However, with renewed interest in the concept and the continued consolidation of credit unions, Metsger said that credit unions may view this tool as an alternative to “simply merging totally out of existence,” which includes the disappearance of their identity in their communities.

“This is not a silver bullet or a panacea that would end consolidation in the credit union industry,” he said. “But it is an additional tool that some credit unions may find as a better alternative than the ones they may be facing now.”

The idea of a network credit union received a shot in the arm before the conference when the NCUA's general counsel wrote that the key elements of the concept are permissible under the Federal Credit Union Act. According to the letter, a network credit union structure proposed by Hoosier Hills Credit Union President/CEO George McNichols is permissible under the Federal Credit Union Act and the NCUA's Chartering and Field of Membership Manual, among others. Hoosier Hills is based in Bedford, Ind., and has $434 million in assets.

According to the general counsel's letter, the proposed structure would allow a merged (non-surviving) credit union to become a part of a continuing (surviving) credit union, but would allow the merged credit union to continue to operate and serve its former members under the “merged credit union's name, a division of (the) continuing credit union.”

The idea of allowing a merged credit union to operate under the auspices of a surviving entity could keep the spirit of cooperatives thriving within the communities in which they operate, Metsger said, adding that when credit unions come together, especially small credit unions, local identities could potentially be lost through a merger.

“One of the advantages for this credit union that is looking for alternatives and does not want to lose its identity, is that under the network model, it could continue to operate under its own name, in terms of how it is visible to its own members,” Metsger said.

Credit unions that are very active in their communities may be able to retain their identities by perhaps still being able to contribute to their local communities in their own names, he added.

The NCUA's general counsel continued that the regulator permits credit unions to operate using more than one name, and explicitly allows identifying a portion of a credit union as a branch, unit or division of the same credit union. However, it cautioned that any credit union operating under more than one name must ensure its members understand they are dealing with one credit union rather than two different credit unions.

Additionally, the general counsel said the continuing credit union could appoint an advisory committee comprised of officials of the merged credit union to serve in an advisory role, as well as reserve one seat on its nominating committee for a representative of the merged credit union.

Metsger explained that this potential advisory role would be part of a pre-merger memorandum of understanding and hammered out by the merging credit unions. Any proposals to add an advisory committee or role would be decided upon by the merging entities and must have the approval of the NCUA prior to the merger.

In an evolving financial landscape, the network model allows for continued viability of credit unions in the midst of consolidation while giving all players a seat at the table, he noted.

The general counsel explained that the surviving institution would be permitted to appoint committees as necessary to perform specific functions, which includes appointing officials of the merged credit union to an advisory committee.

Since Metsger's announcement that the NCUA would work toward removing barriers for credit unions interested in the network credit union concept, some credit unions have already expressed an interest in the idea. Bill Myers, director of the NCUA Office of Small Credit Union Initiatives, said since Metsger's announcement, credit unions have called the office to ask for additional information on what he refers to as the kinder, gentler merger.

“We have been contacted by credit unions,” Myers said. “There are two pieces of interest: Credit unions looking at merging other credit unions as a growth strategy, and whether or not using this concept can make themselves more attractive to smaller credit unions that are concerned about being gobbled up.”

He said the network credit union concept may be a viable option for some smaller institutions heading toward a merger, whether it's forced or voluntary.

“Because of that concern, they often wait until it's too late for that decision,” he said. “They've waited until it's not just their voluntary decision. There's push by us and sometimes there's shove by us. If their financials fall to a certain point, they don't get to make that decision at all if we liquidate them and make the decision.”

The network credit union approach may give troubled credit unions the opportunity to weigh their options earlier and preserve part of what makes them valuable, he added.

Still, there may be another way to utilize this type of merger, according to Metsger. He explained that several credit unions could team up to hone their individual expertise.

“Part of their struggle is they all have to have a CEO and they all have to have an accountant or someone in IT,” he said. “By aggregating those resources, together they can reduce their overall costs on a per member basis and perhaps increase their viability in the marketplace. It's not something I think you're going to see all over the country happening all of a sudden. It is a challenge and there's going to have to be a real cooperative spirit that will supersede other things for these credit unions to decide it's in the best interest of their members.”

If credit unions do move their balls into the network credit union court, Metsger said the NCUA will make sure there will not be bureaucratic barriers that prevent them from putting that into place.

He added that the traditional “big fish, little fish” merger could change in the face of possibilities for multiple credit unions to join together and leverage their resources.

“If boards want to do this, they will find that at the NCUA, we would facilitate their opportunity to do so,” Metsger said. “It's important to know that if they are interested, we are not the barrier to it and we would be open to this option for some credit unions.”

However, as Metsger pointed out, entering a network credit union is only an option for SEG-based credit unions. The NCUA will discuss the network credit union concept during a March 9 webinar at 2 p.m. ET titled, “Mergers as a Growth Strategy.”

“The time to move from rhetoric to reality is now,” Metsger said. “Death of the small credit union does not have to be a pre-ordained conclusion.”