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  • Division of Banks

Decision  Decision of September 25, 2018

Date: 09/25/2018
Organization: Division of Banks
Location: Lawrence, Massachusetts
  • Petitioner: Merrimack Valley Federal Credit Union
  • Respondent: Division of Banks

Decision relative to the conversion of Merrimack Valley Federal Credit Union to a state charter

Table of Contents


Merrimack Valley Federal Credit Union (Merrimack Valley or Credit Union), Lawrence, Massachusetts, a federal credit union chartered by the National Credit Union Administration (NCUA), seeks to convert to a Massachusetts credit union charter under the name “Merrimack Valley Credit Union” pursuant to the provisions of Massachusetts General Laws chapter 171, section 80. In connection with the conversion, the Credit Union also seeks to designate its main office pursuant to Massachusetts General Laws chapter 171, section 8.

The Credit Union posted and published notice of the application as required by the Division of Banks (Division). The membership of the Credit Union has voted favorably on the conversion by more than the majority of members voting at a special membership meeting held on September 24, 2018.  The public comment period has expired and the Division did not receive any comments.


Merrimack Valley Federal Credit Union is a community credit union, whose membership includes the Merrimack Valley geographic area. This area includes parts of northern Massachusetts as well as southern New Hampshire.1 The Credit Union was originally chartered in 1955 as the Communications Workers Employee Credit Union. At that time, the Credit Union was established to serve the Union Local 1365. As of the date of the application, the Credit Union has over 49,000 members.

As of June 30, 2018, the Credit Union had assets of approximately $617 million and shares and deposits of approximately $542 million. The Credit Union offers a full array of deposit services and credit products to its members. Merrimack Valley provides both first and second home mortgages, personal loans, new and used automobile loans, home improvement loans, boat loans, as well as credit cards. The Credit Union also participates in Fannie Mae’s lending programs aimed toward assisting homebuyers by providing low down payment programs. In addition, Merrimack Valley offers business services, including commercial real estate loans. With regard to deposit products, Merrimack Valley offers free checking and savings accounts, free online banking, free mobile banking, bill pay, e-statement, as well as access to over 40,000 no-fee ATMS.

Merrimack Valley’s main office is located in Lawrence, Massachusetts and it serves its membership from six branch offices located in Lawrence, North Andover, Methuen, and Haverhill, Massachusetts, as well as Plaistow and Seabrook, New Hampshire.


The conversion of a federal credit union to a Massachusetts credit union charter is governed by Massachusetts General Laws chapter 171, section 80. The statute establishes the general framework under which a federal credit union may incorporate as a state-chartered credit union. See G. L. c. 171, § 80. Through the application and approval process, the Division has established additional regulatory criteria for the approval of charter conversions, for both credit unions and banks.  With regard to a credit union seeking to convert to a Massachusetts charter, these statutory requirements and criteria include determinations that: (1) the credit union is a well-capitalized, well-managed institution which is not in troubled condition; (2) the credit union is not converting in order to evade informal or formal remedial action by the NCUA, its federal chartering authority; (3) the credit union will be able to continue to serve its members’ deposit and credit needs as a state-chartered credit union; (4) the conversion will promote public convenience and advantage; (5) the conversion will not adversely affect competition among banking institutions; (6) the credit union will be able to meet its obligations and responsibilities under the Massachusetts Community Reinvestment Act (“CRA”); (7) the credit union’s membership has approved the conversion; (8) statutory lending and investment limitations are met or will be satisfied within a reasonable period; and (9) the credit union’s proposed charter and by-laws will comply with chapter 171 of the General Laws.

The Division’s review of the complete application demonstrates that Merrimack Valley meets the preceding requirements for conversion to a state-chartered credit union.

Merrimack Valley is a well-capitalized and well-managed credit union. As of June 30, 2018, the Credit Union had a net worth to total assets ratio of 10.61% and a return on average assets ratio of 0.76%. Its financial performance is strong and compares favorably with credit union peers. Publicly available financial data, as well as confidential supervisory information, confirm that the Credit Union has a strong balance sheet and earnings record.2

Merrimack Valley has also demonstrated that it has thoroughly considered the implications of converting to a state charter and has set forth its valid strategic and business reasons for seeking to convert. More specifically, it is not converting in order to evade supervisory action by the NCUA. The Credit Union’s application details its recent efforts to seek to expand its field of membership under its current charter. Based upon recent litigation impacting the scope of authorized field of membership expansions under federal regulation and creating uncertainty with regard to such expansions, the Credit Union has determined that the state charter will provide it with the ability to achieve its strategic goals and solidify its continued well-being.3 In particular, Merrimack Valley has indicated that the state charter provides the opportunity for sustained growth through the potential for an expanded field of membership and the ability to continue to achieve economies of scale. The Credit Union has also noted the ability to reach new members as important to fully achieving its purpose, particularly those individuals who may be unbanked or with limited access to financial services.

As previously noted by the Division, a charter conversion for the purpose of operating under a more favorable statutory or regulatory structure and climate is not an impermissible motive.The dual chartering system of the United States is in fact designed to promote charter innovation and flexibility.  In addition to permitting conversion to a federal charter, this “two-way street” allows state credit unions to convert to a federal charter where the institution believes that such conversion will be beneficial to the credit union.

The Division also reviewed the impact on competition among financial institutions, including both banks and credit unions, resulting from an approval of this conversion. The mere conversion from a federal to state charter will not directly impact competition. Merrimack Valley is currently a competitor in its market. Like any other Massachusetts chartered credit union, any field of membership expansion must be reviewed and approved by the Division in accordance with General Laws chapter 171, section 10. As such, the competitive effects of the conversion are neutral.

With respect to member benefits, the Division notes that the members of Merrimack Valley will directly benefit from the addition of excess deposit insurance from the Massachusetts Credit Union Share Insurance Corporation (MSIC), arrangements for which have been secured by Merrimack Valley upon conversion to a state charter.

The Division has also assessed whether Merrimack Valley will be able to comply with the Massachusetts CRA law. The corresponding federal Community Reinvestment Act does not apply to federal credit unions, and as such, Merrimack Valley has never been subject to CRA requirements. As part of its conversion application, Merrimack Valley has submitted its Community Reinvestment Act Policy. While not currently subject to CRA requirements, the Credit Union has communicated to the Division that it currently tracks data for purposes of compliance with CRA and that it expects to be in full compliance with Massachusetts CRA requirements. In addition, as noted, the Division conducted an onsite visitation at the Credit Union following submission of its conversion application. The Division believes that the foregoing supports approval of the conversion application.

The Division also concludes that Merrimack Valley has satisfied the remaining statutory criteria for approval of the proposed conversion. The Credit Union membership voted to approve the conversion; the Credit Union does not have any non-conforming assets or investments; and, its proposed charter and by-laws will comply with Chapter 171 of the General Laws.5 Lastly, as noted, Merrimack Valley has made satisfactory arrangements with MSIC for insurance of its excess deposits upon conversion to a state charter.

Based upon Merrimack Valley’s application and the full record before the Division, approval is hereby granted pursuant to Section 80 of Chapter 171 of the General Laws for the Credit Union to convert to a Massachusetts charter under the name “Merrimack Valley Credit Union” and to maintain and operate all existing banking offices under the provisions of Chapter 171 of the General Laws, with its  Lawrence office located at 500 Merrimack Street as its main office pursuant to Section 8 of Chapter 171.

The approvals granted herein are subject to the following conditions:

  1. That the Credit Union’s final by-laws and amended and restated charter are filed with, and approved by, the Division, and that said amended charter is also filed with the Secretary of State;
  2. That the Credit Union obtain confirmation of the continuation of insurance of its shares and deposits from the NCUA;
  3. That the Credit Union obtain and maintain full insurance of all share and deposit accounts as required under Section 30 of Chapter 171 of the General Laws; and
  4. That the proposed charter conversion be completed within six months of the date of this Decision unless otherwise extended for cause.


Terence A. McGinnis, Commissioner of Banks

September 25, 2018

  1. Merrimack Valley’s current field of membership includes those who reside, work, or attend school in certain municipalities in northern Essex County, Massachusetts, southern Rockingham County, New Hampshire, and three municipalities in northern Middlesex County, as well as immediate family members of such persons, and members and volunteers of religious, civic or charitable organizations having their principal place of business within the identified municipalities.
  2. Following receipt of the application to convert to a state charter, the Division conducted an onsite visitation at the Credit Union.
  3. See Am. Bankers Ass’n v. NCUA, 306 F. Supp. 3d 44 (2018).
  4. See Decision Relative to the Conversion of Massachusetts Federal Credit Union, Braintree, Massachusetts, to Convert to a State Charter, (August 8, 1997) at 7.
  5. The Division reviewed the Credit Union’s proposed by-laws for conformity with General Laws chapter 171. Minor revisions were incorporated as part of the application review process.

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