California Coast Credit Union is joining forces again, this time with Financial 21 Community Credit Union, just a few weeks after completing a merger with First Future Credit Union , which was touted as the largest merger of credit unions with at least $500 million in assets in the nation’s history.
Gene Roberts, chief executive at Financial 21, says the main factors behind the merger with California Coast, now at $1.8 billion in assets, are to expand the branch network and provide better services to its 11,500 members.
“Our members will see at least 20 more branches by merging with California Coast,” Roberts said. It now has five branches.
Financial 21 has $132 million in assets and is ranked 13th in the most recent Business Journal list of largest credit unions in the county.
Following its merger with First Future in June, California Coast became the second largest in the county, with $1.8 billion in assets and 25 branches. Top-ranked San Diego County Credit Union has $4.2 billion in assets and 22 branches.
Roberts, who turns 65 in January, says his retirement was a consideration.
Assuming the transaction is blessed by federal and state regulators, the target date for the merger’s completion is Dec. 15, but the computer conversion may not be completed until late in the first quarter, Roberts says.
Talks between Cal Coast and Financial 21 actually began last fall when Cal Coast’s former chief executive, Jim McPheters, approached Roberts.
McPheters announced his retirement earlier this year but remained on board until the merger with First Future was completed.
While Financial 21 was doing research on Cal Coast, the latter agreed to merge with First Future in January, and announced the deal March 28.
The merger was completed in June, but converting the two computer systems wasn’t completed until Labor Day weekend.
California Coast Chief Executive Officer Marla Shepard says plans to assimilate Financial 21 were made about the same time the plans to merge with First Future were going on.
“Basically, I knew (Financial 21) wanted to merge, and that we’d do that as quickly as feasible after we did our merger,” she said.
Shepard wasn’t sure whether all of Financial 21’s branches would be retained, but all 47 of its employees would be.
Roberts says that after obtaining approvals from the National Credit Union Association and the state Department of Financial Institutions, expected in about two weeks, the transaction must be approved by Financial 21’s members.
Given what he’s already heard, Roberts expects a better than 90 percent favorable vote from members.
“Every survey that we’ve done over the years asking our members what they would like always comes back the same. About 99.9 percent say they want more branches,” he said. “People still like the branches even if they go in once a month. They like to know it’s convenient, if they have a problem or a question.”
70 Years And Counting
Founded in 1937, Financial 21 was originally named San Diego Gas & Electric Federal Credit Union and served only employees for the utility.
The name was later changed to Gasco Credit Union, and then in 1999 to Financial 21.
In addition to its headquarters branch on Fourth Avenue, Financial 21 has branches in Kearny Mesa, Chula Vista, El Cajon and San Marcos.
Unlike many of the large investment banks and major lenders that have been burned by the subprime mortgage crisis, Financial 21 didn’t make subprime loans, but it has been affected, as most lenders have, by the related problems, Roberts says.
“We may have a second trust deed, or a home equity loan that’s behind the subprime loan. If that goes south, then it trickles down to us,” he said. “Our delinquency rate is about 1 percent as of the end of August, which isn’t too bad.”
Joe Schroeder, chief executive at San Diego Metropolitan Credit Union, with about $300 million in assets, says credit union mergers have become more common in recent years as the cost of competing with larger institutions rises, particularly for smaller organizations.
“Credit union mergers have been averaging about 300 a year, with most involving smaller credit unions between $5 million and $10 million in assets,” said Schroeder. “It’s tougher for the smaller credit unions, keeping in compliance, meeting regulatory and service demands. Plus, San Diego is a tough market. It’s one of the most competitive credit union markets in the United States.”