Coulee Dam Federal Credit Union is seeking approval of regulators to merge with Spokane-based STCU, a joining that would rebrand the local institution but retain jobs and offer more services, both credit unions say.

The move, approved by both institutions' boards of directors in December, will require the approval of state and federal regulators - and a majority of CDFCU's members.

It's a change following dominant industry patterns, as smaller banks and credit unions find it increasingly challenging to navigate the requirements of the changing marketplace, tighter regulations and an accelerated shift to digital operations.

CDFCU Chief Executive Officer Colleen Manley thinks it's a move that makes a lot of sense for their members.

"I think members will see the benefits, too," she said, adding that they will be getting information on the proposed merger and STCU's services in the near future.

In the industry for 44 years, Manley said it's seen a host of changes since the Great Recession in 2008, which happened just as she took the helm at the credit union and the world of financed reeled.

Increasing complexity hit big banks, which saw their own era of mergers and acquisitions, but smaller institutions are also feeling the need to keep an open mind on what's best for their customers and members.

Manley said the subject of merging with another credit union has come up in board discussion occasionally over the years but never at what seemed like the right time. "It really escalated in 2020," she said.

It was a tough year. CDFCU now operates five branches, having closed its Almira and Bridgeport branches. It reduced staffing from 54 down to 45, not replacing employees who left for work elsewhere or retired, she said.

Manley who joined the credit union in 1979, had to steady her voice before adding that she had imagined she would eventually hand the reigns someday to a new CEO, not to a merger in the year of her beloved institution's 80th anniversary.

After noting that CDFCU stopped offering its own mortgage service in 2018 due to the increased complexity, Manley said STCU would be able to offer more services to members and upward mobility to employees. She said that like CDFCU, the non-profit STCU has grown with a commitment to serve members and their communities.

CDFCU originally served U.S. Bureau of Reclamation employees at Grand Coulee Dam in 1941. STCU started in 1934 to serve schoolteachers during the Great Depression.

Both credit unions are deeply involved in their communities, including serving leadership positions in chambers of commerce and other community organizations, support for a host of non-profits, and promoting employee volunteerism, a statement from STCU points out.

Both credit unions are financially sound, but CDFCU has $180 million in assets serving 14,000 members through branches in five communities. STCU has $4.1 billion in assets, with branches over much of Eastern Washington and North Idaho. It has more than 210,000 members and 29 locations.

"As we talked with the team at CDFCU, it became apparent that our credit unions are a natural match for a friendly, beneficial merger," said Ezra Eckhardt, STCU president and CEO. "We're excited to bring these teams together for the good of credit union members and the communities we serve."

STCU has 3,000 members in Okanogan, Douglas, Ferry and Lincoln counties. And in December it converted several Umpqua Bank branches in Medical Lake, Ritzville, Coulee City and Othello, adding another 5,000 members.

Industry analysts expect operating margins to get tighter after Covid, part of what may drive mergers even more than usual this year.

"The trend of looking for larger market share and trying to gain new members is going to be part of the pressures that are seen in community organizations like credit unions," Elizabeth Kim, head of market intelligence at SS&C Intralinks told American Banker last week. "In order to just survive, they need to combine a lot of operational assets [and] operational know-how."

The merger is subject to approval by the National Credit Union Administration and the Washington State Department of Financial Institutions.

STCU and CDFCU hope to complete the merger in late summer or fall.