SAN DIMAS, Calif.-Phil Perkins shouldered the task of guiding WesCorp FCU after NCUA conserved the former $32-billion corporate giant. He spent three-and-a-half years in the CEO's role of what was technically Western Bridge Corporate FCU, managing both operations and the recapitalization bid, and supporting staff through some of the organization's most difficult times. Following WesCorp's closing July 6, Perkins talked with Credit Union Journal about his experiences at WesCorp/Western Bridge.

Credit Union Journal: What led to you take the WesCorp position?
Perkins
: I was working with Delaware Investments in Philadelphia as senior VP, senior portfolio manager. I had made a decision in late 2009 to change jobs. When I began reaching out to various colleagues, I contacted an old friend, Jim Nance, who eventually took over as CEO for U.S. Central after it was conserved. At the time he told me he was in discussions with NCUA regarding difficulties in the credit union system and that there may be an opportunity for me. Just a phone call and a few days later, in February of 2009, I was traveling to Virginia to meet with NCUA.

CUJ: What did NCUA see in you that led naming you as CEO of WesCorp?
Perkins
: They did not really share why they chose me, other than I was someone with long experience in the securities market, held leadership and CEO positions in different phases of my career, and possessed a lot of operations experience. I think I was a guy with a background and pedigree who could take on this kind of role quickly.

CUJ: Did you make any requests of NCUA about your WesCorp role?
Perkins
: Before I accepted the job it was essential that it be a real job. I said that if NCUA had secret designs to close the place in six months or merge it in three, I was not interested in the job. I said I'll take all the risk in the world as long as there is not an outcome already determined and that NCUA was being honest with me that I had an opportunity to work on that outcome. I also wanted my chain of reporting to go to a very senior person at NCUA-it ended up being Scott Hunt-and that I had the right to hire and fire people as necessary.

CUJ: Was NCUA moving fast with the conservatorship?
Perkins
: The decision to conserve WesCorp and U.S. Central was not something done quickly. This was in the works and planned, certainly as a contingency, for some time. This plan was set in motion likely months in advance of NCUA's first meeting with me. The agency was marching toward a deadline and they needed a body. It was about two weeks before NCUA conserved WesCorp and U.S. Central that Jim and I were told which institution we would be running. Thursday night, March 19, after the NCUA board vote on the conservatorships, I got the call to fly to Los Angeles on Saturday morning.

CUJ: How big was this challenge?
Perkins
: It was enormous. I knew very little about credit unions. In the investment world not many people were even aware of corporate credit unions. I knew they were deposit-taking institutions, but knew nothing about the regulator and people inside the credit union industry. I had enough information at the start of my role to clearly understand the scope and scale of the potential losses. I had spent time working in emerging markets with Deutsche Bank before Delaware Investments, and I knew how quickly panic could set in as far as markets and safety of deposits. I knew there was a real risk of collapse of the deposit base from a run on WesCorp deposits. So I had to focus on that concern. Initially the focus was on stabilizing the business and keeping it going, because if those deposits had been pulled out and we had to liquidate the securities at their very lowest point, that would have been the end of the credit union system in a cataclysmic way. That would have wiped out the insurance fund and we'd all be in different jobs now.

CUJ: What was the situation like when you got to WesCorp on March 21, 2009?
Perkins
: I landed at 9 a.m. from Philly and walked in the back door of WesCorp for the first time Saturday morning. The NCUA requested that all senior WesCorp staff come in that weekend. The looks on the faces of the staff were probably not unlike those you'd see after a car bombing. People were shattered, shocked, and despondent, very fearful for their own careers. They had just seen two top leaders, Bob Siravo and Bob Burrell, get fired on Friday. I think part of the shock also came from the fact those outside the C-level suite did not have any concept of the seriousness of the situation. The immediate challenge was to render aid and comfort to the staff so that Monday they knew they had jobs to do, put their shoulders to the wheel, and WesCorp would continue to keep going from an operating perspective as if nothing had happened-that was critical. At the same time the staff concerns became clear to me, two senior NCUA people were ensconced in a conference room all day Saturday and Sunday, calling leaders of the biggest CUs who were members of WesCorp, explaining what happened and why, going over the guarantee to ensure members their deposits were safe so they did not pull their money out.

CUJ: What was WesCorp's toughest test?
Perkins
: There were a few for sure. But that first year was about rebuilding member confidence. Not so much in our investment prowess, but continuing to process-we settled billions of dollars of member transactions a day and it was critical that continued without interruption.

CUJ: Talk about the staff who worked with you for three-and-a-half years.
Perkins
: They were truly extraordinary and were dedicated to the task all the way until the end. Every business I had previously worked in was for-profit-investment banking, sales and trading, investment management. A pretty mercenary environment. You buy loyalty with coin, and it's all performance based. You are either doing well or you are replaced. But I quickly realized in working with the team at WesCorp that working within the credit union industry means more than a paycheck, it's a higher calling.

CUJ: Were losses still underplayed when you arrived?
Perkins
: To say the losses were underplayed is very difficult to do with the perspective we have today. Back in 2008, people's perceptions of the economy were not the same. Early on, who would have thought housing prices could fall, and continue to fall, as they have? There was always the outlook, then, that things could get better and the OTTI would not be as great. Also, remember, the market losses in 2008 to 2009 mounted rapidly. That was one of the reasons PIMCO's evaluations may have differed from NCUA's. I think if PIMCO would have made their evaluations just a month or two earlier, we might have seen a notably different finding from them. Literally, losses mounted by a couple billion a quarter.

CUJ: Describe dealing with member reaction that first year?
Perkins
: Members were shocked, even more shocked than WesCorp employees. They never had to deal with losses of capital before. CEOs had to deal with boards who were upset, because the CEO and other credit unions in the industry did not know what was happening at WesCorp. There was also real anger toward NCUA, asserting that the agency, in their typical heavy-handed fashion, came in and put a major slap down on two institutions that were not cooperating or had been troublesome.

CUJ: How did you address those reactions?
Perkins
: We conducted a series of 20 town hall meetings along the West Coast and teleconferenced East Coast members. We talked about the portfolio in the context of the markets. One of the first things I did was hire a former colleague, Joe DeMichele, who was tremendous at explaining these portfolios to people who had very little knowledge of bonds. We explained what happened to the bonds, why the markets-and some of the smartest minds-missed the impending trouble, including the rating agencies. I think eventually most of the membership kind of got it, and then interestingly, their anger remained with the NCUA-why did the agency not prevent this?

CUJ: NCUA was on-site at WesCorp for 15 years. From what you have learned inside WesCorp, how did they miss this?
Perkins
: By definition they did not miss it, because they conserved WesCorp. It was not WesCorp that woke up one day, took a write-down and threw itself upon the mercy of the regulator. NCUA took action. I came in on weekends, went all through the board books, read through the regulations, and I found nothing in any of the materials that told me at any point regulations were violated. All of the investing was done within the scope of regulations and, in my opinion, no one broke any rules. Not even concentration risk. At the time boards were free to set concentration limits, and in those days the only thing that mattered was concentration by rating outside AA and AAA. The scope and spate of regulatory activity around these mortgage-backed securities was way behind where they needed to be.

CUJ: What did you think of the chances for recapitalizing as United Resources?
Perkins
: After the NCUA Guaranteed Notes program was established, I thought chances were good. CUs would have never put more of their capital at risk, nor would I have asked them to. CUs would not have contributed capital as long as the troubled securities were still on the balance sheet. I felt then the recap would succeed, because time had passed and a lot of the original anger faded, and we successfully kept the business going. People also had a greater knowledge of what happened at WesCorp and to financial markets across the country.

CUJ: Why did the recapitalization fail?
Perkins
: There are a number of reasons, but the biggest is that we could not get the support of the large credit unions. WesCorp was different than all the other corporates in that we still had many large credit unions processing with us. While I believe CEOs got over their initial anger, I think boards did not. CEOs realized they needed a corporate, while boards-which were not involved with day-to-day activities of the CU-did not come to that same realization and could not forgive WesCorp nor put capital at risk again. Our business plan for United Resources was predicated on keeping a good number of the larger credit unions. But these are the ones who could afford to go out on their own, and that's what many decided to do.

CUJ: What will you remember most about your three-plus years at WesCorp?
Perkins
: The staff, who did not miss a beat right after the conservatorship up until we closed. As far as accomplishments, the team takes pride in helping to provide the engineering solution for the NGN program. Personally, if I were ever to be remembered for something I did while at WesCorp, it was to talk to NCUA about a smooth exit for the business. Once recapitalization failed, instead of simply liquidating WesCorp, I advised NCUA to go to plan B and auction off WesCorp accounts and business. That resulted in a very orderly exit for WesCorp that did not impact the processing business for many credit unions.

CUJ: What's next for you?
Perkins
: I am looking for a job and am now beginning a search. I would like to stay on the West Coast and remain within the credit union industry.

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