DULUTH, Ga.-A new name in corporate credit unions will begin operating this week and another will soon follow.
At the same time, however, Western Bridge Corporate FCU announced last week it was abandoning plans to recapitalize and recharter as United Resources FCU after it came up well short of its capital-raising goal.
Georgia Corporate FCU and Southwest Corporate FCU have officially launched operations as Catalyst Corporate following the completion of their merger and recapitalization. The combined entity, which raised $93 million in new capital, serves 875 credit unions.
Alloya Corporate FCU, the newly chartered remnant of Members United Corporate FCU, said it has raised $72 million in new capital, allowing it to move forward with the reorganization under NCUA's new capital rules. In a notice to members, John Fiore, chairman of the Alloya board and president of Motorola Employees FCU, said it currently has more than 1,000 subscribed members, making Alloya the largest corporate credit union in terms of credit union membership in the country.
"We were confident we'd make it but we still would have liked to see it happen a little quicker," said Fiore. "Our staff did a very good job of talking with credit unions throughout the entire process so we knew where many of them stood."
Fiore added that he expects more CUs in his region to come on board and is getting requests to join from the south and west. "By the time we get to launch, which is close to the end of October, I will not be surprised if capital commitments reaches $75 to $85 million."
But as Credit Union Journal first reported Aug. 1, the once high-flying Western Bridge Corporate FCU's (WesCorp) bid to raise funds from its member CUs and begin anew as United Resources Corporate FCU has come up short.
Also Last week, Southeast Corporate, Tallahassee, Fla., said it would now seek a merger, as well, having failed to raise adequate capital from its member credit unions. The success of Kentucky Corporate's capital call is being debated, as well.
Western Bridge Corporate FCU confirmed that as of its Aug. 31 deadline for capital commitments it had raised just under $90 million in capital commitments from credit unions, well short of its $200-million goal.
The result, said Western Bridge CEO Phil Perkins in a letter to credit unions, is that "United Resources will not be chartered and will not assume operations of Western Bridge."
Perkins stressed in his statement that "NCUA has reaffirmed the continuity of service and operations for all Western Bridge member credit unions ...There are no plans to close Western Bridge's operations, move credit unions off the platform, or begin winding down.
"We will now seek for key operations to be acquired in order to continue the service to our members," Perkins continued, adding, "It is our hope a plan will provide encouragement and a basis for significant reconsideration by numerous members who have passed on the United Resources stand-alone offering."
Matt Davidson, United Resources chair, told Credit Union Journal that he is hopeful NCUA-which is conservator of Western Bridge-will merge the corporate in whole.
"That would provide the best solution for the members that are with us, if we moved in whole to another entity, which I hope will be another corporate."
Added Davidson, who is CFO for the $3.1-billion Kern Schools FCU, "We worked hard to recapitalize Western Bridge. This is a sad day."
Western Bridge's financial performance likely influenced natural-person CU decisions on recapitalizing, suggested sources. According to Callahan & Associates' data, through May Western Bridge's total capital was $2.045 million, ROA was 0.13 percent, and net interest income 0.00 percent. And what may have garnered more attention is Western Bridge's 0.00 percent capital ratio when stacked up against stronger corporates such as Corporate One (8.55 percent capital), Mid-Atlantic (4.82 percent), Corporate Central (10.37 percent) and Corporate America (3.92 percent).
A number of people, including Dale Verderano, CEO of the $128-million Matadors Community CU in Chatsworth, Calif., expressed concern for CUs that committed capital to United Resources and may be left "holding the bag" without firm backup plans.
"[United Resources] should have known way back when they started putting out their reports on capital contribution results that they were not gaining speed," said Verderano, whose CU recently converted to Corporate America in Alabama and away from Western Bridge. "They needed to say something to those credit unions that are supporting them that their effort was in jeopardy and that the CUs should be considering alternatives. This whole thing has been silly to me-like a bunch of kids playing a game."
Stuart Perlitsh, CEO of the $315-million Glendale Area Schools FCU, Glendale, Calif., believes United Resources' stalled bid will leave a lot of CUs scrambling to find another provider.
"About 250 credit unions have chimed in favorably to move forward. ...[T]hose 250 will be looking to no more than five to 10 vendors to accommodate 250 CUs at once. That will be quite a mess."
For his part, Kam Wong, CEO of the $1.7-billion Municipal CU in New York, said that he is not concerned about an interruption in item-processing service as it has transitioned away from Members United and is now working directly with the Fed.
"I am not sure what happened to Members United. They used to be very good on service. Had they not been there for us during the 9/11 crisis, helping us get cash to members and extend a line of credit, that terrible situation would have been much more difficult for us. They used to be a good partner. Again, I'm not sure what happened."
