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<p>AMES and DES MOINES, Iowa – Both parties agree they want the merger, but whether or not EdCo Community Credit Union merges with ISU Community CU to form the fourth largest credit union in the Hawkeye State is coming down to whether the presidents and boards of the two credit unions can agree on the definition of “strategic business unit.” According to a letter sent by EdCo Community President/CEO Dennis Sharpe to EdCo Community CU President/CEO and Chairman Kim Sharp and Aaron Davenport, respectively, Sharpe outlined his proposal for EdCo being operated as a “strategic business unit as part of the ISUCCU family.” He cited the Dictionary of Business’ definition of strategic business unit as being “an autonomous division within a company responsible for planning the marketing of a particular range of products.” Sharpe further designated the name for the strategic business unit would be “the Des Moines Regional Center (DMRC),” and it would include two current branches of EdCo – the 38th Street branch, and the branch at SE 14th Street inside the Wal-Mart Supercenter. Further, Sharpe wrote, “As an independent strategic business unit, the Des Moines Regional Center (DMRC) will conduct business in line with the needs of their members. DMRC will operate within a budget and in line with DMRC’s business and strategic plans and policies. Quarterly financial statements would be provided to ISUCCU for consolidated financial statements. The organizational chart will describe the structure of DMRC and its reporting relationship to ISUCCU.” Sharpe concluded by stating that the agreement between the two credit unions would be in effect for five years beginning on the effective date of the merger, but he did not elaborate on his plan for after that date. What is Sharp’s position on Sharpe’s proposal? “You can operate as an independent business unit, but you still have to do things like merge accounts and present your budget to the parent company. Just because you operate as an independent business unit doesn’t mean you have total autonomy. If that’s what you want, why merge?” One thing Sharp and Sharpe agree on is that it was EdCo Community CU that approached ISU Community CU about a possible merger. That was in March.”We’re a healthy credit union, but small credit unions can only do so much for their members for so long,” Sharpe told Credit Union Times. When EdCo Community first considered merging, it looked in to several credit unions. It decided on ISUCCU, said Sharpe, because, “It’s a well-managed credit union, and they’re a good blend for us.” Both ISUCCU and EdCo Community CU started out as occupational credit unions serving educational groups. They’ve both since converted to community charters, and both serve the eight county area around Des Moines. Sharp said EdCo Sharpe’s has “made up his own definition of strategic business unit. It’s so contrary to section 533.30 of the Iowa credit union code that describes the rules for credit union mergers. Sharpe interprets strategic business unit as being a standalone operation with no responsibility to the parent.” Sharpe defended himself by saying he asked ISUCCU for its definition of what it considered to be a strategic business unit, but he said he didn’t hear back from the credit union. “I’m not sure ISU wants us to be a strategic business unit of them,” said Sharpe. “That’s what’s so confusing.” If the merger between the credit unions is completed, EdCo’s Sharpe said he saw himself being the president of DMRC. However, he has already reached a contract agreement with EdCo’s Board to retire in February 2003. As part of his contract, he would stay on with DMRC as a consultant for three years. ISUCCU’s Sharp said he sent Superintendent of Credit Unions Jim Forney of the Iowa Credit Union Division a letter with details of Sharpe’s merger proposal. Sharp said Forney told him it is EdCo’s responsibility to prove how Sharpe’s merger proposal and plan for running DMRC would be in compliance with section 533.30. Although EdCo’s Sharpe told Credit Union Times “there is room for negotiation, in principle,” he added that when it came to the 10 points he discussed in his merger proposal for running the Des Moines Regional Center as an independent strategic business unit, “that is not negotiable.” Sharp said he still hopes the merger between EdCo and ISU Community will take place, but he admitted he is not optimistic for that happening any time soon. At press time, the credit unions’ boards planned to meet on July 18 to discuss Sharpe’s proposal, but at this stage he said he didn’t know if the boards would proceed with that meeting. Regardless whether ISU Community’s merger with EdCo happens, ISUCCU is continuing with its growth strategy. In the two years Sharp has been president/CEO of the credit union, he has taken the credit union from having $83 million in assets and 13,500 members, to its present $134 million, 20,000 member spot. That growth is partly due to the new services ISUCCU began offering since Sharp came on board such as a new call center, variable term mortgages and a mortgage development officer position. ISUCCU recently merged with ISEA CU, West Des Moines. As a result, ISUCCU picked up three additional counties in the state for its FOM – Madison, Marion and Warren. The credit union is in the process of converting ISEA’s data. Sharp expects everything to be completed by August or September. Sharp said ISUCCU is considering merging with two other credit unions in the state. If those mergers are finalized, that would increase ISUCU’s state-wide field-of-membership coverage. “Credit unions toughest competition in the future isn’t going to come from banks or S&Ls, it’s going to come from the stores like Wal-Mart that have their own bank and provide financial services to consumers. Even the largest grocery story in Iowa, Hy-Vee, has its own bank. Credit unions have to be ready to deal with this competition,” said Sharp. -</p> <p>[email protected]</p>

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