A Bold Vision: 10 Years Ahead of Their Time

Imagine three credit union CEOs with a bold vision for their future. By combining the resources of their thriving institutions, they will deploy huge leaps in member value. Routine? Today maybe. Not in 1994.


10 Years Ahead of Their Time

Imagine three credit union CEOs with a bold vision for their future. By combining the resources of their thriving institutions, in particular through the deployment of technology, they will make leaps in member value.

Today, a merger such as this might be viewed as routine. In 1994, it was visionary.

In the end, NCUA held public hearings and refused to sanction the merger. Below, Ed Callahan, former CEO of Patelco, outlines his rationale for the merger in an article he wrote for the July 2004 edition of the Callahan Credit Union Report.

A Metamorphosis, Not a Merger

By Ed Callahan

My credit union, which is Patelco CU, and two others – First Technology FCU, which is based in Oregon , and Seattle Telco FCU – have been talking about combining into one credit union. The new credit union – yet to be approved by regulators and yet to be named – would be one of the ten largest credit unions in the country.

The three boards and managements have been discussing a possible combination since March. It would be the first of its kind of such a magnitude. Needless to say, we are very excited about it. The newer, larger credit union would be a boon to all three memberships, and that is what working in the credit union movement is all about.

Not a Classic Merger

Something I want to say from the beginning is that this is not a “merger” of the classic business sort. We've all seen too many stories in the press about corporations that merge in order to make a new, “stronger” corporation. Invariably, such mergers are accompanied by massive layoffs of persons who have worked years, even their whole working lives, for those corporations. Plants close, whole communities are disrupted all for the “good” of the new corporation.

Press releases about such mergers often even seem exceptionally proud of the jobs they report will be eliminated and the write-offs that will “be put behind them.” In most corporate mergers “someone pays.” But that's not what this new work is all about.

Corporate mergers are for the benefit of stockholders. They are meant to increase the return on assets or some other financial ratio. That's not what this is all about.

When Security Pacific Bank merged with Bank of America a couple of years ago, people were laid off, branches were closed and customers disrupted. Because stockholders are considered first and customers last. Again, that's not what this is all about.

Not one person would lose a job in this new credit union. Not one branch will close. And the winners are the people who do their financial business with these credit unions, because we put them first.

That's why I don't want this new work to be thought of as a classic merger. Rather it is three credit unions undergoing a metamorphosis. They fold like a caterpillar into a chrysalis, and they emerge a butterfly. Bigger. Better. More agile. More flexible. Better prepared for the future. Let me explain.


As I said, we put the members first. Member benefit is our touchstone for proceeding. We feel that geographic diversity is going to help our memberships. Each of the three credit unions is now confined to a single state. The new credit union will span the entire Pacific coast.

The new credit union will have a diversity of sponsors and approaches to financial delivery services. We feel that the sponsor companies of the three credit unions have much in common but also much that is beneficially different. There are, within the sponsors, telephone utility companies as well as entrepreneurial, develop-the-technology-fast companies.

That brings us to technology and approach to delivery of services. First Technology has a national reputation for leading-edge skills in high-tech delivery to members. Already about a fifth of its members are doing some form of “home banking” by using their personal computers to make transactions. And soon First Technology will be offering “smart phones.”

Patelco and Seattle Telco are not so close to the cutting edge as First Technology, but Patelco in particular prides itself on a delivery system that offers nation-leading rates and a branch network that is second to none it convenience. Combine that with the flare of First Technology for innovation service and you have an unbeatable combination for the future. In fact, we expect the new credit union to show very healthy internal growth.

Less directly beneficial to the members will be the increased size of the credit union. Aside from the normal economies of scale to be achieved, the new credit union will have more clout, more presence, and greater ability to make strategic alliances. All of these attributes are going to lead to better financial service for members.

Not a Classic Merger: Part Two

All of the above advantages were thought out by putting the membership first. That's reason enough for not being companies with a merger in corporate America . But there are others. First, providing we can really launch this new credit union, we are going to save the best of our small, regional selves within the larger body; there is going to be no “distracting” from the member. For example, we are not going to designate a single “headquarters.” There will be no “one boss.” Rather we would run the new credit union as a team. There would be a CEO for manual delivery services and one for automated delivery services.

In addition, we plan for each of the forming credit unions to keep its logo for purposes of newsletters and local marketing; we do not intend to lose the goodwill and name recognition that we have spent years building.

Again, in a traditional merger there are usually losers; here we see none, only benefits.

A Wake-Up Call

All of the above would be reason enough to combine the talents and technologies of the three credit unions. But there is more. It comes from the heart of the credit union movement.

We know that if we do not serve members, they will be snared away by banks or other for-profit corporations. We know competition is heating up and that in the future it is going to get even hotter.

So we are jumping out front. We are combining our talents, and skills and technologies in order to deliver to our members the very best that people and technologies can offer.

Someone – some bank – is going to be out there trying to do it first. We are determined no only to be the first with the kinds of delivery systems and convenience we know credit union people want, but to be the best. That's in the tradition of the credit union movement. That's in the tradition of cooperating, of helping others and making sure that the average people have equal access to the best financial services of the age.

We thought about our members first. That is what has guided us to this point. Keeping their best interests at heart will take us to the next step and beyond.

Patelco Dec-94 Dec-04
Assets $991,634,729 3,506,140,590
Loans $686,555,176 2,226,881,236
Members 110,055 204,521
First Technology Dec-94 Dec-04
Assets $264,120,395 1,453,859,007
Loans $158,359,886 824,434,217
Members 47,747 133,990
Seattle Telco Dec-94 Dec-04
Assets $168,075,348 445,024,662
Loans $142,487,871 392,442,653
Members 39,405 71,134



Feb. 28, 2005


  • i appreciate your trying to remain true to the credit union business model. historically, triumvirates coalesce into unified structures. even if you operate as three strategic business units, people will want someone 'in charge', and that will lead to another top layer of management. what can you do as partners or joint ventures without merging?
  • The writer's thoughtful presentation of facts and arguments was convincing. However, some CU members may oppose CU mergers based on the fear that the bona fide long term plan is for the newly-merged CU, with its richer asset base, to then proceed to a management-coordinated CU-to-bank conversion. Recent publicity about member opposition to CU-to-bank conversions may reinforce members' resistance to CU mergers with other CUs.
  • Using this rationale, we should merge every CU in the country into one large CU. It would certainly "benefit" the members. They could walk into any CU and do their business. PATELCO has been a maverick for years and I do not hold them up as the model for anything. From their near disaster with indirect lending to their fight over share insurance, they have success in spite of themselves.