Merger Plan Scrapped
The $3.4 billion Corporate America Credit Union and the $185 million Louisiana Corporate Credit Union announced Sept. 17 that they have called off their merger plans.
The two corporates decided to part ways rather than remain in “merger limbo,” as Corporate America interim President/CEO Dan Buckley called it, waiting for NCUA approval. The two first announced their intent to merge back in January 2011.
“We began the merger process more than a year ago. And while it was approved by both boards of directors and state regulators, it has remained pending at NCUA,” said David Savoie, president/CEO of LaCorp. “We feel it’s time to move on with key initiatives at each of our organizations. For example, LaCorp independently has raised capital and eliminated all U.S. Central dependencies, while also making sure we continue to do a good job of serving our members.”
According to LaCorp’s 5310 report, as of June 30 it was slightly below the NCUA’s required 4% leverage ratio at 3.98% but far exceeded the regulator’s Tier 1 risk based capital and total risk based capital requirements, reporting 19.36% and 23.66%, respectively. LaCorp will need to generate income to boost its retained earnings ratio, which was 0.12% as of June 30. In October 2013, the NCUA will begin requiring corporate credit unions to maintain a 0.45% retained earnings ratio.
Buckley said Corporate America is focused on addressing the issues facing all corporates, such as full compliance with the revised corporate rules.
“Paramount for Corporate America is to ensure the strength, capabilities and staff skill sets needed to serve credit unions in a new regulatory era,” he said.
As of June 30, Corporate America meets all current and future NCUA capital requirements, with a 0.64% retained earnings ratio, 4.38% leverage ratio and a tier-one risk-based capital ratio more than 10 times what NCUA requires.
Buckley and Savoie said despite calling off the merger, the two corporates will continue to collaborate on various projects, as they have for many years. One project in process is enacting an agreement for LaCorp to partner with Corporate America for disaster recovery services.
“It makes sense to work with Corporate America for business recovery and continuity services,” Savoie said. “Our corporates have good proximity but are far enough away from each other to make it practical as a backup site.”
Corporate America is headquartered in Irondale, Ala., a suburb of Birmingham, while LaCorp is located in Metairie, La., a suburb of New Orleans. The two cities are approximately 350 miles apart.
Like Savoie, Buckley said Corporate America appreciates ongoing opportunities to collaborate. “The member credit unions of LaCorp understand the value their corporate added to their business,” he said. “At Corporate America, we also recognize the value of partnering with LaCorp by leveraging our collective strengths in the delivery of products and services to our member owners.” Buckley replaced former Corporate America CEO Thomas Bonds who quit July 3 after taking a leave of absence earlier in the year.
Bonds and former NCUA Office of Corporate Credit Unions Director Scott Hunt had a documented feud that had complicated and slowed the LaCorp merger. The delay led the Alabama Credit Union Administrator to tell NCUA Chairman Debbie Matz in a November 2011 letter, “I do not believe Director Hunt can objectively act on any issue related to Corporate America ... It is our desire to respectfully request that the NCUA board direct agency management to allocate the requisite resources outside of Director Hunt’s control to conduct the merger review and forward a recommendation to the NCUA board.”