputation; 

(6) Directly or indirectly and without 

expressed factual foundation make 

charges concerning improper, illegal, or 

immoral conduct; or 

(7) Directly or indirectly and without 

expressed factual foundation make 

statements impugning the safety and 

soundness of the credit union. 

(f) Clear and conspicuous disclosures 

required. Any information required by 

paragraph (b) of this section to be 

disclosed on the notice provided to 

members pursuant to paragraph (a) of 

this section must be legible, written in 

plain language, and reasonably 

understandable by ordinary consumers. 

(g) Approval of a proposal to merge. 

Approval of a proposal to merge a 

federally-insured credit union into a 

federally-insured credit union requires 

the affirmative vote of a majority of the 

members of the merging credit union 

who vote on the proposal. Members 

must be members as of the record date 

to vote. If the continuing credit union is 

not federally insured, the requirements 

of subpart B of this part also apply, and 

the merging credit union must use the 

appropriate form ballot and notice in 

subpart C of this part unless the 

Regional Director approves the use of 

different forms. If the continuing credit 

union is federally insured, use of the 

sample form notice, ballot, and 

certification of vote forms in subpart C 

of this part will satisfy the requirements 

of this subpart. 

■ 10. Add § 708b.304 to read as follows: 

§ 708b.304 Merger of a federally-insured 

credit union into another federally-insured 

credit union. 

(a) Merger resolution for continuing 

credit union, NCUA 6302. The 

continuing credit union’s board of 

directors must complete this form after 

it votes to merge with the merging credit 

union. The merger package required by 

§ 708b.104 must include merger 

resolutions from both the merging and 

continuing credit unions. 

Merger Resolution (Continuing Credit 

Union) 

Resolution 

The Board of Directors believes our credit 

union should merge with [name of merging 

credit union] (merging credit union). Our 

credit union will assume the merging credit 

union’s shares and liabilities. The merging 

credit union will transfer to our credit union 

all of its assets, rights, and property. All 

members of the merging credit union will 

receive shares in our credit union, which will 

stay in business under its present charter. 

Certification 

We, the Board Presiding Officer and 

Secretary of this credit union, are authorized 

to: 

• Seek National Credit Union 

Administration Regional Director approval of 

the merger. 

• Execute and deliver the merger 

agreement on the effective date of the merger. 

• Execute all agreements and other papers 

required to complete the merger. 

We certify to the National Credit Union 

Administration that the foregoing is a full, 

true, and correct copy of a resolution adopted 

by the Board of Directors of our credit union 

at a meeting held under our bylaws on 

[month and date], 20ll. A quorum was 

present and voted. The resolution is duly 

recorded in the minutes of the meeting and 

is still in full force and effect. 

lllllllllllllllllllll

Board Presiding Officer 

lllllllllllllllllllll

Date 

lllllllllllllllllllll

Secretary 

lllllllllllllllllllll

Date 

(b) Merger resolution for merging 

credit union, NCUA 6303. The merging 

credit union’s board of directors must 

complete this form after it votes to 

merge with the continuing credit union. 

The merger package required by 

§ 708b.104 must include merger 

resolutions from both the merging and 

continuing credit unions. 

Merger Resolution (Merging Credit Union) 

Resolution 

The Board of Directors believes our credit 

union should merge with [name of 

continuing credit union] (continuing credit 

union). The continuing credit union will 

assume the shares and liabilities of our credit 

union. Our credit union will transfer to the 

continuing credit union all of our assets, 

rights, and property. All members of our 

credit union will receive shares in the 

continuing credit union, which will stay in 

business under its present charter. 

Certification 

We, the Board Presiding Officer and 

Secretary of this credit union, are authorized 

to: 

• Seek National Credit Union 

Administration Regional Director approval of 

the merger. 

• Execute and deliver the merger 

agreement on the effective date of the merger. 

• Execute all agreements and other papers 

required to complete the merger. 

We certify to the National Credit Union 

Administration that the foregoing is a full, 

true, and correct copy of a resolution adopted 

by the Board of Directors of our credit union 

at a meeting held under our bylaws on 

[month and day], 20ll. A quorum was 

present and voted. The resolution is duly 

recorded in the minutes of the meeting and 

is still in full force and effect. 

lllllllllllllllllllll

Board Presiding Officer 

lllllllllllllllllllll

Date 

lllllllllllllllllllll

Secretary 

lllllllllllllllllllll

Date 

(c) Merger agreement, Form 6304. 

Submit a proposed merger agreement to 

the NCUA with the initial merger 

package required by § 708b.104. Do not 

sign, date, or notarize the proposed 

agreement. At the completion of the 

merger, officials of the merging and 

continuing credit unions must sign this 

agreement and have it notarized. The 

continuing credit union should retain 

the original document. Send one copy of 

the executed form to the NCUA 

Regional Director (see Form NCUA 6309 

in paragraph (g) of this section). The 

date you execute this document is the 

effective date of the merger. 

Merger Agreement 

This agreement is made and entered into 

on [month and day], 20ll, by and between 

[name of continuing credit union] 

(continuing credit union) and [name of 

merging credit union] (merging credit union). 

The continuing credit union and the merging 

credit union agree to the following terms: 

1. The merging credit union will transfer 

to the continuing credit union all of its 

assets, rights, and property. 

2. The continuing credit union will assume 

and pay all liabilities of the merging credit 


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30312 Federal Register / Vol. 83, No. 125 / Thursday, June 28, 2018 / Rules and Regulations 

union. In addition, the continuing credit 

union will issue all members of the merging 

credit union the same amount of shares they 

currently own in the merging credit union, 

subject to the following share adjustments (if 

any): 

[Name of continuing credit union] by: 

lllllllllllllllllllll

Board Presiding Officer 

lllllllllllllllllllll

Treasurer 

[Name of merging credit union] by: 

lllllllllllllllllllll

Board Presiding Officer 

lllllllllllllllllllll

Treasurer 

Before me a Notary Public (or other 

authorized officer) appeared the above 

named [name of Board presiding officer] and 

[name of Treasurer], Board Presiding Officer 

and Treasurer of [name of continuing credit 

union], who being personally known to me 

as (or proved by the oath of credible 

witnesses to be) the persons who executed 

the annexed instrument acknowledged the 

same to be their free act and deed and in 

their respective capacities the free act and 

deed of said credit union. 

(SEAL) 

Notary Public 

My commission expiresllllll, 20ll. 

State of lllllllllllllllll

County of llllllllllllllll

Before me a Notary Public (or other 

authorized officer) appeared the above 

named [name of Board Presiding Officer] and 

[name of Treasurer], Board Presiding Officer 

and Treasurer of [name of merging credit 

union], who being personally known to me 

as (or proved by the oath of credible 

witnesses to be) the persons who executed 

the annexed instrument acknowledged the 

same to be their free act and deed and in 

their respective capacities the free act and 

deed of said credit union. 

(SEAL) 

Notary Public 

My commission expiresllllll, 20ll. 

State of lllllllllllllllll

County of llllllllllllllll

(d) Sample form notice to members, 

NCUA 6305A. If a federally insured 

credit union is merging into another 

federally insured credit union, use of 

this form will meet the requirements of 

§ 708b.106. Brackets provide 

instructions or indicate that the merging 

credit union should fill in the 

appropriate information, or select the 

appropriate option to conform the 

notice to the circumstances of the 

merger. 

Notice of Meeting of the Members of [Name] 

Credit Union 

The Board of Directors of [name of merging 

credit union] have called a [special] meeting 

of the members of this credit union at 

[location, address], on [month, day, year] at 

[time]. The purpose of this meeting is: 

1. To consider and act upon a plan and 

proposal for merging [name of merging credit 

union] with and into [name of continuing 

credit union] (hereinafter referred to as the 

‘‘Continuing Credit Union’’), whereby all 

assets and liabilities of the [name of merging 

credit union] will be merged with and into 

the Continuing Credit Union. All members of 

[name of merging credit union] will become 

members of the Continuing Credit Union and 

will be entitled to and will receive shares in 

the Continuing Credit Union for the shares 

they own in [name of merging credit union] 

on the effective date of the merger. 

2. To ratify, confirm and approve the 

action of the Board of Directors in 

authorizing the officers of [name of merging 

credit union], subject to the approval of 

members, to do all things and to execute all 

agreements, documents, and other papers 

necessary to carry out the proposed merger. 

The Board of Directors of [name of merging 

credit union] encourages you to attend the 

meeting and vote on the proposed merger. 

Whether or not you expect to attend the 

meeting, we urge you to sign, date and 

promptly return the enclosed ballot to vote 

on the proposed merger. 

If you wish to submit comments about the 

merger to share with other members, you 

may submit them to the National Credit 

Union Administration (NCUA) at [insert 

email address] or [insert physical address]. 

The NCUA will post comments received from 

members on its website, along with the 

member’s name, subject to the limitations 

and requirements of its regulations. 

Other Information Related to the 

Proposed Merger: 

The Board of Directors has carefully 

evaluated and analyzed the assets and 

liabilities of the credit unions and the value 

of shares in both credit unions. The financial 

statements of both credit unions, as well as 

the projected combined financial statement 

of the continuing credit union, follow as 

separate documents. In addition, the 

following information applies to the 

proposed merger. 

Reasons for merger: The Board of Directors 

has concluded that the proposed merger is 

desirable and in the best interests of members 

because [insert reasons]. 

Net worth: The net worth of a merging 

credit union at the time of a merger transfers 

to the continuing credit union. [Name of 

merging credit union] [has or does not have] 

a higher net worth ratio than [name of 

continuing credit union]. 

Share adjustment or distribution: [Choose 

option A or B and delete the other.] 

A: [Name of merging credit union] will not 

distribute a portion of its net worth to its 

members in the merger. The board of 

directors has determined a share adjustment, 

or other distribution of [name of merging 

credit union]’s net worth is unnecessary 

because [insert reasons]. 

B: [Name of merging credit union] will 

distribute a portion of its net worth to its 

members in the merger. The board of 

directors has determined to distribute a 

portion of [name of merging credit union]’s 

net worth as [describe method of calculating 

share adjustment or other provisions for 

reserves, undivided earnings or dividends.] 

Locations of merging and continuing credit 

union: [Name of merging credit union]’s 

main office at [street address, city] will 

[close/remain open/remain open forll]. [If 

the merging credit union has branches, insert 

the same statement about the branch 

locations]. [Name of continuing credit union] 

has the following locations that are near 

[name of merging credit union]. [List address 

and type of location—i.e. main office, fullservice branch for each non-ATM location of 

the continuing credit union in reasonable 

proximity to the locations of the merging 

credit unions.] 

Changes to services and member benefits: 

[If applicable, explain any loss of services, 

such as increases in fees or loss of ATM 

access, as well as any changes to benefits 

such as life savings protection insurance or 

loan protection insurance. If inapplicable, 

delete entire section.] 

Merger-related financial arrangements: [ ] 

[If inapplicable, delete entire section.] 

NCUA Regulations require merging credit 

unions to disclose certain increases in 

compensation that any of the merging credit 

union’s officials or the five most highly 

compensated employees have received or 

will receive in connection with the merger. 

The following individuals have received or 

will receive such compensation: 

Name Title Description of increase Amount 


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Federal Register / Vol. 83, No. 125 / Thursday, June 28, 2018 / Rules and Regulations 30313 

Please note that the proposed merger must 

have the approval of the majority of members 

who vote. 

Enclosed with this Notice of Special 

Meeting is a Ballot for Merger Proposal. If 

you cannot attend the meeting, please 

complete the Ballot and return it to [mailing 

address]. To be counted, your Ballot must be 

received by [month, day, year] at [time of 

special meeting]. 

BY THE ORDER OF THE BOARD OF 

DIRECTORS: 

lllllllllllllllllllll

President 

lllllllllllllllllllll

Date 

(e) Form ballot, NCUA 6306A. 

Ballot for Merger Proposal 

Name of Member: 

Account Number: 

Your credit union must receive this ballot 

by [insert date of meeting]. Please mail or 

bring it to: 

[insert credit union address] 

I have read the Notice of Special Meeting 

for the members of Credit Union. The 

meeting will be held on the above date to 

consider and act upon the merger proposal 

described in the notice. I vote on the 

proposal as follows (check one box): 

[ ] Approve the proposed merger and 

authorize the Board of Directors to take all 

necessary action to accomplish the merger. 

[ ] Do not approve the proposed merger. 

Signed: lllllllllllllllll

Member’s Name 

Date: llllllllllllllllll

(f) Form certification of vote, NCUA 

6308A. Within ten calendar days after 

the membership vote, the merging credit 

union must complete this form and mail 

it to the NCUA Regional Director. 

Certification of Vote on Merger Proposal of 

the Credit Union 

[Merging] 

We, the undersigned officers of the [name 

of merging credit union], certify the 

completion of the following actions: 

1. At a meeting on [month and day], 

20ll, the Board of Directors adopted a 

resolution approving the merger of our credit 

union with [name of continuing credit union] 

(continuing credit union). 

2. Not more than 90 days or less than 45 

days before the date of the vote, our members 

received copies of the notice of meeting and 

the ballot, as approved by the National Credit 

Union Administration. 

3. The credit union arranged for a meeting 

of our credit union members at the time and 

place announced in the notice to consider 

and act upon the proposed merger. 

4. At the meeting, the members present 

received an explanation of the merger 

proposal and any changes in products, 

services and locations. 

5. The members of our credit union voted 

on of the merger as follows: 

lllNumber of members present at the 

meeting 

lllNumber of members present who 

voted in favor of the merger 

lllNumber of members present who 

voted against the merger 

lllNumber of additional written ballots 

in favor of the merger 

lllNumber of additional written ballots 

opposed to the merger 

6. The action of the members at the 

meeting was recorded in the minutes. 

This certification signed [month and day], 

20ll. 

lllllllllllllllllllll

Board Presiding Officer 

lllllllllllllllllllll

Secretary 

(g) Form certification of completion of 

merger, NCUA 6309. Within 30 calendar 

days after the effective date of the 

merger, the continuing credit union 

must complete this form and mail it to 

the NCUA Regional Director with the 

documents listed on the form. 

Certification of Completion of Merger 

We, the undersigned officers of the abovenamed credit union, certify to the National 

Credit Union Administration as follows: 

1. The merger of our credit union with 

[name of merging credit union] was 

completed as of [month day and year of the 

executed merger agreement], according to the 

terms and plan approved by this Board of 

Directors by a resolution adopted at the 

meeting held on [month day and year of 

board of directors meeting]. We previously 

provided a certified copy of the resolution to 

the National Credit Union Administration. 

2. We completed all required steps for the 

merger and transferred the merging credit 

union’s assets. 

Attached to this certification are the 

following documents: 

1. Financial reports for each credit union 

immediately before the completion of the 

merger. 

2. A consolidated financial report for the 

continuing credit union immediately after 

the completion of the merger. 

3. The charter of the merging federal credit 

union [if available]. 

4. The insurance certificate for the merging 

federally insured credit union [if available]. 

5. A copy of the executed merger 

agreement, Form NCUA 6304. 

This certification signed [month and day], 

20ll. 

lllllllllllllllllllll

Board Presiding Officer 

lllllllllllllllllllll

Treasurer 

(h) Form calculation of PAS ratio, 

NCUA 6311. The merger package 

required by § 708b.104 must include 

PAS calculations for both the merging 

and continuing credit unions. The 

Probable Asset/Share Ratio (PAS) 

reflects the relative worth of $1 of shares 

in a credit union, assuming it will be an 

on-going concern. The ratio is computed 

by dividing the net value of assets by 

the credit union’s total shares. 

ADDITIONS: Cash is valued at book less 

any known potential losses. Loans are valued 

at book net of probable estimated loan losses 

(ALLL). Investments are valued at book value 

less any known losses. However, if a longterm investment is likely to be liquidated 

prior to maturity, it is valued at current 

market value. Fixed Assets are valued at 

book, except when major fixed assets are not 

in use or are in the process of being sold. In 

these instances, the asset is valued at its 

probable market value. Other Assets are 

valued at the most realistic value to the credit 

union, usually not to exceed book value. 

DEDUCTIONS: Notes Payable are valued at 

book. Accounts Payable are valued at book. 

Other Liabilities are valued at book. 

Contingent and/or Unrecorded Liabilities are 

valued at the most realistic known value. 

This item should include any unrecorded 

dividends not accrued for the accounting 

period. Subsidiary Ledger Differences are 

deducted if the credit union is likely to suffer 

a loss due to the problem. Other Losses 

include any other known losses. Do not 

include deficits in undivided earnings or net 

losses because they have already reduced 

assets if properly recorded. 

PROBABLE ASSET/SHARE RATIO—CONTINUING CREDIT UNION

Book Value Market Value 

ADDITIONS: 

Cash .................................................................................................................................................................

Loans ...............................................................................................................................................................

Investments ......................................................................................................................................................

Fixed Assets ....................................................................................................................................................

Other Assets ....................................................................................................................................................

Total (A) ....................................................................................................................................................

DEDUCTIONS: 

Notes Payable ..................................................................................................................................................


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30314 Federal Register / Vol. 83, No. 125 / Thursday, June 28, 2018 / Rules and Regulations 

PROBABLE ASSET/SHARE RATIO—CONTINUING CREDIT UNION—Continued 

Book Value Market Value 

Accounts Payable ............................................................................................................................................

Other Recorded Liabilities ...............................................................................................................................

Contingent and/or Unrecorded Liabilities ........................................................................................................

Subsidiary Ledger Differences (Losses) Other Losses ...................................................................................

Total (B) ....................................................................................................................................................

Net Value of Assets (A¥B) ...............................................................................................................

Total Shares ............................................................................................................................................................

Probable Asset/Share Ratio ....................................................................................................................................

PROBABLE ASSET/SHARE RATIO—MERGING CREDIT UNION

Book Value Market Value 

ADDITIONS: 

Cash .................................................................................................................................................................

Loans ...............................................................................................................................................................

Investments ......................................................................................................................................................

Fixed Assets ....................................................................................................................................................

Other Assets ....................................................................................................................................................

Total (A) ....................................................................................................................................................

DEDUCTIONS: 

Notes Payable ..................................................................................................................................................

Accounts Payable ............................................................................................................................................

Other Recorded Liabilities ...............................................................................................................................

Contingent and/or Unrecorded Liabilities ........................................................................................................

Subsidiary Ledger Differences (Losses) Other Losses ...................................................................................

Total (B) ....................................................................................................................................................

Net Value of Assets (A¥B) ...............................................................................................................

Total Shares ............................................................................................................................................................

Probable Asset/Share Ratio ....................................................................................................................................

(i) Certification of no non-disclosed 

merger-related financial arrangements. 

The merger package required by 

§ 708b.104 must include the following 

certification. 

Certification of No Non-Disclosed MergerRelated Financial Arrangements 

We, the undersigned officials of [name of 

merging credit union] and [name of 

continuing credit union], certify to the 

National Credit Union Administration 

(NCUA) as follows: 

1. The information provided to the NCUA 

in the merger application, and the proposed 

disclosure to the members of [name of 

merging credit union] includes a complete, 

true and accurate statement about all mergerrelated financial arrangements, if any, 

provided to covered persons, as those terms 

are defined in Part 708b of the NCUA’s 

regulations. 

2. We understand that we have an 

affirmative duty to revise our merger 

application and the notice to the members of 

[name of merging credit union] if mergerrelated financial arrangements are added or 

increased after our application is submitted. 

This certification signed [month and day], 

20ll. 

[name of continuing credit union] 

lllllllllllllllllllll

Board Presiding Officer 

lllllllllllllllllllll

CEO 

[name of merging credit union] 

lllllllllllllllllllll

Board Presiding Officer 

lllllllllllllllllllll

CEO 

[FR Doc. 2018–13867 Filed 6–27–18; 8:45 am] 

BILLING CODE 7535–01–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 25 

[Docket No. FAA–2018–0605; Special 

Conditions No. 25–730–SC] 

Special Conditions: Airbus Model 

A318, A319, A320 and A321 Series 

Airplanes; Electronic System Security 

Protection From Unauthorized External 

Access 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Final special conditions; request 

for comments. 

SUMMARY: These special conditions are 

issued for the Airbus Model A318, 

A319, A320 and A321 series airplanes. 

These airplanes will have a novel or 

unusual design feature when compared 

to the state of technology envisioned in 

the airworthiness standards for 

transport category airplanes. This design 

feature is airplane electronic systems 

and networks that allow access from 

external sources (e.g., wireless devices, 

internet connectivity) to the airplane’s 

internal electronic components. 

The applicable airworthiness 

regulations do not contain adequate or 

appropriate safety standards for this 

design feature. These special conditions 

contain the additional safety standards 

that the Administrator considers 

necessary to establish a level of safety 

equivalent to that established by the 

existing airworthiness standards. 

DATES: This action is effective on Airbus 

on June 28, 2018. Send comments on or 

before August 13, 2018. 


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