In an ironic recruiting twist, First USA Inc. has hired a senior executive away from its former parent company.
Dallas-based First USA, a leading MasterCard and Visa issuer and fast-growing merchant processor, appointed Peter B. Bartholow executive vice president and chief financial officer in April.
In his search for the best candidate, John C. Tolleson, First USA's chairman and chief executive, called on Mr. Bartholow because of their past association with MCorp. Most of MCorp's banks failed several years ago, and Mr. Bartholow stayed on to manage the Texas holding company through bankruptcy proceedings, which are nearing completion.
"Pete and I had worked together for 12 years at MCorp," said Mr. Tolleson.
In light of First USA's recent growth, Mr. Tolleson decided to expand his management team and appoint a full-time chief financial officer. The function had been headed by Pamela H. Patsley, who can now concentrate on her other responsibilities on the merchant side of the business.
First USA began life as a subsidiary of MCorp, where Mr. Bartholow spent 20 years, starting in 1974 as an assistant vice president of financial planning and ending up as chief executive.
MCorp at one time had assets exceeding $20 billion, but along with many other Texas financial institutions, it was hit hard by the collapse of the energy and real estate markets.
In 1986, in a move to raise capital, MCorp sold its profitable credit card and transaction processing subsidiary, then called MNet, to Lomas Financial Corp. In 1989, Lomas divested the company in a management-led leveraged buyout. It went public in 1992 as First USA Inc.
The managers who founded First USA for MCorp in 1985 remained, led by Mr. Tolleson, Richard Vague, president of First USA Bank in Delaware, and Ms. Patsley, president of First USA Merchant Services. Mr. Bartholow was on the board of directors when the company was owned by MCorp.
"It's very rare to find a senior executive who knows the company, the business, and the people we deal with, who can make an immediate contribution to our efforts," said Mr. Tolleson.
Mr. Bartholow, during his tenure at MCorp, steered the company from its $600 million-asset beginning to its $22 billion peak and then through bankruptcy. Although Mr. Bartholow calls the last experience "a disaster," he salvaged $420 million for the creditors. He will remain a director of the company with input into the final stages of the proceedings.
Both the chief financial job and Ms. Patsley's with the merchant unit "have become extremely large positions that [each] deserve the attention of senior executives," said Mr. Tolleson.
Mr. Bartholow will be responsible for financial and accounting activities, as well as funding and capital market activities.
"We don't expect major change from this reorganization," said Mr. Tolleson. "We expect more of the same," including one of the credit card industry's strongest and most consistent profit records, which in turn has paid off handsomely for himself and other stockholders, Mr. Tolleson said.
He added that the company's growth rate calls for expertise in public markets and securitization and the selling of credit card debt and interest income to investors to generate cash flow.
Mr. Bartholow said that going to First USA is a positive change after more than four years of intricate bankruptcy maneuvers at MCorp. He points to his strengths in building, planning, and strategic direction, which he had used at MCorp before the difficulties struck in the mid-1980s.
First USA is clearly on the move. It recently reported net income of $27.1 million for the third fiscal quarter, more than double the income of a year earlier, while managed credit card loans grew 114% to $6.4 billion. Return on assets in the most recent quarter was 2.09%, a 41.2% increase over the previous year.
First USA also opened 568,758 credit card accounts, an increase of 128.8% over the same period in fiscal 1993. First USA serves 6 million credit card customers.
"It's wonderful to be part of a company focused on success," said Mr. Bartholow.
"We are growth-oriented, with a low-cost structure, which allows us to reinvest and offer products and lower costs to our customers," said Mr. Tolleson.
The company invests in direct mail marketing, targeting individuals that fit the profile of customers they desire - customers with good credit and high income who will carry a balance on their credit cards, ensuring interest proceeds for First USA.
The primary product is a no-fee credit card with an introductory annual interest rate of 6.9% for six months.
"The company has a lot left to accomplish," Mr. Bartholow said. "The prospects plainly are for more growth in the credit card and merchant service businesses. I hope to make a contribution, making sure the company is fit to grow as we think it can."