"People have asked us, how did you guys do that?" Leusink said. "The answer is, anytime you enter that type of discussion, you have to check your ego at the door. It was about developing trust quickly with an exceptionally high level of candor."

Leusink said that he and Kempf went to great lengths to try to identify who would be the CEO of the surviving organization, 4Front Credit Union.

"The comical part is that we hired professionals who did testing and interviews, and they came back and said that we were both well fit for the position with different skill sets and management styles, but neither would cause [the credit union] harm," Leusink chuckled. "Well, thanks a lot."

After the executive evaluation was complete, Leusink landed the CEO job and Kempf was named president.

"How did I get the CEO position? Because I'm about 10 years older," he admitted. "I had spent more time in the industry, more time in the saddle as CEO of an organization, and those were the determining factors."

The next step required Leusink and Kempf, along with the HR directors and the board of directors from the credit unions, to review the management teams' skill sets to decide on the executive vice presidents and other positions for the merged credit union.

"You have to be committed to having those really awkward and difficult discussions," Leusink said. "We made some really difficult decisions in some cases. In the process we had two leadership positions that included folks who were offered the opportunity to leave the organization who were displaced by the merger and treated fairly along the way."

The new management team then spent months reviewing a matrix spreadsheet of more than 3,000 operational components, including every process and policy, to operate the merged credit union.

"By addressing the 3,000 different components of the organization, the management team, with assistance from the board of directors, came to a consensus of what was in the best interests of our members," he said. "We didn't attempt to preserve anything from both credit unions. Sometimes we migrated to a best practice that neither of us did, so it was a great way to rid ourselves of any baggage."

Michael N. Lussier, president/CEO of the $831 Webster First Federal Credit Union in Worcester, Mass., often jokes about writing a book on credit union consolidations after he retires.

"I've done 16 mergers so far here in my career, and I think I have experienced everything," he said.

One of the challenges he experienced is that many smaller credit unions hold all kinds of vendor contractual obligations. Lussier has also noticed that it's very common for the board of directors to jack up the salaries of executives in the last year of their employment contracts.

"These challenges usually become liabilities and expenses at the time of merger," he said. "Often times, a vendor realizes that this is considered lost business and is not usually very forgiving. Sometimes the vendor is the same one used by the merging credit union, and contract obligations are usually dissolved and/or absorbed into the merging credit union's contract. Unfortunately, if a contract for a vendor or an employee is outstanding, it is usually considered a true obligation and must be paid."

However, it's also important to look for the dates on the contract, as many credit unions become creative with employee contracts during their initial merger decision process, which could be deemed as unusual and unreasonable. Although it's rare for contracts to be forgiven, recently signed contracts, at times, may be renegotiated, Lussier said.

Regardless of who pays off the vendor and employment contracts, the net result is the same, he added.

"I often have the merged credit union expense it prior to conversion as this is a direct liability, or we make sure the liability is booked properly so that the true value of the capital and net asset valuation is done correctly at the time of the merger," Lussier said. "There is no other way. It is what it is."

One of the other challenges is to identify the risks in the loan portfolio.

"Some credit unions, because they try to make things work and don't want to look bad, do a lot of loan modifications," he said. "So you really have to look at the quality of the loans because that is pretty much where the risk is. It's also important to see if the loans were written to the secondary market standards, which is not common among some small credit unions."

Sometimes, there are some loans in the portfolio that can be considered non-saleable, making them a higher risk that would require more capital to be put aside to cover that risk and properly account for the net asset valuation.

When credit union executives announce a merger to their staff, it is the most significant moment of the process for employees for many reasons.

"There has to be great care taken in communicating the merger because it is going to come as a shock to employees," Glenn Christensen, president/CEO of the CEO Advisory Group, a M&A consultancy in Kent, Wash., said. "They will have a million thoughts running through their minds – am I going to have a job? What is going to happen to my salary and benefits? Who am I going to report to? Will I be working at a new branch or office? Will I be able to work with new people? What is going to happen to my fellow employees?"

To calm these fears and anxieties, Christensen said it helps for the CEOs of both credit unions, other executives and board members to meet with employees to explain the rationale behind the merger, what will happen to their jobs and what to expect going forward.

"I have found that it sets a wonderful tone with the employees of the target credit union," Christensen said. "It makes them feel like we are all in this together and it makes the merger announcement positive from the get-go."

Establishing those positive feelings and attitudes is important because members and people in the community will be asking employees what they think about the merger.

As soon as the consolidation is announced to staff, it is also important to announce the merger to members through all communication channels, including the media.

"You don't want to have too much time lapse between announcing it to staff and announcing it to members and the media because the rumor mill may start to churn," he said.

Bob Steensma, president/CEO of the $329 million Five Star Credit Union, found that one of the behind-the-scene merger challenges for him has been melding workplace cultures. In addition to overseeing the consolidation of credit unions into Five Star CU, he has led the mergers of banks into the Dothan, Ala.-based credit union.

Integrating the employees of the merged institution into the Five Star CU workplace culture took a lot of training and education in products, sales, services and systems.

"We have developed our own program that talks about the way we do things and the way we approach the sales and services aspects of the business and all of the expectations," Steensma said. "We also provide them with their job descriptions before we get into the training because we want to make sure they know what they are walking into on day one. We are as open as we can be because training is very expensive, it takes a lot of time and effort and we don't want employees leaving because we failed to share something that was a key piece of information."

Even with extensive training, however, it typically takes additional time for employees of the merged credit union to become fully acclimated and comfortable in their new workplace culture, according to Steensma.

One of the side benefits of the merger process, however, is that it has helped Five Star CU identify potential leaders among its employees involved in the training programs.

"It gives us a chance to put our people in an out-of-the box situation, and it gives them a chance to take a leadership role in helping others learn about Five Star," he said. "It's a great opportunity for building the organization's future leaders."