The initial NCUA-sponsored bidders conference for corporate credit unions interested in possibly acquiring all or parts of the failed Western Bridge corporate credit union was a month ago and now questions are circulating among credit unions about probable next steps.

Answers are beginning to emerge in the form of alternative scenarios for the conserved corporate and its some 875 members. Nothing is coming out of the NCUA–other than to acknowledge that four entities have expressed interested in bidding. The NCUA declined to reveal their identities, but industry sources told Credit Union Times they are Alloya, Catalyst, SunCorp and CenCorp. 

“We are encouraged that we will find an acquirer given we have four corporates looking, but we cannot make any guesses as to what the bids may look like,” said NCUA spokesperson David Small.  He added that the regulator is aiming for a November decision but will not guarantee that timeline.

The four corporates named by sources each declined to comment in response to a request for clarification of their interest in Western Bridge.

Just what might they be seeking to buy? One reality is that a high NCUA priority, dating back to a September statement by Scott Hunt, head of the agency’s corporates office, is a strong preference for an outright sale of Western Bridge as a whole.

“NCUA prefers to sell Western Bridge as an operating whole because it is the least systemically disruptive in the short term,” explained credit union consultant Marvin Umholtz.

“I believe a white knight will in fact emerge and take it all. That will end NCUA’s issues,” said a senior executive with a corporate credit union who requested anonymity.

A reality, added another credit union insider, is that the credit union system is not designed to handle the abrupt need for many hundreds of credit unions to exit Western Bridge and enter a new processing system at a different corporate, the Fed, or elsewhere.

More worrisome, said that insider, is that many hundreds of these credit unions are smaller institutions with thin staffing, and they will need considerable handholding as they transition.

However, a stumbling block to seeing this scenario come to be is “it probably will have some shape or form of a capital raise,” Hunt said at the October annual meeting of the California and Nevada Credit Union Leagues.

An executive at a large corporate corroborated that. He explained that existing members of the corporates said to be interested in acquiring Western Bridge had put in capital, and they would expect the same from new members that came in via an acquisition. “No matter who were to acquire Western Bridge as a whole, there almost certainly would be a capital requirement.”

The willingness of the current 800 Western Bridge users, and also their ability to, capitalize is a large untested question. What is known is that just around 300 of them had committed to capitalize the ill-fated United Resources,  the planned new corporate that failed to rise out of Western Bridge in the summer.

That means about 500 declined to put up capital and their willingness to capitalize another corporate is unknown.

This leads to the second scenario: long-term NCUA operation of a shrunken Western Bridge. Scott Hunt floated this idea as a possibility at the California and Nevada Credit Union Leagues meeting.

As reported in the leagues’ newsletter: “Hunt also said it’s possible none of the four anticipated bids are accepted. In that case, Western Bridge might still operate under NCUA conservatorship but would heavily downsize its staff and operations.”

The problem with this, said credit union insiders, is that a diminished Western Bridge would quickly begin to lose customers and also employees.  Little by little, the institution would erode, and this would solve no problems, for the NCUA or Western Bridge’s credit union users.

A third scenario, mentioned by some outsiders, sees the NCUA selling off pieces of Western Bridge to a medley of buyers. Enthusiasm for this is slim, however, as it is unclear what pieced out Western Bridge assets would fetch in today’s market or even if there would be any buyers.

And it is also unclear how this would help with the problem of providing many hundreds of small and mid-sized credit unions with continuing correspondent banking services.

The clock is ticking, and that is not in the NCUA’s favor. “It is in NCUA’s interest to resolve this quickly,” said a corporate credit union executive.

Another executive, who also requested anonymity, added that the uncertainty surrounding Western Bridge’s fate is prompting some of the larger current users to make alternative arrangements rather than wait out NCUA’s process.

But when and as those large natural person credit unions depart Western Bridge, the acquisition becomes less and less attractive. “NCUA needs this resolved sooner, not later,” she added.