Despite news of foreclosures, credit union layoffs and NCUA intervention, both merger candidates are reporting solid financials to regulators. In fact, according to NCUA 5300 and financial performance reports as of Dec. 31, 2007, First Future has a 10.68% net worth ratio, delinquencies of less than 1%, and a 0.54 return on assets.

California Coast maintains a leaner 8.58% net worth and has a 97% loan-to-share ratio. During 2007, the credit union experienced some balance sheet challenges like many California credit unions. Delinquencies skyrocketed as ROA took a nosedive. However, Cal Coast still ended the year well in the black and didn't post large increases in fourth quarter loan loss provisions like many of its Left Coast peers.

So, why merge?

"What we were experiencing was a lack of new member and savings growth," Shepard said. "In order to serve members and provide best products and services possible, you need to have size and efficiency. We weren't satisfied with staying the same size and struggling for growth."

First Future decided to pursue a merger partner at its board planning session this past October after considering it for years. Shepard pushed for serious discussion about what the board would be willing to give up in order to make a merger happen.

"That's when we agreed that the name would be something we'd be willing to give up for the right merger. I said, 'Well, now we have something to talk about,'" she said.

San Diego is a competitive credit union market. The combined $1.85 billion credit union still won't be San Diego's largest–that title belongs to the $4 billion San Diego County Credit Union. And the county's largest employer, the military, brings with it several established and sticky financial services cooperatives like mammoth Navy Federal and locals USA Federal, Pacific Marine and North Island, which all have at least $500 million in assets each.

"The savings gained through efficiencies are in the millions of dollar within one year," Shepard said. "Think about it, you only have one data processor, one check processor, one accounting firm, one headquarters building, one board planning session–the savings are really significant."

Shepard said California Coast was first on her list of potential merger partners, thanks to, among other things, a 20-year history of shared ventures between the two institutions.

"We've shared branches together, deployed ATMs together and implemented other partnerships, so we have a good track record of working together," McPheters said. The retiring CEO said the two credit unions have worked side-by-side throughout the process, and volunteers and senior managers have already met together several times.

In addition to the usual economies of scale and gains in brick and mortar, Shepard said Cal Coast's member and employee satisfaction ratings, as well as service philosophy, was an easy sell to her board. And, McPheters' retirement meant no political jostling for the post-merger CEO position.

All employees will be retained, though Shepard said she's counting on an industry average 20% annualized attrition rate to slim down departments that overlap. Shepard said her staff literally applauded when they were told they would move from their cramped headquarters into California Coast's roomy new administrative headquarters, which is also more freeway-friendly.

The new board will have 11 seats, with six volunteers from California Coast and five from First Future.

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