Calling its move discouraging but necessary, the $1.4 billion University of Iowa Community Credit Union has undergone a pullback from its campus operations by closing two branches, ATMs and student ID services in a give-up to a local bank.
The shuttering of the campus facilities and subsequent takeover by the $2 billion Hills Bank of Iowa City has been on the drawing boards since last fall and follows a bidding procedure completed last year in which the university administration formally ended a five-year pact with UICCU.
The university subsequently solicited bids from banks and CUs with Hills emerging as the successful bidder for the two branches as well as ATMs and student ID cards previously managed by the Iowa City CU.
“The fact is that while it is disappointing we will not have those facilities any longer, they were really not profitable and had become heavy transaction users not fitting into our overall business model,” explained James Kelly, senior vice president of marketing at Iowa’s second largest CU.
Approximately 10,000 UICCU members are affected by the closing and were informed last November of the projected switch to Hills.
The original five-year contract gave the UIC the option of two two-year extensions, “but when they decided to put it out to bid, we re-evaluated the profitability of the relationship and projected that we would be losing money,” said Kelly, adding that would seem unfair “to the full 91,000 members we serve and so we only bid for the ATMs.”
“I think there was an understandable desire by the university administration that one financial institution handle branches, ATMs and the ID cards all in one,” said Kelly. “So we ended up losing the ATMs as well.”
The CU-bank rivalry in Iowa City, with the Iowa Bankers Association playing a backstage role with the university in seeking to curb UICCU’s expansion plans, has for years been a topic for discussion in the state. That followed a rare and well-publicized defeat by UICCU members in 2007 for UICCU to rebrand as Optiva CU.
At the time, speculation was rife that the banking lobby, through its alumni or wealthy donors serving on the University of Iowa board, had pressured the university administration to force UICCU to sever or loosen its ties to the university.
Members rebelled and the Optiva brand was dropped. During the run-up to the Optiva flap, the Iowa banking trade group had quietly complained UICCU’s business loan expansion should be curbed. Earlier, bankers had objected to a 2003 attempt by the CU to purchase the troubled Hawkeye State Bank.
Kelly and other UICCU officials have declined to discuss whether banking pressure figured in the new Hills two-year contract.
In the meantime, UICCU expects to “continue operating profitably and successfully as we have in serving the University of Iowa community” from four other Iowa City branches. The CU has nine Iowa branches.