DES MOINES and AMES, Iowa – It came down to the definition of "strategic business unit." One party considered it as being an independent business unit, while the other argued it didn't mean a standalone operation with no accountability to the parent company. Regardless of who's right, one thing EdCo Community CU and ISU Community CU agree on is the merger of the two credit unions is off. The boards of both credit unions had planned to hold a joint board meeting on July 18 to discuss EdCo CCU President Dennis Sharpe's proposal, but as far as Sharpe is concerned, "The deal is off, we'll continue on our own," he said. The merger of the two would have made ISU Community CU the fourth largest CU in Iowa. Nickie Whitaker, chairperson of EdCo Community CU advised ISU Community CU President Kim Sharp and Chairman Aaron Davenport by email on July 6 that, "After nearly four months of constant communications, we have not come to a basic definitive agreement on the key points, which would be the foundation of the merger. We, at EdCo, feel that it is in the best interest of our members to discontinue our merger discussion at this time." In her email, Whitaker cited that Sharp and Davenport had not responded to EdCo Community's May 28 letter, and therefore "continued discussions would not be worthwhile." That letter included EdCo's definition of "strategic business unit," according to the 1996 edition of the Dictionary of Business- "an autonomous division within a company responsible for planning the marketing or a particular range of products" – and featured a detailed proposal from EdCo's President Dennis Sharpe for EdCo to operate as a "strategic business unit as part of the ISUCCU family." Sharpe also designated that the name of the strategic business unit would be "the Des Moines Regional Center," it would include two current branches of EdCo – the 38th Street branch, and the branch at SWE 14th Street inside the Wal-Mart Supercenter, and he would be president (CU Times, June 26). Speaking with Credit Union Times, Sharpe said he was confused by ISU's lack of response to his letter. "The strategic business unit was their idea," he said, "but when we asked them for a definition, they never gave us one." Sharpe said EdCo also never received a copy of ISU's audit report from its CPA firm. "We gave them ours, just like they asked for it, but they never gave us theirs," he said. ISU's Sharp said the credit union's decision not to give EdCo a copy of its audit report was deliberate. He said state Superintendent of Credit Unions Jim Forney of the Iowa Credit Union Division had asked Sharpe to prove to him that the merger wasn't what Forney described as a "pseudo-merger" because of Sharpe's strategic business unit proposal. Sharp said Sharpe told Forney "he would think of a way to respond." "He (Sharpe) never did respond to Forney," said Sharp, "and we didn't see any sense in giving EdCo our audit statement and pursuing this further if Forney didn't consider this a real merger. It would have been an exercise in futility. How could I agree to something that isn't legal and doesn't meet the requirements of the Iowa credit union code?" Sharpe has not only tossed in the towel on merging with ISU Community, he said he's not interested in merging with any credit union any longer. "Maybe there's no such thing as an equal merger, maybe it doesn't exist. I hoped the merger between the two credit unions would have worked out. We have reserves and our net income. We'll follow our niche and take it from there." That niche, said Sharpe, is student loans. EdCo has about $4 million in its portfolio in student loans. ISU meanwhile is continuing with its plan to continue to expand its field-of-membership through mergers with other CUs. At press time, Sharp said ISU already had discussions with one other credit union and a meeting was imminent. It had another CU in its sites as well. Sharp said ISU Community's merger strategy is necessary for the CU's ability to survive. "We want to be able to grow and provide more products and services to our members so they'll look at us as being their leading service provider," he said. ISU currently has 20,000 members and $136 million in assets. Sharp said the credit union is growing about 36% annually in assets. -


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