Which way to the exits?
That is the question high up in the minds of western state credit union executives as they face two realities. Western Bridge had decisively failed to recapitalize.
Even ardent former supporters concede that the likelihood of a renewed capital drive from the San Dimas, Calif., corporate is slim. And the NCUA has made it plain it intends to close down Western Bridge, which currently serves almost 900 credit unions.
This has triggered something of a rush by present Western Bridge users for new partners to handle item processing, liquidity, investments, all the services provided by a corporate credit union. Many of those credit unions, including Matador Credit Union and Financial Partners Credit Union, spoke of their plans.
Surviving corporates, including Corporate America, Corporate One and SunCorp, reported that they are now seeing a significant increase in inquiries from one-time Western Bridge members. Corporate One executive Paul Hixon said, “In the last month, we've added 15 new members from the West; 21 members if you go back two months.”
At SunCorp, executive vice president Mark A. Schieffer said the Westminster, Colo.-based corporate had signed no new members from Western Bridge, but several are currently performing due diligence.
Other corporates said they expect a rush of inquiries, but so far it’s been much nearer a trickle.
One reason may be that many western state credit unions, such as Patelco and Vons Credit Union, said their current plan is to do nothing. Steve Weakley, CEO of $320 million Vons Credit Union, headquartered in El Monte, Calif., explained in an email: “Our Plan B is to allow Western Bridge management to work with the NCUA on an alternate plan for all Western Bridge members. The NCUA has made it very clear about maintaining continuity of service during this transitional period. Given this commitment by the NCUA to facilitate orderly transitions of member services to other service providers, Vons Credit Union will stay the course. It’s the least disruptive course of action.”
But another reality is that the NCUA has made it plain that it is no rush to close Western Bridge. “The National Credit Union Administration remains firmly committed to ensuring continuity of service and operations for all Western Bridge member credit unions,” wrote Scott Hunt, head of the NCUA’s corporates department, in a recent memo. Hunt added: “We have no immediate plans to shutter Western Bridge’s operations. NCUA is committed to an orderly and timely resolution that ensures uninterrupted service to all member credit unions.”
When will Western Bridge close? Nobody knows. Best guesses from industry experts are autumn of 2012. “We have it on high authority that we will have 12 months to transition,” said a Western Bridge user.
A wild card is that the NCUA now is engaged in attempting to sell off all Western Bridge assets, with a preference for a buyer that will buy the whole package and continue to service Western Bridge’s natural personal credit unions. Does such a buyer exist? Skepticism is rampant among outsiders, but they also acknowledge that the NCUA has had many weeks to prepare for this eventuality and it may have unearthed potential bidders that have managed to stay beneath the radar.
At least some large Western Bridge users are vocally supportive of the NCUA sales strategy. At $3.7 billion-asset Patelco, Chief Financial Officer Scott Waite said, “Most promising for us would be if the remnants of Western Bridge are acquired in whole. That would be preferred. This would minimize disruption of services to us.”
But the idea also resonates with smaller credit unions, such as the $300 million San Diego Medical FCU. Said CEO Paul Lewis, “Our plan is to go with the group. ... My expectation is that it will be financially better to go with the group.” He added: “My concern is to get the whole package of services that Western Bridge has provided.”
Fueling support for an NCUA-driven sale of Western Bridge assets that would allow current users to maintain continuity of services is a widespread belief that converting from Western Bridge will be both difficult and expensive. Will it in fact? There are many, many variables, such as what services a credit union uses as well as what core system it runs on, that impact the realities of conversion.
But testimony from western state credit unions that have made the move away from Western Bridge suggest the transition is not as fraught with difficulties as rumored.
Matadors Community Credit Union is a $125 million institution headquartered in Chatsworth, Calif., that had been a longtime WesCorp member. It is well along a process of converting into a member of Irondale, Ala-based Corporate America, according to Chief Operating Officer Melissa Broadwell. “The transition has been amazingly smooth.”
“Our choices were limited. People said, it’s easy to go with the Fed. No, it’s not. Not for us. We wanted all the services in one place and we would not have gotten that with the Federal Reserve. We do with Corporate America,” she said.
Matadors Chief Financial Officer Jeff Ballard added: “The Corporate America pricing structure was the cheapest we looked at. It will cost us less than what were paying Western Bridge.”
Ballard also indicated that a particular appeal is Corporate America’s unique, capitalization optional membership. “We have no plans to put capital into Corporate America.” he said. He said that Matadors had lost $434,000 in capital with WesCorp and the direction from the board was to not go there again.
“This really is the smoothest conversion we have ever done. If anything we are converting ahead of schedule,” he said.
It is a different story, with similar plot points, at 1st Valley Credit Union in San Bernadino, Calif. with assets under $40 million. CEO Gregg Stockdale has decided his best solution is a patchwork. “We went with the Fed for draft clearing, we have a relationship with a bank, and we are a depositor with a noncapital-requiring corporate, Corporate America.”
Stockdale said the bank he is using is Cincinnati-based Fifth Third.
“It looks as though we will be free of Western Bridge by the end of October. We started work on this several months ago,” added Stockdale.
Why three providers? To Stockdale they are three legs of a stool and, collectively, they provide his credit union with the range of services it needs at competitive costs. “We may actually spend less than we did at Western Bridge. We won’t spend more,” said Stockdale, who insisted “We have not had to add staff. None.”
Stockdale did acknowledge one reservation. “The Fed is not there to train you. They are government employees. But I’ll tell you, once the systems are set up, working with the Fed is a piece of cake.”
In Downey, Calif., $740 million Financial Partners Credit Union, which lost over $3 million with WesCorp, said CEO Nader Moghaddam, took a third course. “After doing a lot of homework and research,” said Moghaddam. “We decided to go with the Fed.”
Financial Partners, said Moghaddam, has eased the process by using conversion software offered by BluePoint Solutions, a Vista, Calif.-based technology developer.
Lori Reeves, vice president of operations at Financial Partners, said, “We started transitioning out of Western Bridge in mid-February, we were completely out by the end of May.”
“Using BluePoint has helped us manage this process,” she added. “It gives us a single solution to manage all our channels. Remote, mobile, branch–it is very streamlined.’
“We may have added 15 to 30 minutes to our daily processing time. We have not added staff,” Reeves said.