And so, even though the two corporates continued to work together to create a proposal that might gain approval from Tennessee and federal regulators, Veach and his volunteers also made their daily decisions with the strong possibility of a denial in mind. That meant continuing to roll out new products and services, upgrading some crucial yet potentially redundant systems, and preparing a Plan B to upgrade the rest should the merger not go through.

Last October, the merger request was denied for good.

"When the merger didn't go through, we had to gather our wagons and really focus on our members," Veach said. "We spent a lot of time out with our members, talking to them, seeing what their needs were and discussing how they felt about us."

Sandy Swofford, senior vice president of marketing and business development, said communication with members was a top priority throughout the merger attempt. During the initial pitch, for example, both VolCorp and WesCorp leaders drove the length of Tennessee, east to west, staging town hall meetings with members along the way.

"We're high touch, and we felt it was important to communicate to our members in person," Swofford said. "I hate to sound trite, but it really does go back to caring about our members, which guides all our decisions. And I think it was the most important factor in not suffering any major setbacks [after the merger denial]."

VolCorp management and staff also focused on improving internal operations, so members wouldn't seek the merger promises of better rates and services.

For Veach, the challenge to provide better service without added economy of scale was personal. After all, he was chief financial officer at the time of the original merger proposal, and VolCorp's primary reason for merging was to offer better rates to members. Those not-good-enough rates were coming out of his office.

And, Veach doesn't even personally believe in economy of scale.

"I don't know about economies of scale, if that ever works," Veach said. "I spent several years in banking and have been through several mergers, and economy of scale is always brought up as a reason for merging; but in practice, I've never seen it."

Veach said if post-merger institutions are compared to the two previously separate entities, frequently, there is little, if any, benefit to members or customers. Banks are guiltier than credit unions when it comes to broken merger promises, he said, but even nonprofit institutions tend to overlook increased costs associated with a larger institution.

"To me–and this is personal, based on my experience–economy of scale logically makes sense," Veach said. "But when you follow up after the fact and see if members or bank customers have really seen any benefit, whether it's lower loan rates, lower fees or higher deposits, it's hard to see it."

Instead, Veach preaches improved management and efficiencies.

VolCorp revisited its strategy and decided to focus on rates, striving to offer the best rates among the corporates. Specifically, VolCorp seeks to match or beat WesCorp's rates whenever possible. Despite the 30-to-1 size ratio, a quick online rate check confirms VolCorp is doing just that. VolCorp even paid 4.0% on membership capital accounts during the second quarter.

Veach insisted the improved rates are the result of efficiencies and management priorities, and members didn't lose any products or services as a result.

Swofford agreed.

"Rick completely reorganized us," she said. "He had worked with all of us and knew our strengths and weaknesses and did a great job of putting everybody in the right place." VolCorp also kept turnover low, though Veach said it was difficult, given the stress of uncertainty.

"WesCorp was here several times reassuring employees that they wanted everyone and made it very attractive to stay, which was probably the most important reason we had so little turnover," he said. "Plus, we were doing special things here to keep everyone happy, special events to keep morale up, things like that."

When the merger was ultimately denied, Veach said employees were a little disappointed but also a little pleased that the corporate would remain independent. Members reacted the same way, he said.

"They were totally sold on merger and voted twice overwhelmingly to approve it," Veach said. "I think they sort of had mixed emotions, just like our employees. They were disappointed because they were looking forward to a payout and especially liked that this office would be retained, and they would work with the same people out of Nashville as before the merger."

When all is said and done, nearly one year after receiving the final denial, Veach said he has no regrets. WesCorp would have made a fine merger partner, Veach said; in fact, VolCorp has adopted some of WesCorp's strategies to its members' advantage.

"Oh, I'll admit it, we went to school on WesCorp," Veach said with a laugh. "They really helped us improve what were doing here, and we continue to have good relationships with them.

"But at the same time, when the merger was turned down, we rededicated ourselves to our members and have worked hard to eliminate any reason they would have to go to another corporate. We've worked hard at that, and we're very proud to say we didn't lose a single one."

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