Calling its move discouraging but necessary, the $1.4 billionUniversity of Iowa Community Credit Union has undergone a pullbackfrom its campus operations by closing two branches, ATMs andstudent ID services in a give-up to a local bank.

The shuttering of the campus facilities and subsequent takeoverby the $2 billion Hills Bank of Iowa City has been on the drawingboards since last fall and follows a bidding procedure completedlast year in which the university administration formally ended afive-year pact with UICCU.

The university subsequently solicited bids from banks and CUswith Hills emerging as the successful bidder for the two branchesas well as ATMs and student ID cards previously managed by the IowaCity CU.

“The fact is that while it is disappointing we will not havethose facilities any longer, they were really not profitable andhad become heavy transaction users not fitting into our overallbusiness model,” explained James Kelly, senior vice president ofmarketing at Iowa's second largest CU.

Approximately 10,000 UICCU members are affected by the closing and were informedlast November of the projected switch to Hills.

The original five-year contract gave the UIC the option of twotwo-year extensions, “but when they decided to put it out to bid,we re-evaluated the profitability of the relationship and projectedthat we would be losing money,” said Kelly, adding that would seemunfair “to the full 91,000 members we serve and so we only bid forthe ATMs.”

“I think there was an understandable desire by the universityadministration that one financial institution handle branches, ATMsand the ID cards all in one,” said Kelly. “So we ended up losingthe ATMs as well.” 

The CU-bank rivalry in Iowa City, with the Iowa BankersAssociation playing a backstage role with the university in seekingto curb UICCU's expansion plans, has for years been a topic fordiscussion in the state. That followed a rare and well-publicizeddefeat 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 ofIowa board, had pressured the university administration to forceUICCU to sever or loosen its ties to the university.

Members rebelled and the Optiva brand was dropped. During therun-up to the Optiva flap, the Iowa banking trade group had quietlycomplained UICCU's business loan expansion should be curbed.Earlier, bankers had objected to a 2003 attempt by the CU topurchase the troubled Hawkeye State Bank.

Kelly and other UICCU officials have declined to discuss whetherbanking pressure figured in the new Hills two-year contract.

In the meantime, UICCU expects to “continue operating profitablyand successfully as we have in serving the University of Iowacommunity” from four other Iowa City branches. The CU has nine Iowabranches.