APPLE VALLEY, Minn. — Unwavering in its campaign to court members of a credit union that had rebuffed its merger proposal offer four different times, Wings Financial Federal Credit Union finally threw in the towel after NCUA stepped in ruling that one of the financial institution's tactics was out of regulatory bounds. After six weeks of a merger campaign targeted at Continental Federal Credit Union's membership, Wings Financial announced April 20 that it had withdrawn its merger proposal. The decision to do so came three days after NCUA said the $200 payments that the $1.6 billion CU had been offering to Continental's members were not allowed by the Federal Credit Union Act. "Because this decision materially changes the terms of our offer, we believe we would be required to re-solicit the many CFCU members who have already indicated their support of the merger," said Wings Financial President/CEO Paul Parish in a statement on the continentalwings.com Web site. "After careful analysis, we have concluded that effectively starting this campaign over is not practical. As a result we are withdrawing our merger proposal."
Since March 9, the day it submitted its merger proposal to $182 million Continental FCU, Wings Financial has offered Continental FCU's more than 25,000 members $200 each should a merger between the two CUs ever occur. Wings Financial essentially ignored an April 9 cease and desist letter from Continental FCU's attorneys, which ordered the CU to stop all merger campaign activities including a petition and the $200 payment offer.
It was only when NCUA ruled on April 17 that the payments were impermissible because they would constitute the equivalent of a pre-merger dividend to Continental FCU's members to accomplish a partial equalization of shares, which is not allowed. The regulator said Wings Financial would also have to stop the offer because the unilateral promise of a dividend by the continuing credit union in a proposed merger, without the approval of the merging credit union, is not permitted.
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Parish said Wings Financial did not agree with NCUA's decision, but remained optimistic about what he describes as "the support we have received from CFCU members". At the time of the merger proposal withdrawal, Parish said the CU had received more than 50 petition signatures "over the last several days." Despite repeated requests, Wings Financial has yet to provide the total amount of signatures collected calling for a special mail ballot vote among Continental's members indicating interest in a merger. Just days before its withdrawal and NCUA's decision, Wings Financial representatives were in Houston and Newark visiting Continental FCU members and airline employees. While Wings Financial said it is "gratified by the many Continental Airlines employees and other former CFCU members" who have joined since March 9, the CU has not provided a figure on how many have actually joined. Meanwhile, Parish said despite the end of the CU's merger efforts, Wings Financial will continue to invite members of the aviation community to join. At press time, a scaled down continentalwings.com site was still up and running although the $200 payment offer had been removed.
Wings Financial's merger proposal goes down in CU history as the first "unsolicited" attempt by one CU to merge with another. Despite Continental FCU rejecting the proposal four different times, Wings Financial continued to encourage Continental FCU members to press the board for a special vote and enter into discussions. Wings Financial also refused to stop the campaign even after Continental's attorneys sent a cease and desist letter on April 9. Continental FCU President/CEO Tom Glatt, who said all along the matter was bigger than the two CUs, commended NCUA for its review of Wings Financial tactics. "We cannot thank our members, our volunteers and the NCUA enough for their support during the last month as we battled to keep our credit union independent," Glatt said. Glatt said over the past month, he has received thousands of e-mails, phone calls, pledges of support and branch visitors from members who "have used strong language to voice their choice for independence." He especially thanked Bill Cheney, president/CEO of the California and Nevada Credit Union Leagues, for his support as well as Mike Clinton, director emeritus for Affinity Federal Credit Union in New Jersey, and Wendell V. Fountain, a retired board director from Vystar Credit Union in Florida for their daily e-mails of encouragement. Glatt also commended Continental FCU's staff for remaining focused on serving the members.
"In working to protect our independence, our board and our management have been fulfilling our responsibility to serve the long-term interests of our members," Glatt said. "Our members are proud of their independent credit union, and want us to stay that way." –[email protected]
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