Two West Coast credit unions have decided to go ahead with the industry's largest merger despite the third partner's decision to drop out.

Patelco Credit Union and First Technology Federal Credit Union will file an application with the National Credit Union Administration by Friday.

In the past two weeks, the boards of both credit unions approved the merger, said Thomas Sargent, president of Beaverton, Ore.-based First Technology. But the marriage still needs the blessing of the NCUA, which has already voiced some concerns.

When the merger was announced last August it included the ailing Seattle Telco Federal Credit Union. But last month the $242 million-asset institution pulled out, citing the NCUA's delays in approving the transaction.

The regulator has raised concerns that such a large combination could hurt smaller credit unions or possibly tarnish the industry's image.

First Technology and San Francisco-based Patelco had contemplated bringing in a partner to replace Seattle Telco, but none was immediately found and they didn't want to take the time to search for one, Mr. Sargent said.

If the regulator allows Patelco and First Technology to combine, the new entity would consider taking on merger partners, he added.

A merger between Patelco and First Technology still would be the largest in the industry's history, creating a $1.2 billion-asset institution. The new entity would be the country's 10th-largest credit union.

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