Catalyst Corporate and FirstCorp Announce- Plans to Pursue Unique Consolidation

Catalyst Corporate Federal Credit Union and FirstCorp Credit Union have signed a non-binding Letter of Intent to consolidate through a unique purchase and assumption transaction later this year.

“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 the $1.1 billion corporate and President/CEO of Arizona State Credit Union.  “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.”

Catalyst Corporate’s business model is driven largely by efficiencies generated through scale and technological innovation, making this move part of a logical progression. “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,” said Lin Hodges, Chairman of Catalyst Corporate and President/CEO of Associated Credit Union in Georgia.  “We are very pleased to be able to bring this vision to the membership of FirstCorp.”

“All corporates must achieve sufficient earnings to meet the NCUA’s future capital targets,” said Kathy Garner, Catalyst’s President/CEO. “What makes Catalyst unique is that we have an extremely efficient culture, which is enhanced by scale, and that allows us to meet financial objectives while avoiding balance sheet risk.”

The transaction is unique – taking the form of a purchase and assumption of certain FirstCorp assets and share accounts.  Legacy assets will not be acquired by Catalyst Corporate, but 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 Garner.

As with all corporate consolidations, this unique proposal will require approval from both corporates’ primary regulators – in this case, the NCUA and the Arizona Department of Financial Institutions.  The corporates do not anticipate any obstacles, as this solution is advantageous for the members of the corporates, the regulatory agencies, and all credit unions that are impacted by the status of the share insurance fund.

“It is an excellent solution for FirstCorp’s members,” said Greg Harden, Interim CEO for FirstCorp. “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 Corporate views the partnership as a “win-win,” said Garner: “Our membership will benefit from the additional efficiencies brought from the new volumes, all of which will be supported by new PCC and FirstCorp’s members will benefit from Catalyst’s larger scale and capital base.”  Catalyst’s requirement for Perpetual Contributed Capital will continue to be the same for all new members, including those moving over from FirstCorp.

The move itself will be seamless, as Catalyst Corporate can duplicate all FirstCorp product offerings and has experience with orchestrating back-office operational consolidations using strategies that minimize credit union impact.

The consolidation will follow the completion of the acquisition of the Western Bridge Corporate operations on July 1. FirstCorp’s Board of Directors has voted to have Catalyst Corporate take on processing of FirstCorp’s member ACH in advance of the full conversion. “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 September 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,” said Harden.

“Catalyst Corporate is a member-driven organization that is fully committed to business decisions that maximize member value – characteristics it shares with FirstCorp and that make this combination ideal for our members,” said Doss.