30 CUs Choose Alternative To Reinvesting In Corporate CUs
BISMARK, N.D. — Apparently unwilling to invest capital again within the corporate system, approximately 30 credit unions are choosing the "corporate credit union alternative."
ProDraft Services, Inc., a CUSO formerly controlled by Midwest Corporate FCU, just added correspondent services through Fifth Third Bank to accompany its item processing business line. Midwest recently gave all of its controlling stock in ProDraft to the CUSO's 38 CU owners. In its press release, the CUSO referred to its new correspondent services as the "corporate credit union alternative" to be "descriptive," said Doug Wolf, ProDraft VP and former MCFCU CEO. Wolf told Credit Union Journal that 13 credit unions have signed up for the correspondent services and 16 others are considering coming on board and will likely sign an agreement by the end of February. About 70%, he said, are the CUSO's CU owners.
"The overriding reason we are seeing credit unions sign on for our correspondent services is because they are reluctant to put any more capital into a corporate credit union," Wolf explained. "This way they still have a solution within the credit union system, many of them already know us and like working with us, and do not have the capital risk."
With the outlook for recapitalizing MCFCU bleak, Dakotas CUs are seeking alternatives for correspondent services. But according to Paul Brucker, CEO of the $55-million Railway CU here, another corporate was not an option. Brucker said the "major advantage" of signing on with ProDraft for correspondent services is not having to invest in another corporate.
"The handwriting is on the wall that our corporate will not be recapitalized, so we knew we had to do something. We started researching our options quite a while ago. We like ProDraft because it is a credit union solution."
Another Bismark-based credit union, the $13-million Genie-Watt CU, said that avoiding corporate capital investment was a factor that weighed into its decision to use ProDraft. "But it was not the most important reason we chose the company," said CEO Leslie Heisler. "We looked at other options, including local banks. We decided that we wanted a credit union-based solution and one that was local."
Aggregating Clients For Preferred Pricing
While ProDraft will continue to handle item processing, the CUSO will aggregate CU clients to receive preferred pricing on correspondent services from Fifth Third that CUs could not garner working directly with the bank. Wolf said the price ProDraft passes onto credit unions for its correspondent services will be equal to slightly lower, in total, than what CUs received previously from Midwest and other corporates.
"ProDraft also brings first-line service support for the credit unions which they like because they know us already and they like the idea that they make one call, explain their issue, and 90% of the issues that come up we can help them with right away. If something needs more research, the credit union does not have to spend hours on the phone with the bank. We handle that."
ProDraft beta tested its correspondent services with two credit unions prior to launch.
Wolf said interest is coming from credit unions within the Dakotas and from across the U.S., and he expects both item processing and correspondent services will grow significantly as word gets out. "We already had a great deal of growth capacity within item processing and Firth Third will manage growth for correspondent services."