Frequently Asked Questions

Become a Member FAQs

• Why should my credit union consider Catalyst Corporate Federal Credit Union?

  Credit unions that join Catalyst Corporate benefit from a single source for competitively priced payment services, settlement, liquidity and investments – streamlining an array of processes to provide its member credit unions with effective, comprehensive solutions. Leveraging the power of aggregation, Catalyst Corporate is the largest payments aggregator in the nation, and it serves only credit unions. Services are customized to the needs of credit unions, resulting in transparent support for back-office operations that helps make credit unions more efficient. Operating under a credit union charter, Catalyst Corporate is owned and controlled by its members through democratically elected leadership, and it is overseen by the National Credit Union Administration, resulting in an applied understanding of the unique challenges faced by regulated financial institutions.

• How is the business model different?

  Catalyst Corporate launched a new business model when it came into being on September 6, 2011, concurrent with a merger between Southwest Corporate Federal Credit Union and Georgia Corporate Federal Credit Union. During 2012, Catalyst Corporate expanded its membership further to include the former fields of membership of Western Corporate Federal Credit Union and First Corporate Federal Credit Union, as well as other credit unions across the country.

  A driving force behind this consolidation and the new business model was the global financial crisis that led to a reduction of capital in the corporate network, a substantially altered corporate regulation, and the dismantling of U.S. Central Corporate Federal Credit Union, which had formerly provided essential services to a majority of the nation’s corporate credit unions. Operating in this new landscape required a new plan – one driven by the needs of the members that it would most affect. The goal for the plan was to provide potential member credit unions with a lower capitalization threshold, continuity of service, and the opportunity to participate in governance for a stable, risk-averse institution capable of innovation and expansion.

  The primary difference between the pre-Catalyst Corporate model and the model used today is related to the balance sheet, which is smaller at approximately $3.5 billion. This lower asset level allows Catalyst Corporate to minimize the amount of perpetual contributed capital (PCC) needed from credit unions. Maintaining lower balances requires that Catalyst Corporate cap its overnight investment account and provide a sweep of member funds to other overnight investment options. Currently, this sweep is accomplished by utilizing the Federal Reserve’s Overnight Sweep Account, but other options will be available in the future to provide the best return to members in various market environments. The balance sheet is managed with a very low risk profile and strong liquidity. Catalyst Corporate has already surpassed regulatory and business plan requirements related to balance sheet composition and capital ratios.

   

• Catalyst Corporate has a national footprint; where are its offices located?

  Catalyst’s main office is centrally located in Plano, Texas, where all operations are housed. Catalyst also maintains an office in Glendora, California where member-facing staff provide regional service to credit unions on the west coast. We also employ representatives in states across the nation. 

• Will my credit union have access to a line of credit? How is the amount calculated?

  Yes, Catalyst Corporate’s lines of credit (LOCs) are a reliable source for settlement and term loans for all capitalizing member credit unions. Credit unions benefit from automated advances on their LOCs tied to their settlement account. Varying types of collateral accepted to secure loan advances are available. Term loans are offered with a potential maturity of up to five years. No fees are charged to acquire or use an LOC, and interest rates are very competitive. The minimum LOC is based on the larger of the monthly one-day high debit settlement transaction or the three-day average monthly settlement transaction. Larger lines may be awarded upon request, based upon Catalyst Corporate’s overall liquidity capacity. 

• If I decide to transition services to Catalyst Corporate, what should I expect?

  In most cases, a large number of similarities among common solutions will ease the transition. Often Catalyst Corporate is able to deploy the same system or software the credit union is currently utilizing, making the transition virtually transparent. Catalyst Corporate has a dedicated team of project and implementation experts who specialize in guiding credit unions through all aspects of the conversion. The implementation team has a proud tradition of facilitating conversions on the credit union’s timeline. Catalyst Corporate has the resources necessary to avoid conversion queues, thereby maintaining its commitment to adapting to each member credit union’s conversion schedule and needs.

• Is a capital investment necessary to use Catalyst Corporate’s services?

  No - all credit unions are welcome at Catalyst.

• What are the capital requirements?

  Generally speaking, credit unions are asked to contribute 0.25 percent of their prior year-end assets to perpetual contributed capital (PCC), though this calculation is modified by caps and a proportional reduction for smaller institutions. The formula is as follows:

  • 0.25% of assets per the credit union’s most recent NCUA year-end call report
  • $600,000 cap for credit unions $240 million-$750 million in assets 
  • $750,000 cap for credit unions > $750 million in assets 
  • Proportional threshold at $50 million in assets and below 
  • Formula: (($assets/$50 million) x 0.25%) x $assets 
  • Example: The requirement for a $25 million credit union would be 0.125% of assets, totaling $31,250. 
  • Minimum capital requirement of $500

  Snapshot of PCC Characteristics

  Maturity 
  No maturity

  Notice of withdrawal
  Perpetual, with no notice period

  Adjustment
  One-time issuance, no annual adjustment

  Interest bearing investment
  Yes, SOFR +62 bps targeted

  Transferable
  Yes

  100% at risk
  Yes

  Credit union mergers
  Amount combined and held at the corporate with no future adjustment

  Formula
  0.25% of assets with a $600,000 cap for credit unions $240 million to $750 million in assets, $750,000 cap for credit unions > $750 million in assets, and proportional formula threshold at $50 million in assets and below

   

• Does the required amount adjust annually?

  PCC is a one-time issuance and will not adjust annually.

• Is a credit union's investment in PCC an expense?

  No, the new capital can be treated as an interest-bearing investment, rather than an expense.

• Does Catalyst Corporate offer any other type of capital such as membership capital shares (MCS) or non-perpetual contributed capital (NCA)?

  No. Catalyst Corporate will not issue NCA because that type of capital is only used to calculate the total risk-based capital standard. PCC is the only type of capital that can be counted toward the Leverage and Tier 1 risk-based capital ratios. MCS no longer counts as regulatory capital. Any remaining MCS with Catalyst Corporate was put on notice by the corporate no later than October 20, 2011 in accordance with NCUA's directive to do so.

• Will Catalyst Corporate be able to meet NCUA's new capital requirements?

  Very detailed modeling demonstrates that Catalyst Corporate will meet all of the regulatory requirements and interim hurdles. In summary, these are:

  • Leverage Ratio = 4% minimum Core Capital (Retained Earnings + PCC)/Daily Average Net Assets (DANA)
  • Tier 1 Risk-Based Capital = 4% minimum Core Capital (Retained Earnings + PCC)/Daily Average Net Risk-Weighted Assets (DANRA)
  • Total Risk-Based Capital = 8% minimum Total Capital (Tier 1 + NCAs)/DANRA
  • Retained Earnings: 45 bps in 3 years, 100 bps in 6 years, 200 bps in 10 years

  Catalyst Corporate currently has a Leverage ratio and Risk-Based Capital ratios corresponding to well-capitalized status according to Regulation 704, and has surpassed the 2013 Retained Earnings hurdle.

   

• Is PCC available for purchase at any time?

  Yes, PCC is available for purchase on a weekly basis at any time. Eligible investors will be able to subscribe to Capital Units as of the last business day of each calendar week (a "Dealing Day") by executing and submitting a completed Subscription Agreement by 4 p.m. Eastern Time at least three days in advance (a "Subscription Notice Day"). Additional details about the capital offering are available in a Private Placement Memorandum (PPM). Credit unions can request a PPM from a sales or member service representative at any time.

• Why should a credit union invest PCC in Catalyst Corporate if outside providers do not require a capital investment?

  Significant value is provided to credit unions using the cooperative model of a corporate credit union, versus using the services of a vendor. With a vendor, costs for similar services will likely increase, service levels are often much lower, no lines of credit will be available, and additional vendor management will be required. A credit union using a non-financial institution for payment services will still need a relationship with another financial institution to settle that activity.

  By investing PCC in Catalyst Corporate, credit unions do business with an entity they own and control. Credit unions will have access to customized correspondent and payment services, settlement and a line of credit, through one provider, at a low cost, with great service.

   

• Can I join another corporate without investing perpetual capital?

  That will depend on the business plan and policies of the corporate, but all corporate credit unions have to meet the new Reg 704 capital requirements. It is important for credit unions to understand the business plan projections of any company in which it invests.

• What assurance do I have regarding Catalyst Corporate's investment practices?

  Catalyst Corporate's portfolio is very conservative as it is governed by strict regulations. The revised NCUA Regulation 704 takes major steps to reduce balance sheet risk, such as prohibiting complex securities, including private label mortgage-backed securities and collateralized debt obligations; dictating obligor and concentration limits; and tightening modeling result requirements. Moreover, the portfolio plan, which is the basis for the income projections and performance to date, assumes an even more conservative portfolio than is required by regulation.

  On average, more than 40 percent of assets will be held in overnight investments. The portfolio duration will average less than 1.5 years. All assets will be AA rated or better, with no private-label mortgage-backed securities. Investment sector concentration limits will be lower, as will the policy for the decline in net economic value (NEV) in base and shocked tests.

• What is the governance structure of Catalyst Corporate?

  Catalyst Corporate's governance structure is that of a true cooperative and represents the diversity of its membership – both geographically and based on institutional size. Catalyst Corporate has an 11-member Board of Directors that currently represents nine states from coast-to-coast.

  For a complete list of the Board of Directors, click here.

  Catalyst Corporate's Board of Directors appoints several standing committees:

  • Supervisory Committee
  • Asset/Liability Committee
  • Enterprise Risk Committee
  • Technology Steering Committee

  
  

  For a full list of Committee members, click here.