An Open Secret: NCUA, Oxymorons, and Merger Truths



An oxymoron is a figure of speech in which two seemingly contradictory terms are used together. Sometimes the intent is literary, as in “deafening silence.” Sometimes the purpose is ironic juxtaposition—“postal service” or “jumbo shrimp”—to highlight conflicting concepts.

I propose a new example: Truth in Mergers. This is a 25-page NCUA publication from May 2014. The subtitle: A Guide for Merging Credit Unions.

This document was prepared by the NCUA’s Office of Small Credit Union Initiatives (OSCUI). The preface lists three purposes:

  • Understand trends in credit union mergers.
  • Determine when a merger is in a credit union’s best interest or, in the worst case, necessary to continue operations.
  • Negotiate a merger agreement that best serves the merging credit union’s interests.

OSCUI’s mission statement reads: “We support the success of small credit unions…[and] recognize the unique role small, low-income designated and new credit unions play in the lives of their members and communities. We are committed to helping these credit unions not only survive but thrive.”

 The “truth” is that the brochure was to facilitate the demise of smaller credit unions.

Oxymorons can assist the reader to clarify the NCUA’s doublespeak. After each of the following verbatim excerpts, I have provided this figure of speech to aid in interpretation.

Statements from “Truth in Mergers”

Statement Oxymoron
“Mergers between credit unions are commonplace in the industry today.” Old news
“And like all businesses and institutions, mergers can be successful or unsuccessful.” Even odds
“NCUA does not endorse mergers…” Seriously funny
“…mergers undertaken proactively by credit unions in sound financial condition have better outcomes for the credit unions involved and their members.” Alone together
“…many credit unions wait until they are in a troubled financial position before exploring the option to merge.” Definite possibility
“Weak Financial Condition Drives Most Credit Union Mergers” Deliberate mistakes
“A merger can also provide direct benefits to credit union members, including lower cost of services, lower loan rates, and higher dividends. These benefits are significant, immediate, and persistent.” True lies
“Negotiating the terms of the merger contract is one way a merging credit union can realize the greatest benefits of the transaction.” Bittersweet
“OSCUI’s study of merger packages also demonstrated a clear link between a merging credit union’s financial strength and its ability to negotiate advantageously with the continuing credit union.” Strength in weakness
Best Practices: “Shop around for the best fit. . .merging credit unions should seek out and evaluate multiple potential partners and critically evaluate major issues, such as: organizational culture, mission statements, and respective memberships.” Act naturally
“Include a merger in the strategic planning process. Credit unions are encouraged to consider the impact of a merger as part of the strategic planning process.” Definite possibility
“Develop a succession plan for executives and board members. Avoid letting the board and the CEO grow old together.” Open secret
“Merger contracts can be negotiated to ensure that the merging credit union’s members, staff, and community continue to be served.” True myth
“Take measures to enforce the merger agreement. How can merger agreement provisions be enforced when one party to the agreement no longer exists?

“NCUA’s Office of General Counsel suggests that a merging credit union name in the contract the third-party beneficiaries with standing to enforce the contract. For example, if the continuing credit union agrees to keep a branch open for at least one year, the agreement would note that the members of the discontinuing credit union are beneficiaries with standing. Because these matters would fall under state contract law, the wording should be state specific.”

Clearly confused

The almost final word

“This brochure has been prepared by NCUA’s Office of Small Credit Union Initiatives (OSCUI) as a resource to help credit unions…” [emphasis added]


This Office of Small Credit Union’s initiative was intended to phase out small credit unions. Those with problems—for sure. Those in sound financial condition—in due course.

And consequences

This “small credit union” endeavor gave the green light for all credit unions to seek merger opportunities. No matter the size, circumstance, proximity, or business logic. It began an open season for self-dealing. CEOs saw the opportunities to cash out at their retirement. Long standing member loyalties were squandered, and a binge of back room deals by leaders of sound local credit unions was officially sanctioned.

The challenge for Chairman Harper and the board: is there a cure for this official document issued while he was senior policy advisor to Chairman Matz?

To keep mergers in perspective, we give the last word to capitalist Henry Ford: “A business that makes nothing but money is a poor business.”


  • Chip Filson

    A nationally recognized leader in the credit union industry, Filson is an astute author, frequent speaker, and consultant for the credit union movement. He has more than 40 years of experience in government, financial institutions, and business. Chip co-founded Callahan and Associates. Filson has held concurrent positions at the NCUA as president of the Central Liquidity Facility and Director of the Office of Programs, which includes the NCUSIF and the examination process. He holds a magna cum laude undergraduate degree in government from Harvard University. After being awarded a Rhodes Scholarship, he earned a master’s degree in politics, philosophy, and economics from Oxford University in England. He also holds an MBA in management from Northwestern University’s Kellogg School in Chicago.

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