Plan Is To Stand Alone For Now
SAN DIMAS, Calif.-With plans to merge with Members United Bridge Corporate scuttled by NCUA, Western Bridge Corporate is moving closer to receiving its charter as a standalone CU.
But how long it remains a standalone may be answered by its member CUs.
What could have credit unions down the road calling for merger is demand for greater settlement and item processing discounts, explained Matthew Davidson, chair of United Resources FCU, the new entity spinning off of the former WesCorp FCU.
"On our business plan for United Resources we do not mention consolidation. So we are going in the direction of the document," said Davidson. "However I recognize that many credit unions in the western states are in favor of consolidation, and from a business aspect it can make a lot of sense. I think that down the road we will certainly be open-minded and take a look at merger if our members request it, because we would increase our settlement and item processing volume, provide greater discounts, and serve our members better. Settlement and item processing are volume games."
Davidson, who serves as CFO for the $1.3-billon Kern Schools FCU in Bakersfield, Calif., is not concerned that moving forward without merging will lead to higher settlement and item processing costs for United Resources' members. "Our business plan calls for scaling back operations so we will be very lean. I think we can provide these services profitably and in a way that will increase our capital. We are starting from scratch, we have no legacy assets, and when we recapitalize we will be able to earn off that capital. We think it will work out without raising prices."
Davidson, himself a former regulator in Ohio, does not fault NCUA for halting merger plans with Members United, which is also moving to become a standalone corporate under the new brand "Alloya."
"From NCUA's perspective, the merger would have created a pretty healthy credit union that would perhaps have had an advantage over corporates that were not bridges. So from that standpoint I understand the decision."
The Business Plan
United Resources' business plan calls for a scaled-down version of the one-time $34 billion WesCorp with $4 billion to $5 billion in assets and 5% capital. The newly formed corporate has issued a private placement memorandum for a capital offering. Credit unions have until August 31 to decide whether to invest in the new corporate. United Resources will offer a portfolio of products like payment services, liquidity products including term loans, and short-term investments in compliance with NCUA's new corporate credit union regulations.
Davidson is confident United Resources will raise the necessary capital and that the official chartering of the new corporate will occur at NCUA's September board meeting. He termed the response by credit unions to the capital offering "positive. It's really too soon to get a good read, most credit unions are not having their board meetings to vote on this until late July or early August."
The failure of WesCorp cost 1,025 credit union members all of their $2-billion in capital, creating a great deal of anger and frustration still be felt as United Resources seeks to recapitalize.
"The attitudes of credit unions have been generally good," continued Davidson. "There is some skepticism and negativity out there. But we are creating a new credit union to provide settlement, item processing, and liquidity services. Credit unions need those services. They can get those from United Resources, perhaps another corporate, or get some of them from the Fed. They have to get these services somewhere and I believe strongly that they should come from another credit union. The last time I checked the Fed was still a bank, and I hope credit unions choose to do business with one of their own."