SAN DIEGO — Although a proposed merger between California Coast Credit Union and San Diego County Credit Union has escalated into a high-stakes legal battle, with both sides offering sharply different accounts of what led to the deal’s collapse and whether it should be revived, the CEO of one of the credit unions involved insists that despite what’s been alleged in the back-and-forth legal filings, there is “no bad blood” and he believes the merger remains in the best interests of everyone and should proceed.
The two credit unions had initially announced plans to combine and create a $13.6-billion institution before the $3.3-billion California Coast Credit Union sued the $9.2-billion San Diego County Credit Union in California Superior Court, alleging SDCCU improperly terminated an agreement to merge the two San Diego-based cooperatives.
As the CU Daily reported earlier, San Diego County CU has responded by saying it has sought to end its proposed merger with California Coast Credit Union after NCUA raised concerns about the combination and after determining that alleged compliance risks and cultural deficiencies at Cal Coast posed unacceptable threats to members, according to an 18-page sworn declaration filed Feb. 5 in San Diego Superior Court.
Cal Coast then filed its motion before Judge Carolyn M. Caietti seeking the injunction to force SDCCU to proceed.
Dispute Centers on Injunction Request
In recent court filings, San Diego County Credit Union outlined multiple reasons a judge should deny a request for an injunction that would force the merger to move forward.
Among its arguments, SDCCU contends:
- The merger agreement does not justify court intervention compelling completion of the deal
- Alleged issues uncovered during the process raised concerns about risk and operations
- Forcing the merger could harm members and the institution
Cal Coast, however, maintains that SDCCU is attempting to walk away from a binding agreement without sufficient cause.
The CU Daily’s most recent coverage can be found here, here and here.
Now, as the case moves through the courts, Cal Coast is seeking to enforce the agreement, while SDCCU is urging a judge to deny an injunction that would compel the merger to proceed.
A Deal Built on ‘Optimism’ and Complementary Strengths
In an extensive interview with The CU Daily, Cal Coast CEO Todd Lane described a process that began with “a lot of excitement and optimism” about combining two institutions deeply rooted in the San Diego region.
“We’re actually almost at the two-year mark since we first had the discussion,” Lane said, noting that early conversations centered on how the organizations complemented each other.
Although SDCCU was the larger institution, Lane said both sides approached the transaction as a partnership. Cal Coast brought a strong local brand, expanding reach into Orange County, and a long-standing commitment to community engagement through its Cal Coast Cares Foundation. “We just celebrated its 10th anniversary. That foundation is tightly integrated with the community work we do, so it’s really both the credit union and the foundation partnering on initiatives in the region,” he said.
SDCCU, in turn, contributed scale, strong capital, and experience operating as a Tier 1 institution with more than $10 billion in assets, he said.
One unique aspect of the combination, Lane said, was the institutions’ respective public-sector relationships: Cal Coast serves as the financial partner for the City of San Diego, while SDCCU serves San Diego County.
“Between the two institutions, you essentially have both the city and the county covered,” he said, adding, “Finally, for us, a key factor was our conservative balance sheet management. That word—conservative—comes up often. We have strong financial results, strong capital, and solid margins. We also have strong leadership, which contributed to the original optimism and excitement around the merger.
“All of those factors remain true today. They have not changed, and they continue to benefit both Cal Coast and SDCCU members. That’s why I’m often asked why Cal Coast is still fighting for this partnership. It’s because those benefits—to members, the community, and our staff—still exist. I think sometimes that focus has been lost,” Lane said.
Due Diligence and Integration Planning
Lane, who was to become CEO of the merged credit union under the original merger agreement, emphasized that the merger followed standard industry practices, including extensive due diligence conducted by independent firms retained by both organizations.
Each credit union reviewed the other’s regulatory examination reports in controlled settings with legal counsel present, and both received what Lane described as a “clean bill of health.”
The institutions then moved into integration planning, hiring Cornerstone Advisors and establishing a governance structure that included an Integration Steering Committee and approximately 20 operational workstreams.
Each team was co-led by executives from both organizations, reflecting what Lane described as a collaborative approach to decision-making.
“We identified differences in systems, processes and risk tolerances, which is normal in any merger,” he said.
The planning phase concluded on schedule, with a targeted completion date of Sept. 30, 2025, he added.
“The merger was constructed in good faith and had full support from both credit unions, including our board of directors. The boards were involved from the very beginning, each forming merger subcommittees that met regularly with leadership and with each other,” Lane said. “I would characterize the process as consistent with other mergers. I’ve been through mergers before—this is my third at Cal Coast—and this followed standard industry practices.”
Termination Letter Sparks Dispute
According to Lane, the process entered its regulatory phase shortly thereafter, involving the National Credit Union Administration and California’s Department of Financial Protection and Innovation. Because SDCCU’s charter was designated as the surviving charter, regulators focused their review on SDCCU.
Lane said that review began in mid-October and concluded in early November. Days later, on Nov. 14, SDCCU notified Cal Coast it was terminating the merger.
“This was both surprising and disappointing,” Lane said.
Competing Legal Narratives
In court filings, SDCCU has argued that the merger should not be forced to proceed, citing concerns related to risk, operations and governance. Cal Coast has countered that SDCCU is attempting to exit a binding agreement without sufficient justification.
Lane alleged SDCCU “manufactured” a liquidity crisis to support its decision and pointing to executive compensation as a potential factor.
Regulatory Questions Add Complexity
Lane acknowledged that regulators have played a role in delaying the transaction but said no final decision has been issued. “They’ve deferred their decision and requested additional documentation,” he said, referring to NCUA.
He said Cal Coast has not had direct interaction with regulators during the review process, given that SDCCU’s charter would survive the merger.
“All integration planning is complete, and the documentation exists,” Lane added.
Disputes Over Risk and Compliance
A key issue in the litigation involves SDCCU’s concerns about Cal Coast’s risk profile and certain business practices. Lane strongly rejected those characterizations, emphasizing a long-standing culture of compliance and oversight at Cal Coast.
“I’ve been at Cal Coast for 17 years, and this organization has always placed a strong emphasis on compliance, safety and soundness,” he said.
He pointed to regular examinations by NCUA and state regulators, as well as internal audit functions that report directly to the supervisory committee.
Some of the issues raised, he said, relate to legacy practices or financial inclusion initiatives, including small-dollar lending programs aimed at underserved communities such as Logan Heights in San Diego.
Those programs, including participation in the Q Cash platform used by hundreds of credit unions, were implemented with “full awareness of the risks” and appropriate controls, he said. Q Cash is offered through Alloya Corporate Credit Union.
“We also provided bilingual services—offering materials in both English and Spanish—while ensuring that all legal documents remained in English. These decisions were made carefully, with legal guidance and risk mitigation,” Lane said. “This reflects our culture: thoughtful, intentional, and member-focused. We are fully compliant with all rules and regulations, and any suggestion otherwise is simply incorrect.
Governance and Culture Questions
Lane also addressed allegations raised in legal filings regarding governance and leadership style, including claims that he described himself as a “dictator” as alleged in an SDCCU filing.
“That never happened,” Lane said, explaining that the merger governance structure was designed to ensure collaboration between the two organizations.
The Integration Steering Committee included nine members, with Cal Coast holding a 5-4 advantage, and Lane said there were some initial concerns raised that Cal Coast would be able to outvote SDDCU on any disagreements. But Lane said he and SDCCU CEO Teresa Campbell had agreed to take any such disagreements off-line and settle them themselves, and that the makeup of the committee has not been an issue.
“Out of hundreds of decisions, we only had to use that approach once,” he said.
Why Cal Coast Still Wants the Deal
Despite the legal battle, Lane said Cal Coast continues to support completing the merger, arguing that the underlying strategic rationale remains intact. “Nothing has changed,” he said.
Among the anticipated benefits cited:
- Increased scale and efficiency
- Expanded branch access, with a combined footprint of roughly 65 locations
- Potential for improved pricing on loans, deposits and fees
Lane also said the Cal Coast board remains aligned in their support for the transaction and believes it would better serve members over the long term.
Asked by the CU Daily why he remains enthusiastic about the merger even though San Diego County CU is not, indicating a potential clash of cultures, Lane said he remains positive because of “all the benefits we discussed earlier still exist. Nothing has changed. There’s been a suggestion of bad blood or animosity, but that doesn’t exist on our side. We know their team well and respect them. Some of the narrative may be driven by the legal process, but that’s not reflective of how the organizations truly interact.”
Looking Ahead
The outcome of the case will determine whether the merger proceeds or the two institutions go their separate ways.
If the deal is ultimately abandoned, Lane said Cal Coast is well-positioned to continue independently.
“We will continue to perform well. Our brand is strong, and member support remains high,” he said.
Still, he emphasized that Cal Coast believes the combined organization would offer greater opportunities.
“We believe we can do even better together,” Lane said.
