Tom Glatt, president/CEO of $176 million Continental, and the board said they reviewed the proposal from Wings Federal on more than one occasion, and each time, after careful consideration they have declined the offer.

"It's time for Wings to accept the decision and discontinue this unsolicited and unprecedented action," Cooper said.

The $1.6 billion Wings Financial submitted a merger proposal to Continental March 9, the same day it launched a petition to get Continental members to move the merger forward through discussions with Continental's board and setting a date for a meeting and mail ballot vote to confirm interest. As of March 16, Wings Financial would not say how many signatures it had collected, only saying the numbers "are in line with our expectations." Wings Financial also promised Continental's more than 25,000 members $200 each should the merger go forward. Continental has since launched its own "pledge of support" petition at www.continentalfcu.org appealing to members to reject the "unsolicited and unwarranted takeover attempt by Wings Financial." Glatt said several hundred signatures have been collected so far.

"We have not had a single voice of acceptance of the Wings proposal. Our members have been very passionate on what they had to say," Glatt said. "In addition to due diligence from the board, we listen to our members. And, they have spoken."

Wings Financial President/CEO Paul Parish has repeatedly said the merger could offer an expanded branch and ATM network to Continental's members as well as lower rates on loans, higher rates on savings, fewer fees. While Glatt has called Wings Financial's proposal a "hostile takeover" attempt, Parish disagrees saying the merger would add value and bring more to Continental's members.

Now that Continental has officially rejected the merger proposal, Glatt said he hopes this ends it.

"The next step is to continue to focus on the members," Glatt said. "With the rejection, that should end it. The great thing is our staff hasn't lost focus. They've done their jobs with taking care of the members."

Parish said the CU is "disappointed", but not surprised that Continental voted against its merger proposal without presenting it to their membership for a vote. Wings Financial said it plans to continue pursuing Continental's membership.

"The officials at Continental FCU have never held meaningful discussions with Wings Financial on the details of, and the benefits to the Continental FCU members, from a merger with Wings," Parish said. "That's why we thought it necessary to introduce ourselves to the Continental FCU members and why we'll continue those efforts."

Parish said Continental has created an atmosphere of "fear among their members through half-truths and unfounded allegations, and through vague promises to be better in the future."

"Neither tactic is particularly effective in covering over–once again–their inability to articulate why our proposal is not in the best interests of its members," Parish said. "All of their concerns could be addressed if they would enter into a dialogue with us."

Discussions with Continental about a possible merger go back nearly two years, but the March 9 proposal is not an attempt to take over the financial institution, Parish said. Wings Financial's board started looking for methods to grow the CU approximately two and a half years ago, which included identifying potential merger candidates. Parish said Continental and other similarly structured CUs were looked at. Continental's complimentary field of membership, office structure and delivery systems made the CU an ideal candidate. Parish said Wings Financial initially contacted Continental in November 2005, then in May 2006 and again in the fall of 2006. 'Even Boxing Matches Have Rules'

Meanwhile, CUNA, NAFCU, the Consumer Federation of America and the National Cooperative Business Association met March 20 to discuss the implications of unsolicited merger proposals and the lack of regulator guidelines in this area. NAFCU President/CEO Fred Becker said there clearly needs to be "rules of the road" so that credit unions have a clear indication of what is permissible when a "hostile takeover" is attempted.

"In my view, the goal of such rules would be to balance the need for continued cooperation with the needs of those credit unions that truly wish to merge," Becker said. CUNA President/CEO Dan Mica said "aggressive, non-friendly takeovers have the potential to do significant harm to our cooperative system."

"We all felt there need to be rules of the road for these types of unsolicited takeover transactions. Even boxing matches have rules," Mica said. "Yet right now credit unions are the only financial institutions that do not have any rules in place. Instead we have a governance vacuum that could be detrimental to the credit union movement at large if allowed to persist."

CUNA General Counsel Eric Richard along with guest attorneys Paul Lambert and David Balabanian with Bingham McCutchen LLP, participated in a recent conference call discussing how other sectors typically have rules in place that allow for regulatory oversight, specific timetables, disclosures, defensive options and other measures to ensure fairness and transparency.

Mica is concerned that the lack of proper procedures on CU takeovers could result in a "wild west" environment within the CU industry. He has urged NCUA to review the subject closely, but not to act in "undue haste."

"The bottom line is to ensure the outcome is honest, fair and in the best interests of the credit union system and its members," Mica said.

Becker said another concern "is the appearance of buying member votes with cash merger payments, with the potential for other suitors auctioning off a credit union through a possible 'bidding war,' which could lead to more 'hostile' mergers, the dilution of credit union capital and consequent risk to the share insurance fund."

"The ability of one credit union to bypass the board of a credit union that it has targeted for merger and initiate a member petition drive and pay personal visits to its branches is also very troubling," Becker said.

Becker said he has expressed the association's concerns with all three NCUA board members. NCUA has been relatively silent on the matter, but Chairman JoAnn Johnson issued a statement March 15 reiterating the agency's position on merger regulations.

"NCUA focuses on member benefit first and foremost when considering any credit union merger," Johnson wrote. "NCUA's rules governing mergers of federally insured credit unions require the approval of the boards of directors of both credit unions and of NCUA before a merger can occur. In the case of Wings Federal Credit Union soliciting Continental Federal Credit Union as a merger partner, there is no merger plan approved by both credit union boards. If such a plan were submitted to NCUA, it would be acted on only after a careful review of all statutory and regulatory requirements."

Cooper said the last week or so has been disruptive to Continental's operations.

"The recent actions of Wings Financial have been a costly distraction for our employees and volunteer board of directors, and to others in the credit union system who would instead prefer to remain focused on delivering a cooperative credit union experience and competitive products and services to their members," Cooper said.

This is not the first time a cooperative has been involved in such a merger attempt, Becker noted. Several years ago, there was a "hostile takeover" attempt in the Farm Credit System, which ultimately failed, was decried by farm credit leaders and led then Senate Minority Leader Tom Daschle,(D-S.D.) and Sen. Tim Johnson, (D-S.D), to call for congressional hearings on the Farm Credit System as a whole.

Glatt said he was overwhelmed by the support Continental received from not only the members, but also the industry.

"It's so gratifying to see people come together so quickly on an issue. I've been in credit unions for 20 years and [the industry] came together quicker on this than it did on the AT&T [FCU] case [which lead to the landmark passage of the Credit Union Membership Access Act].

"This wasn't about Continental, this was about the movement." –[email protected]