Three West Coast credit unions are heading toward the biggest merger in the industry's history.

If the federal regulator gives the nod, San Francisco-based Patelco Credit Union, Seattle Telco Federal Credit Union, and First Technology Federal Credit Union, Beaverton, Ore., will combine to create a $1.4 billion-asset institution with nearly 200,000 customers.

Edgar Callahan, president of $906 million-asset Patelco, said the merger application would be submitted to the National Credit Union Administration next week.

James Baylen, deputy director of the. NCUA's West Coast region, said he saw no reason why the merger wouldn't go through, based on a cursory review of the institutions' financial statements.

The credit unions are merging to make an attractive partner for software and telecommunications companies designing high-tech delivery systems, said Mr. Callahan and Thomas Sargent, president of First Technology.

"We're really trying to position ourselves so we can look for alliances with big players on the information superhighway," Mr. Callahan said.

The institution's size and West Coast concentration should make it an attractive partner, Mr. Sargent said.

First Technology, with $239 million of assets, already makes extensive use of technology. About 8,000 of its 45,000 customers use bank-at-home programs on their personal computers, and many also use its automated bill-payment system, Mr. Sargent said.

Sophisticated Customer Base

Those services will be made available to the other credit unions in the merger. First Technology's customer base comprises employees of 200 high-tech firms, including Microsoft and Intel.

Talks of merging arose in March, when the two executives were discussing how to forge partnerships with software and telecommunications companies.

The idea of bringing in Seattle Telco, chiefly to beef up the customer base, came later.

At the time, $239 million-asset Seattle Telco was in trouble.

In 1993, it lost $5.2 million after closing a mortgage subsidiary, and in the first quarter of 1994 it suffered investment losses related to rising interest rates, said Mr. Baylen.

Capital Problems

As of June 30, the credit union's capital-to-assets ratio stood at 4.24%, less than half the industry average.

The credit union also has been without a chief executive since early this year.

"It's hard to say if they'd be interested in the merger if [the group] hadn't run into capital problems," Mr. Sargent said. Both he and NCUA's Mr. Baylen said the other two merging credit unions had sufficient capital to offset Seattle Telco's deficiency.

In a statement, credit union chairman Dick Geving said the merger would provide better service for the group's members and position it for the future.

Layoffs to Be Avoided

No employees will be cut, said Mr. Callahan, who made a name for himself by slashing staff and budgets when he was NCUA chairman in the early 1980s. But there will be restructuring.

"We're not going to have three accounting departments," he said. "Someone who's an accountant one day might find himself a branch manager the next."

No name has been chosen for the new entity. Mr. Callahan said it would be "something like Pacific Technology Federal Credit Union." But each credit union will retain its name locally.

Both Mr. Callahan and Mr. Sargent will be chief executive officers, with Mr. Callahan in charge of nonautomated services and Mr. Sargent in charge of automated services.

Talks Spur Some Jitters

Largely due to Mr. Callahan's success at Patelco -- he has built the credit union from $280 million of assets since taking the reins in 1987 -- the merger talks have given some West Coast credit unions the jitters, sources said.

This is particularly true of some telephone-employee credit unions, who worry about potential customer overlaps.

Both Patelco and Seattle Telco serve telephone company employees.

Mr. Callahan shrugged off the concerns.

"Anytime something new happens people get shaken up," he said.

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