MCE FCU previously excluded teachers in Montgomery County because MCT FCU covered them. This violated a former rule that prevented overlapping fields of membership.

"There [are] no sour grapes on our part," said Conway, stressing his credit union is capable of meeting competition from a smaller rival resulting from the added FOM powers given to MCE FCU.

Whether the NCUA is being less restrictive on FOM matters and if the agency acts too late in the case of failing credit unions are open questions. Others believe that there is widespread sympathy for the agency in how it manages policy.

"So, assume there is a credit union that is sinking and to get its capital ratio up they've cut staff and services and run off deposits – a common strategy," said consultant Denny Graham, head of St. Louis-based FI Strategies LLC, a firm that advises credit unions and banks. "Is that what's best for their members? No. Is that what's best for their board and management? Probably, if they want to keep their jobs," said Graham arguing that the NCUA has its hands tied.

"By statute, they really can't declare an emergency merger until the capital goes below 2% and by that time no one wants that credit union – they're too far gone," Graham said. "Sure, they'd take them with some assistance, but the NCUA isn't going to do that either. Prior to 2%, they can have an LUA and PCA that say they have to look for a merger partner, but they can't force it."

Graham said he knows of one client approached by the NCUA to look at a troubled credit union where the potential acquirer was 50 times the size of the target credit union. After lengthy discussions, the target credit union thought the merger was a great idea because it would bring in more products and services.

The stall came when talks turned to board representation. In considering the consolidation idea, there was a demand for two more seats on the board and the request was turned down. 

In this instance, he said "NCUA is virtually powerless to make anything happen as long as the other credit union is abiding by their LUA."

Sharing a similar view, former NCUA Chairman Dennis Dollar,  a Birmingham, Ala.-based credit union consultant, maintains that although the regulator's "tight interpretation of FOM barriers and solvency definitions have stopped some worthwhile potential mergers in their tracks, NCUA has actually worked quite well with merging credit unions in most cases."

"Our experience working with mergers shows that they really don't want to stand in the way when a merger will result in a stronger credit union, more financially stable and less potentially, a threat to the insurance fund," Dollar said.

While the NCUA has been cooperative, Dollar said the agency's tight FOM and solvency definitions could probably stand some updating and greater flexibility. Still, the approval process has worked in a relatively timely basis, he added. Generally, the trend with FOM regulation has become more favorable than in years past, reminding credit union managers that there are plenty of tools that can be used with affinity arrangements and simple geographic definition changes said Michael Bell, a lawyer and consultant in Niles, Mich.There is still uncertainty about dealing with the NCUA Office of Consumer Protection, he said.

"That is something new to all of us," said Bell who most recently advised GFA Credit Union in Worcester, Mass., on its planned purchase of a struggling New Hampshire savings bank.

"Whether it's a unique acquisition or FOM expansion creativity, a 'can do' mindset is vital," Bell said. "Regulators by default say 'no' first. That's their job.  The key is to take that no as 'not yet' rather than an absolute. Persistence pays off."