The $2.2 billion Catalyst Corporate FCU and the $1.1 billion First Corporate CU have signed a non-binding letter of intent to consolidate through a purchase-and-assumption transaction later this year.
The consolidation will follow the completion of the Plano, Texas-based Catalyst's acquisition of the Western Bridge Corporate operations on July 1.
FirstCorp's board has voted to have Catalyst Corporate take on processing of the Phoenix-based corporate's member ACH in advance of the full conversion. FirstCorp currently processes with U.S. Central Bridge.
The consolidation will require approval from both the NCUA and the Arizona Department of Financial Institutions. The corporates said in the release they do not anticipate any obstacles.
“The Board of Directors believes that this combination with Catalyst Corporate provides the best long-term value proposition for the members of FirstCorp,” said David Doss, chairman of FirstCorp and president/CEO of the $1.35 billion Arizona State Credit Union in Phoenix.
“We have studied the Catalyst business plan closely, and we see a sustainable model that will allow our 48 members to continue to enjoy low-cost, comprehensive wholesale financial services well into the future,” Doss said.
The consolidation is necessary for corporates to thrive by achieving economy of scale, said Lin Hodges, Catalyst Corporate chairman and president/CEO of the $1.3 billion Associated CU in Norcross, Ga.
“Since the early planning stages, Catalyst has promoted the reality that corporates must be able to achieve scale in this new operating environment in order to thrive,” he said. “We are very pleased to be able to bring this vision to the membership of FirstCorp.”
Even though Catalyst will purchase certain FirstCorp assets and share accounts, legacy assets will remain in the FirstCorp charter until they mature or until they are sold at a later date.
“This approach protects FirstCorp's membership capital, which will remain at FirstCorp, and also will immunize Catalyst's members against risk of future losses on these assets,” said Catalyst President/CEO Kathy Garner.
“It is an excellent solution for FirstCorp's members,” said Greg Harden, FirstCorp interim CEO. “To be assured of access to quality services at competitive prices for the long-term while being protected from immediate losses is a real win and maximizes the benefits to our members.”
Catalyst's requirement for Perpetual Contributed Capital will continue to be the same for all new members, including those moving over from FirstCorp. Catalyst said the transition will be seamless for members, because the Texas corporate can duplicate all FirstCorp product offerings and has experience with orchestrating back-office operational consolidations.
“This early conversion will ensure that all FirstCorp APEX-ACH users experience a seamless transition away from the U.S. Central Bridge Corporate platform before Sept. 30, 2012, and will support FirstCorp's commitment to ensuring that its members are not impacted by the 80% fee increase that takes effect in the interim,” Harden said in the corporate's statement.
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