ONTARIO, Calif. (3/18/11)--The Western States Corporate Realignment Task Force concluded that a merger of Western Bridge Corporate CU and Members United Bridge Corporate CU would be the most viable future for the corporate. However, given federal regulators' recent restriction on corporate mergers, the task force recommended Western Bridge apply for a new charter as a stand-alone corporate credit union. The task force announced its recommendations Wednesday. It also announced that Joan Opp, CEO of Palo Alto, Calif.-based Stanford FCU will be its new chairman, succeeding Dave Chatfield. The task force, which was formed on Sept. 24 is not a league committee nor associated with any corporate credit union. It is a volunteer, independent group of credit union leaders from eight western states; Arizona, California, Hawaii, Idaho, Nevada, Oregon, Utah, and Washington. Recommendations included:
* The merger of Western Bridge and Members United Bridge should be implemented at the earliest possible date."Too small to succeed" concerns warrant as much, if not more attention than "too big to fail" concerns. * Since at this time Western Bridge is precluded from proceeding with the merger by the National Credit Union Administration (NCUA), the corporate should move forward to apply for a new charter as a stand-alone corporate credit union, using either a de novo charter or employing a "reverse merger" with purchase and assumption of its operations through an existing--presumably western--non-conserved corporate credit union charter. * While continuing to encourage the proposed merger as the best option, the task force recommended natural person credit unions support the reconstituted Western Bridge by participating in its recapitalization and its services. "This support is imperative in order to help retain a cooperative, unified, affordable system solution for credit unions of all types and sizes owned and controlled by credit unions," the task force said. * In the interest of attracting capital from natural person credit unions, Western Bridge and other corporates should be encouraged to use non-perpetual capital accounts to create necessary accountabilities. "This will create positive and constructive incentives for newly formed corporates to improve their financial performance in the 2011-2013 time frame, rather than relying on the 'comfort' of perpetual capital." To the extent corporates rely on perpetual capital accounts to meet reserves and undivided earnings (RUDE) and leverage targets, fewer natural person credit unions will be willing to recapitalize their corporates. Using non-perpetual capital will be more attractive and put the onus on corporates and NCUA to assure that necessary financial disciplines and long overdue efficiencies are implemented in the broader corporate system. * Natural person credit unions should take several actions to assess whether a stand-along Western Bridge makes the most sense for them. Credit unions should assess attribution assumptions to affirm or disaffirm business model projections, and request a customized pro forma pricing comparison that:
* Models the pro forma based on the natural person credit union's payments and settlements volumes; * Compares pricing for all of its contemplated providers, such as the Fed, a third party bank, Western Bridge and other alternate corporates being considered; and * Compares service level, service quality, service gaps, product mix, and product limitations across all the contemplated providers being considered.
For more details, use the link. The report also outlines the group's guiding principles of system solution, aggregation and universal solution, and several scenarios, pricing and service comparisons with other providers, and more.