Compliance Blog

Written by Steve Van Beek

One of the issues I covered during Wendesday's webcast was share insurance after a merger.  Part 745.2(f) of NCUA's Regulations provides the general framework.  

Granted, the issue isn't one that comes up all the time as there (1) needs to a merger or assumption and (2) there need to be members who were members of both credit unions that have now merged.  

Here is 12 CFR 745.2(f):

"(f) Continuation of separate share insurance coverage after merger of insured credit unions. Whenever the liability to pay the member accounts of one or more insured credit unions is assumed by another insured credit union, whether by merger, consolidation, other statutory assumption or contract: The insured status of the credit unions whose member account liability has been assumed terminates, for purposes of this section, on the date of receipt by NCUA of satisfactory evidence of the assumption; and the separate insurance of member accounts assumed continues for six months from the date the assumption takes effect or, in the case of a share certificate, the earliest maturity date after the six-month period. In the case of a share certificate that matures within the six-month grace period that is renewed at the same dollar amount, either with or without accrued dividends having been added to the principal amount, and for the same term as the original share certificate, the separate insurance applies to the renewed share certificate until the first maturity date after the six-month period. A share certificate that matures within the six-month grace period that is renewed on any other basis, or that is not renewed, is separately insured only until the end of the six-month grace period." 

Thus, the general rule from NCUA is that separate share insurance coverage applies for a six-month grace period.  Prior to the end of the grace period, the member may need to restructure their accounts to ensure their accounts remain fully insured.  If the member holds share certificates, there is extra flexibility built into the rules.  

If your credit union has recently gone through a merger or has plans to, be sure to review if you have members that belonged to both credit unions and determine if their share insurance coverage might be impacted.  

Have a great weekend!