DES MOINES-The Iowa Corporate CU, the nation's smallest corporate credit union, last week signed a preliminary agreement with the National Cooperative Bank that will allow its 140 credit union members to join the cooperative bank and access its correspondent services as the corporate winds down its business.
Sara Flynn, president of the corporate, said the unprecedented deal was sought because of the new world for corporates ushered in by NCUA's new corporate regulations and the elimination of U.S. Central FCU, which provided several of the services NCB will provide their credit unions, such as automated settlement and automated clearing house.
"We wanted to make sure there is a continuity of service before we wind down operations," Flynn told the Credit Union Journal. "Because of our size and our scale we didn't feel we would be viable long-term."
While the aim is to wind down operations of the corporate, there is no time frame set for the wind-down, she emphasized.
Under a preliminary agreement struck with the Washington, D.C.-based NCB, Iowa's credit unions would gain access to the bank's branch capture settlement, deposit account, ACH and lending operations, which includes lines of credit. They could also choose to join another surviving corporate for the same or additional services, such as investments.
Iowa's credit unions have been the leaders in searching for options to the demise of the corporate system and U.S. Central, working last year through the Iowa CU League to acquire a bank to access the payments system. That effort was eventually abandoned.
Because it never invested in mortgage-backed securities and other high-risk investments that sunk U.S. Central and the four other corporates, the Iowa Corporate is one of the healthiest of the surviving 22 corporates. It is undecided what will happen to the $13.5 million in member capital it still holds, but it may be distributed to the members, said Flynn, who stressed the plans are not for a liquidation.
