The $3 billion Catalyst Corporate FCU Monday announced the completion of its purchase and assumption the Phoenix-based First Corporate Credit Union, a so-called “pass-through” corporate that struggled to replace key services provided by U.S. Central FCU.
Forty two of the 48 former FirstCorp members elected to stick with Catalyst, a number the Plano, Texas-based corporate said exceeded the expectations laid out in the original business plan.
“Right out of the gate, we had several key challenges to address,” said Catalyst President/CEO Kathy Garner. “The first of these was to convert FirstCorp's members to Catalyst's ACH solutions quickly, given the impending discontinuation of U.S. Central's APEX-ACH,” she said. The ACH conversions began within weeks of the initial consolidation announcement. “While these rapid-fire conversions were operationally challenging, they were familiar territory for our seasoned staff,” she continued.
Catalyst has merged or acquired three corporates in just under 14 months, beginning with a merger with Georgia Corporate FCU in September 2011 and the July 2012 acquisition of Western Bridge Corporate FCU.
“In the case of the FirstCorp consolidation, the most challenging operational element may have been the compressed time line,” Garner said. “There are always bumps in the road during the integration planning process. Regardless of what we encountered, Catalyst was committed to moving ahead in a manner that was least disruptive to FirstCorp members, which meant creative thinking and some extra legwork upfront.”
The structure of the purchase and assumption could be a useful model for future corporate consolidations, Garner said. By its very nature, a purchase and assumption transaction allowed Catalyst to choose which FirstCorp assets to acquire, she said, rather than assuming all assets, liabilities and capital as would be the case in a merger.
“It was necessary to develop a plan that would insulate Catalyst's membership from risks posed by the legacy assets on the FirstCorp balance sheet. Taking on any risk was not an acceptable outcome for us,” Garner said.
FirstCorp will retain its existing state charter without federal insurance, where its legacy assets can remain until maturity or be sold if the opportunity arises. The charter is expected to continue operating for up to seven years, by which time the majority of FirstCorp's legacy assets will have matured or paid down substantially.
Catalyst Corporate and its wholly owned credit union service organization, Catalyst Strategic Solutions, provide wholesale financial services to credit unions in 20 states, with offices in Duluth, Ga., Honolulu and Ontario, Calif.
The corporate now counts 1,284 capitalized member credit unions.
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