Midwest Corporate Federal Credit Union in Bismarck, N.D., has become the first corporate credit union to voluntarily liquidate in the face of daunting new capital and other regulatory requirements from the National Credit Union Administration.
The $250 million-asset corporate, which served 60 credit unions in North and South Dakota, moved most of its member services to ProDraft Services, a credit union service organization it created that will perform item processing for these credit unions.
Fifth Third Bancorp will perform correspondent services. The credit unions are also eligible to join other corporates, including Missouri Corporate Credit Union and Corporate One Federal Credit Union as well as those with national fields of membership. As part of the liquidation, capital shareholders of Midwest Corporate will share about $1 million in liquidating dividends.
The voluntary liquidation model is being watched closely by several other small corporates as an alternative to mergers.
Doug Wolf, the former chief executive of Midwest Corporate who now helps manage ProDraft, said that the message was clear for the corporate after U.S. Central Federal Credit Union failed, erasing $13 million of its $15 million in capital.
As a result, members of that corporate lost about 85% of their member capital, Wolf said.
ProDraft is owned by 38 credit unions, with 37 in North Dakota and one in South Dakota.