"Our proposal is clearly in the best interest of the Continental membership to whom you and your fellow board members each hold a duty of fiduciary responsibility," Mayer wrote. "We trust that after you review the proposal, you will move expeditiously to act on that responsibility by allowing Continental members their right to vote on the proposed merger."

Continental FCU President/CEO Tom Glatt was in Houston at the time the merger proposal was sent. Ultimately he got word that representatives from Wings Financial were making the rounds at Continental's branches in Houston and Newark, N.J, introducing themselves to Continental's members. Glatt and the board were livid at the presumptuous way Wings Financial conducted the merger campaign, and on March 20, the proposal was flatly rejected.

"The board saw the Wings Financial offer for what it was–a blatant attempt to buy our members' votes and convince them to hand over our network and members' sizeable assets, without any real value in return," wrote Continental FCU Chairman Allan Cooper at the time.

In the midst of all of this, a term that is fairly routine in the banking industry emerged probably for the first time among credit unions: "hostile takeover."

"The strongest thing I can say is this would be considered a hostile takeover," Glatt said. "Does this sound like the way credit unions do business?"

What had yet to be revealed was that Wings Financial had approached Continental about a possible merger at least three prior times. Wings Financial President/CEO Paul Parish confirmed with Credit Union Times that Wings Financial had contacted Continental in November 2005, in May 2006 and again in the fall 2006. Each time Continental rejected the merger proposal.

"We thought they were reasonably receptive," Parish said at the time, recalling the meetings between the respective boards and chairmen. "There was an interest, although cautionary."

A domain name site search revealed that Wings Financial may have had plans to conduct similar merger campaigns toward $291 million FAA First FCU and $48 million Alaska Airlines/Horizon Air Employees FCU.

AlaskaHorizonWings.com and FAAFirstWings.com sites have both been registered, the latter by a Wings Financial employee, the credit union confirmed. Both FAA First and AAHAEFCU told Credit Union Times they were not interested in merging. Then, there was speculation that Wings Financial sought partnerships with $4.4 billion American Airlines CU, $4.8 billion Alliant CU and $2.7 billion Delta Community CU to create one multi-billion financial institution that would serve the air transportation industry. Wings Financial had not responded to questions about such a merger.

American Airlines CU President/CEO John Tippets previously said that American was approached in 2005 by Wings Financial, but there was no discussion of a merger or a partnership proposal.

Meanwhile, Continental pulled out its defenses and appealed to members through its site to keep the credit union independent. The El Segundo, Calif.-based credit union didn't have to look too far for support. NAFCU, CUNA, the California Credit Union League, and a host of high profile credit union CEOs all but condemned Wings Financial's actions. Both trades urged NCUA to step in.

NAFCU President/CEO Fred Becker said he wondered about the $200 incentive payments and on what grounds could NCUA stop a merger. "There are a number of serious questions that we are confident that NCUA will carefully consider and examine in this first hostile takeover of a credit union," Becker said. "We hope this is not the beginning of a wave of bidding wars for members within the credit union community."

CUNA said the unsolicited merger bid indeed presents NCUA with "major challenges."

"The agency's rules and procedures have not been designed with unfriendly transactions in mind," said Pat Keefe, CUNA vice president of communications and media outreach, at the time. "Dealing with the many issues of law, policy, and supervision in such transactions will require time and caution. There is too much at stake for the members of these credit unions, and for the whole credit union system, to permit any snap judgments by the regulators."

Steadfast, Wings Financial continued with its online petition. According to the credit union, it needed only needed 750 signatures to get the board to reconsider the proposal. Despite numerous requests from Credit Union Times, Wings Financial never provided information on how many signatures it had collected.

Wings Financial refused to budge even after receiving an April 9 cease-and-desist letter from attorneys representing Continental. The letter ordered a halt to "unlawful conduct, all misleading and deceptive statements and the Web site Wings Financial is running at continentalwings.com." The site remains up, for instance.

For its part, NCUA chose to stick to the regulatory guidelines and continued to reiterate that the Wings/Continental matter has "underscored the validity of the concept that credit union boards have an essential role in determining whether a merger is beneficial to the credit unions and their members, said NCUA Chairman JoAnn Johnson at an April 5 Massachusetts Credit Union Governmental Affairs Day Conference.

The agency held to its position that it would ensure that all statutory and regulatory requirements are being followed including an assessment of the accuracy of all advertising and representations being made about the merger, as well as a careful review of other federal financial institution rules governing mergers between and among banks, thrifts and other corporations to ensure that NCUA regulations are as comprehensive as possible. NCUA said it was prepared to address any inadequacies or insufficiencies that threaten member protection, transparency and fairness.

In the end, it was NCUA that put a stop to Wings Financial's merger campaign. On April 20, the agency ruled that the $200 payments Wings Financial had offered to Continental's membership should a merger go through were impermissible under the Federal Credit Union Act.

As a result of Wings Financial's unprecedented merger tactics, several state leagues adopted resolutions that took straightforward stances against unsolicited mergers. For the most part, the statements reiterated that a credit union's board, after considering the best interests of the members, could approve or disapprove a merger proposal. Third parties may not interfere in the business operations of a credit union nor are they entitled to provide "inaccurate or misleading" communications to the members of another credit union. The authority of one credit union to spend funds to influence member votes at another credit union should be subject to "serious review" by regulators, the resolutions read.

So far, the Texas Credit Union Commission has taken probably the strongest stance for its state-chartered credit unions. In October, the commission approved a rule that would prohibit a Texas credit union from offering a merger inducement to another credit union's members as a means of promoting a merger of the two credit unions.

Since it launched its campaign in March, Wings Financial has revamped its continentalwings.com Web site to invite Continental employees to join. Wings Financial has also partnered with far airline carries to serve their employees. Continental FCU has since expanded its ATM and branch networks, introduced investment services and upgraded several other products. Glatt said these changes were part of Continental's strategic plans well before Wings Financial submitted the March 9 merger proposal.

Even the American Bankers Association questioned how unsolicited mergers could change the scope of the credit union industry.

"This [merger attempt] reflects a fundamental change in credit unions," Keith Leggett, ABA senior economist, said at the time. "Prior to 1998, credit unions had unique fields of membership and basically, other credit unions could not compete for them. Now, [some] credit unions that are seeing that they can't grow membership organically, those with similar economies of scale–you'll see larger and mid-size credit unions approaching smaller credit unions."

Leggett also wondered "Does this create more anarchy? This [merger] raises some additional questions."

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