After almost 35 years processing credit union credit card transactions, Town North Bank has sold off its last stake in card processing. The credit union-owned bank sold its card processing division, TNB Card Services, to Fifth Third Processing Solutions.
The sale, the terms of which were not disclosed, closed on July 6. But a source involved in the initial stage of the sale process reported that early price quotes ranged from $30 million to $60 million.
"We decided pretty early on that it was too rich for us," commented the source, who declined to speak on the record, citing a lack of knowledge about the final price. "It definitely seemed like a strategic purchase, rather than merely a financial one."
The deal means that about 370 credit unions, many in Texas, that currently process their card transactions with TNB have become clients of Fifth Third Processing Solutions, bringing Fifth Third's total number of credit union clients to roughly 770.
Fifth Third Processing Solutions started out as a division of Fifth Third Bank, but the bank sold a majority stake in the division to private equity investment firm Advent International in June 2009. It provides credit card, debit card, EFT and ATM services to approximately 1,700 financial institutions, comprising 1,300 banks and 400 credit unions.
"We are very pleased to acquire TNB Card Services, which has distinguished itself as a respected leader in the credit union market with a loyal following of clients and a focus on simplifying complex payment systems," said Charles Drucker, CEO of FTPS. "The acquisition furthers our position as a leading provider of innovative products and services for credit unions and their members. We look forward to working with the TNB Card Services team as they continue providing their exceptional servicing to their valued clients."
Jesse Gutierrez, CEO of Texas Bay Area Credit Union and chairman of the board of Town North Bank, said, "The combination of TNB Card Services' deep understanding of credit unions and their members with FTPS' commitment to industry-leading technology will deliver an exciting choice to credit unions who are looking for a partner to help them achieve their program goals."
The sale comes after Town North Bank sold TNB's entire agent-issuing credit card portfolio to Elan Financial Services, a division of U.S. Bancorp, in May 2009. At that time, TNBCS executives insisted the sale did not mean they were getting out of the card processing business.
But the bank has since said that the sale of its card processing division was motivated by similar balance sheet and capital pressures that led to the Elan sale.
"We are managing the bank for capital adequacy and liquidity," said Steve McDonald, CEO of Town North. "The sale of the TNB Card Services division represents significant progress toward our plan to restore capital."
Neither McDonald nor any other Town North Bank executive returned calls for comment on the sale.
Royal Cole, president of Fifth Third's financial institution division, said the card processor expected its culture and attitude toward customer service to be a good fit for TNB's credit union clients. He also said the purchase would not lead to layoffs among TNB's seasoned employee base.
"We made this purchase for growth and want to position ourselves for growth-not cost cutting," Cole said.
The sale leaves just two credit union-owned card processors using the First Data platform to serve credit unions: PSCU Financial Services, a giant payment processing CUSO headquartered in Tampa, Fla., and The Members Group, a CUSO affiliated with the Iowa Credit Union League.
Jeff Russell, vice president for strategic development for TMG, said his CUSO would continue to focus on offering the products and services that credit unions need and that the strength of the CUSO model would be evident to credit unions.
"We think the CUSO model offers real benefits for credit unions and expect to keep offering those," Russell said.
But Ondine Irving, a CU credit card consultant and publisher of the Credit Card Connection website, had a different outlook about the news. "I think it's terrible news," she said. "I just feel badly for TNB's credit union clients who signed on thinking they were getting a credit union option, only to find that now they are with a bank-affiliated processor. I hope they will evaluate their options at their first opportunity."
Town North Bank was purchased by the credit unions, in part to process cards, in 1976.