Newsroom

NCUA, in a recent legal opinion, told a federal credit union that it needs an exemption from management official interlocks rules for one of its board members, but it noted particular concern over the credit union's practice of allowing another firm's board to select its own slate of board candidates.

The letter addresses the case of Everence FCU in Lancaster, Pa. The credit union's field of membership overlaps with the customer base of Everence Financial, a group of companies that provide insurance and financial services. Management at the two organizations have agreed to collaborate in providing services to their shared customers, and Everence Financial's board selects the credit union's slate of board candidates. That is in conflict with the Federal Credit Union Act and the agency's FCU Bylaws.

Hattie Ulan, NCUA's associate general counsel, said an FCU's board must be selected by and from the membership. The FCU Act places board elections in the hands of the membership, and the FCU Bylaws further contemplate members' involvement in selecting board nominees. "Everence's involvement in the selection of the slate of nominees presented to the FCU's membership is contrary to the FCU Act and FCU Bylaws," she wrote.

The interlocks issue involves one of Everence FCU's board members who also serves as the president and chief executive officer of Everence and a small, federally chartered thrift under the Everence umbrella. The interlocks issue arises with respect to the thrift, which is located in the same town where the credit union maintains nine offices. Rather than terminate the person's service, and as the thrift has less than $5 million in assets, Ulan suggested that the credit union seek an exemption from the interlocks prohibition.

The interlocks law and NCUA rules generally bar an FCU's management official from simultaneously serving as a management official of another depository organization with an office in the same city, town or village unless the dual service qualifies for an exception or NCUA exempts it, Ulan noted. If each organization has $50 million or more in assets, the official is prohibited from serving an unaffiliated depository organization in the same relevant metropolitan statistical area.