Bank Linkup in Iowa
With its corporate planning a wind down in 2011, Iowa credit unions took the first step last week in confronting the fallout from NCUA's corporate restructuring by signing a preliminary processing pact with the National Cooperative Bank of Washington.
The proposed linkup with the co-op bank, spurred by leadership of the Iowa Credit Union League and a servicing affiliate, has been on the drawing boards for months but still underscored the industry angst about how exactly to deal with provider services in the wake of the Sept. 24 restructuring.
Both leaders of the Iowa League and the $100 million Iowa Corporate Central CU of Des Moines, the smallest in the corporate network, stressed that the agreement for NCB to start offering a broad array of funding, item processing and wholesale services replacing the corporate remains preliminary. Any implementation of NCB servicing could be months away.
A formal statement by the 140-member Iowa League and Iowa Corporate management said a "tri-party declaration of intent" had been signed in September by National Cooperative Bank FSB, a savings bank subsidiary of National Cooperative Bank, Iowa Corporate and Affiliates Management Co., a wholly owned subsidiary of the league.
The three parties to the agreement are working cooperatively, said the statement, with the intent of developing "a business model to meet the needs of Iowa credit unions for correspondent banking services."
The groups "are currently working through operational detail," and if successful in reaching a definitive agreement, any proposal for service offerings would be reviewed by Iowa CUs "at a series of town hall meetings throughout Iowa when the work is finalized." No timetable was mentioned when that might occur.
Sara Flynn, the CEO of Iowa Corporate, said the corporate "is excited to work with NCB, an organization that holds many current relationships with the credit union industry and shares our mission and values of providing cooperative solutions."
Although Iowa Corporate, she said, "has the highest capital ratio of any corporate, due to our small size, we felt it necessary to explore alternative ways of continuing to meet the needs of our members."
Under NCB, "we feel strongly that our members will be offered a competitive alternative in terms of security, member service and cost," she said in the league statement.
Disclosure of the tentative deal with NCB followed a further endorsement by CEOs and top managers of the state's 15 largest CUs convened last week near Iowa City for a league-sponsored conference.
Pat Jury, president/CEO of the league, told Credit Union Times, "We wanted those credit unions which have the largest percent of capital in Iowa Corporate, roughly 70% to sign off on the agreement with National Cooperative Bank."
He said staffs from the league and the corporate have made a number of trips to Washington and vice versa to Iowa. Top executives of NCB were in Coralville, an Iowa City suburb, for the conference Oct. 26 to discuss the plans.
"This has been a work in progress for months, and our mission has been to find a replacement for the services offered by Iowa Corporate that are priced equitably for both large and small Iowa credit unions," explained Jury.
"Our goal is to put together an operation that will cause the least amount of disruption," Jury said.
The NCB pact, he said, is an outgrowth of the league's unsuccessful attempt a year ago to buy a wholesale Arizona bank and convert it into a correspondent vehicle. A formal application to the Federal Reserve Bank of Chicago was finally withdrawn based on regulatory hurdles in a CU group buying a bank.
NCB, which provides correspondent services to a diverse group of co-op groups, including food chains, hardware dealers, health care agencies and others, also assists the National Credit Union Foundation in funding.